Manufacturers & Distributors ARTICLE -

Tax Incentive on Dividends from Foreign Subsidiaries

Target Audience: Manufacturing and Distributing Companies, M&D Industry Employees, Manufacturing Distributors

The American Jobs Creation Act provides for an 85% dividends received deduction for certain dividends from controlled foreign corporations (CFC's). This provision of the new tax law was enacted in order to create an incentive for U.S. based multinationals to distribute the earnings accumulated by their CFC's back to the U.S. parent, so that the earnings may be invested in the U.S.

Taxpayers have a limited amount of time to take advantage of this opportunity, and will only be able to claim the 85% dividends received deduction for cash dividends received during the 2005 tax year. In addition, an election has to be made in order to claim the deduction. The election would result in qualifying dividends being federally taxed at 5.25% rather than 34%. If you have any questions regarding this, or any other tax matter, please contact Feeley & Driscoll, P.C.

Find out how our M&D accountants can add value to your business. Email us or call us at 1 (888) 875-9770.

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