Chuck Grassley: “the Dividend Allocation Rule, DAR, is the result of several old court cases and subsequent IRS interpretation that…”

“the Dividend Allocation Rule, DAR, is the result of several old court cases and subsequent IRS interpretation that applies only to cooperatives which are corporations. When a non cooperative corporation pays a dividend to its shareholder the corporation pays tax on the dividend issued and the shareholder pays a tax on the dividend received, so they pay two levels of taxation. In fact, under the President's dividend exclusion proposal as presented to the U.S. Congress, the President of the United States makes a compelling argument that being taxed twice is inherently unfair and it would be good for the Nation's economy that only one level of tax should be paid by the corporation and that the shareholder would receive the dividend tax free. Well--if two levels of taxation on corporations and their shareholders is unfair and adverse to the creation of capital and the economy--how would you like to try to operate as a fiscally sound business entity if you had to figure out every day how you were going to generate enough cash flow to pay THREE levels of taxation.”