Dividend Received Deduction (DRD)

Brief Definition

The Dividends Received Deduction (DRD) is a tax deduction available to corporations in the United States that receive dividends from other domestic corporations.

Further Explanation

The Dividends Received Deduction (DRD) is a tax deduction available to corporations in the United States that receive dividends from other domestic corporations. The DRD is intended to reduce or eliminate the triple taxation of corporate earnings: first at the earnings level, then at the dividend level when paid to the recipient corporation, and finally when the recipient corporation distributes those dividends to its shareholders.

Example:
Corporation A owns 25% of Corporation B and receives $100,000 in dividends from Corporation B. Since Corporation A owns more than 20% but less than 80% of Corporation B, it qualifies for a 65% DRD.