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PSLmodels / Business-Taxation

USA Corporate and Pass-Through Business Tax Model
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Dividend received deduction #113

Closed codykallen closed 5 years ago

codykallen commented 5 years ago

Under pre-TCJA law, corporations were allowed a deduction for dividends received from taxable domestic corporations. The general deduction rate was 70%, with an 80% rate for dividends from a 20%-owned corporation and a 100% rate for dividends from a corporation in the same affiliated group.

The TCJA reduced the 70% rate to 50% and the 80% rate to 65%.

Implementing this may be tricky, as we lack information on the sources of the dividends received from domestic corporations. Moreover, the IRS information is the amount of the income net of the deduction. I think the best approach to modeling this will be to assume the 70% rate was used in general, and to back out dividends received in earnings_prep.py. We would not be able to model the 100% deduction for dividends received from affiliated corporations, but this should not be particularly important, as the TCJA does not change it, and policies to change it would have little effect on revenue (although larger effects on how corporate organizations register their subsidiaries).

codykallen commented 5 years ago

This has been implemented by #116.