Fillable California Schedule H (Form 100) - Dividend Income Deduction

2015 Instructions for Schedule H (100)

Dividend Income Deduction

Important Information

Specific Instructions

To complete Part II:

1. Fill in columns (a) through (c).

Revenue and Taxation Code (R&TC)

California follows the federal dividend

2. Enter in column (d) the total amount of

Section 24410 was repealed and re-enacted

distributions ordering rule where dividends

insurance dividends received.

to allow a “Dividends Received Deduction”

are deemed to be paid out of current year

3. Enter the qualified dividend percentage in

for qualified dividends received from an

E&P first, and then layered back on a last-in,

column (e).

insurer subsidiary. The deduction is allowed

first-out (LIFO) basis.

4. Multiply the amount in column (d) by the

whether or not the insurer is engaged in

qualified dividend percentage in column (e)

A corporation may eliminate or deduct dividend

business in California, if at the time of each

and enter that amount in column (f).

income when certain requirements are met.

payment, at least 80% of each class of stock

5. Multiply the amount in column (f) by 85%

The available eliminations or deductions are

of the insurer was owned by the corporation

and enter the result in column (g).

described below.

receiving the dividend. For taxable years

6. Total the amounts on Part II, line 4,

beginning on or after January 1, 2004, and

Part I – Elimination of

column (g). Enter the amount from Part II,

before January 1, 2008, an 80% deduction

Intercompany Dividends

line 4, column (g) on Form 100, Side 2,

was allowed for qualified dividends. For taxable

line 11.

years beginning on or after January 1, 2008,

A corporation may eliminate dividends received

The calculation of the qualified dividend

the deduction is increased to 85%. A portion

from unitary subsidiaries but only to the extent

percentage should be presented in a

of the dividends may not qualify if the

that the dividends are paid from unitary E&P

supplemental schedule that is attached to

insurer subsidiary paying the dividend is

accumulated while both the payee and payer

the taxpayer’s return. That schedule should

overcapitalized for the purpose of the dividends

were members of the combined report. See

identify the amount of the net written

received deduction. See Specific Instructions,

R&TC Section 25106 for more information.

premiums for all the insurance companies

Part II, for more information.

Complete Part I and enter the total of Part I,

in the commonly controlled group for the

For taxable years beginning on or after

line 4, column (d) on Form 100, Side 2, line 10.

preceding five years (including an identification

January 1, 2008, dividend elimination is

of property/casualty premiums, life insurance

Part II – Deduction for Dividends

allowed regardless of whether the payer/payee

premiums, and financial guarantee premiums),

Paid to a Corporation by an

are taxpayer members of the California

the relative weight given to each class of net

combined unitary group return, or whether

Insurance Company

written premiums, and the total income of

the payer/payee had previously filed California

the insurance companies in the commonly

R&TC Section 24410 provides that a

tax returns, as long as the payer/payee filed

controlled group (including premium and

corporation that owns 80% or more of each

as members of a comparable unitary business

investment income for the preceding five

class of stock of an insurer is entitled to 85%

outside of California when the earnings and

years). For more information, see R&TC

dividends received deduction for qualified

profits (E&P) from which the dividends were

Section 24410.

dividends received from that insurer. The

paid arose.

deduction would be allowed regardless

In addition, dividend elimination is allowed

of whether the insurer does business in

for dividends paid from a member of a

California.

combined unitary group to a newly formed

The amount of the dividends that qualify for

member of the combined unitary group if the

the dividends received deduction is the total

recipient corporation has been a member of

amount of dividends received from that insurer,

the combined unitary group from its formation

multiplied by the insurer’s qualified dividend

to its receipt of the dividends. E&P earned

percentage. The qualified dividend percentage

before becoming a member of the unitary

is determined under R&TC Section 24410(c).

group do not qualify for elimination. See R&TC

Section 25106 for more information.

In Farmer Bros. Co. v. Franchise Tax Board (2003)

108 Cal App 4th 976, 134 Cal Rptr. 2nd 390,

the California Court of Appeal found R&TC

Section 24402 to be unconstitutional. A statute

that is held to be unconstitutional is invalid and

unenforceable. Therefore, R&TC Section 24402

deduction is not available.

Page 28 Form 100 Booklet 2015

California Schedule H (Form 100) - Dividend Income Deduction - 2015 Page 2

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