Schedule H (100) - California Dividend Income Deduction - 2014 Page 2
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22014 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Section 24410 was repealed and re-enacted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 (R&TC
line 4, column (g) on Form 100, Side 1,
was allowed for qualified dividends. For taxable
line 11.
Section 25106)
years beginning on or after January 1, 2008,
The calculation of the qualified dividend
the deduction is increased to 85%. A portion
A corporation may eliminate dividends received
percentage should be presented in a
of the dividends may not qualify if the
from unitary subsidiaries but only to the extent
supplemental schedule that is attached to
insurer subsidiary paying the dividend is
that the dividends are paid from unitary E&P
the taxpayer’s return. That schedule should
overcapitalized for the purpose of the dividends
accumulated while both the payee and payer
identify the amount of the net written
received deduction. See Specific Instructions,
were members of the combined report. See
premiums for all the insurance companies
Part II, for more information.
R&TC Section 25106 for more information.
in the commonly controlled group for the
For taxable years beginning on or after
Complete Part I and enter the total of Part I,
preceding five years (including an identification
January 1, 2008, dividend elimination is allowed
line 4, column (d) on Form 100, Side 1, line 10.
of property/casualty premiums, life insurance
regardless of whether the payer/payee are
premiums, and financial guarantee premiums),
Part II – Deduction for Dividends
taxpayer members of the California combined
the relative weight given to each class of net
unitary group return, or whether the payer/
Paid to a Corporation by an
written premiums, and the total income of
payee had previously filed California tax returns,
the insurance companies in the commonly
Insurance Company (R&TC
as long as the payer/payee filed as members
controlled group (including premium and
Section 24410)
of a comparable unitary business outside of
investment income for the preceding five
California when the earnings and profits (E&P)
R&TC Section 24410 provides that a
years). For more information, see R&TC
from which the dividends were paid arose.
Section 24410.
corporation that owns 80% or more of
In addition, dividend elimination is allowed
each class of stock of an insurer is entitled
for dividends paid from a member of a
to 85% dividends received deduction for
combined unitary group to a newly formed
qualified dividends received from that
member of the combined unitary group if the
insurer. The deduction would be allowed
recipient corporation has been a member of
regardless of whether the insurer does
the combined unitary group from its formation
business in California. The 85% deduction
to its receipt of the dividends. E&P earned
applies to taxable years beginning on or after
before becoming a member of the unitary
January 1, 2008.
group do not qualify for elimination. See R&TC
The amount of the dividends that qualify for
Section 25106 for more information.
the dividends received deduction is the total
In Farmer Bros. Co. v. Franchise Tax Board (2003)
amount of dividends received from that insurer,
108 Cal App 4th 976, 134 Cal Rptr. 2nd 390,
multiplied by the insurer’s qualified dividend
the California Court of Appeal found R&TC
percentage. The qualified dividend percentage
Section 24402 to be unconstitutional. A statute
is determined under R&TC Section 24410(c).
that is held to be unconstitutional is invalid and
unenforceable. Therefore, R&TC Section 24402
deduction is not available.
Page 28 Form 100 Booklet 2014
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