100 percent dividend
(4) Dividends received by company (A) In general The deductions provided by sections 243 and 245 (as modified by subparagraph (B))— (i) for 100 percent dividends received, and (ii) for the life insurance company’s share of the dividends (other than 100 percent dividends) received. (B) Application of section 246(b) In applying section 246(b) (relating to limitation on aggregate amount of deductions for dividends received) for purposes of subparagraph (A), the limit on the aggregate amount of the deductions allowed by sections 243(a)(1) and 245 shall be the percentage determined under section 246(b)(3) of the life insurance company taxable income (and such limitation shall be applied as provided in section 246(b)(3)), computed without regard to— (i) the deduction allowed under section 172, (ii) the deductions allowed by sections 243(a)(1) and 245, and (iii) any capital loss carryback to the taxable year under section 1212(a)(1), but such limit shall not apply for any taxable year for which there is a loss from operations. (C) 100 percent dividend For purposes of subparagraph (A)— (i) In general Except as provided in clause (ii), the term “100 percent dividend” means any dividend if the percentage used for purposes of determining the deduction allowable under section 243 or 245(b) is 100 percent. (ii) Treatment of dividends from noninsurance companies The term “100 percent dividend” does not include any distribution by a corporation which is not an insurance company to the extent such distribution is out of tax-exempt interest, or out of the increase for the taxable year in policy cash values (within the meaning of subparagraph (F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies, or out of dividends which are not 100 percent dividends (determined with the application of this clause as if it applies to distributions by all corporations including insurance companies). (D) Special rules for certain dividends from insurance companies (i) In general In the case of any 100 percent dividend paid to any life insurance company out of the earnings and profits for any taxable year beginning after December 31, 1983 , of another life insurance company if— (I) the paying company’s share determined under section 812 for such taxable year, exceeds (II) the receiving company’s share determined under section 812 for its taxable year in which the dividend is received or accrued, the deduction allowed under section 243 or 245(b) (as the case may be) shall be reduced as provided in clause (ii). (ii) Amount of reduction The reduction under this clause for a dividend is an amount equal to— (I) the portion of such dividend attributable to prorated amounts, multiplied by (II) the percentage obtained by subtracting the share described in subclause (II) of clause (i) from the share described in subclause (I) of such clause. (iii) Prorated amounts For purposes of this subparagraph, the term “prorated amounts” means tax-exempt interest, the increase for the taxable year in policy cash values (within the meaning of subparagraph (F)) of life insurance policies and annuity and endowment contracts to which section 264(f) applies, and dividends other than 100 percent dividends. (iv) Portion of dividend attributable to prorated amounts For purposes of this subparagraph, in determining the portion of any dividend attributable to prorated amounts— (I) any dividend by the paying corporation shall be treated as paid first out of earnings and profits for taxable years beginning after December 31, 1983 , attributable to prorated amounts (to the extent thereof), and (II) by determining the portion of earnings and profits so attributable without any reduction for the tax imposed by this chapter. (v) Subparagraph to apply to dividends from other insurance companies Rules similar to the rules of this subsection shall apply in the case of 100 percent dividends paid by an insurance company which is not a life insurance company. (E) Certain dividends received by foreign corporations Subparagraph (A)(i) (and not subparagraph (A)(ii)) shall apply to any dividend received by a foreign corporation from a domestic corporation which would be a 100 percent dividend if section 1504(b)(3) did not apply for purposes of applying section 243(b)(2). (F) Increase in policy cash values For purposes of subparagraphs (C) and (D)— (i) In general The increase in the policy cash value for any taxable year with respect to policy or contract is the amount of the increase in the adjusted cash value during such taxable year determined without regard to— (I) gross premiums paid during such taxable year, and (II) distributions (other than amounts includible in the policyholder’s gross income) during such taxable year to which section 72(e) applies. (ii) Adjusted cash value For purposes of clause (i), the term “adjusted cash value” means the cash surrender value of the policy or contract increased by the sum of— (I) commissions payable with respect to such policy or contract for the taxable year, and (II) asset management fees, surrender charges, mortality and expense charges, and any other fees or charges specified in regulations prescribed by the Secretary which are imposed (or which would be imposed were the policy or contract canceled) with respect to such policy or contract for the taxable year.