
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC247]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
               Subchapter B--Computation of Taxable Income
 
             PART VIII--SPECIAL DEDUCTIONS FOR CORPORATIONS
 
Sec. 247. Dividends paid on certain preferred stock of public 
        utilities
        

(a) Amount of deduction

    In the case of a public utility, there shall be allowed as a 
deduction an amount computed as follows:
        (1) First determine the amount which is the lesser of--
            (A) the amount of dividends paid during the taxable year on 
        its preferred stock, or
            (B) the taxable income for the taxable year (computed 
        without the deduction allowed by this section).

        (2) Then multiply the amount determined under paragraph (1) by 
    the fraction--
            (A) the numerator of which is 14 percent, and
            (B) the denominator of which is that percentage which equals 
        the highest rate of tax specified in section 11(b).

For purposes of the deduction provided in this section, the amount of 
dividends paid shall not include any amount distributed in the current 
taxable year with respect to dividends unpaid and accumulated in any 
taxable year ending before October 1, 1942. Amounts distributed in the 
current taxable year with respect to dividends unpaid and accumulated 
for a prior taxable year shall for purposes of this subsection be deemed 
to be distributed with respect to the earliest year or years for which 
there are dividends unpaid and accumulated.

(b) Definitions

    For purposes of this section and section 244--

                         (1) Public utility

        The term ``public utility'' means a corporation engaged in the 
    furnishing of telephone service or in the sale of electrical energy, 
    gas, or water, if the rates for such furnishing or sale, as the case 
    may be, have been established or approved by a State or political 
    subdivision thereof or by an agency or instrumentality of the United 
    States or by a public utility or public service commission or other 
    similar body of the District of Columbia or of any State or 
    political subdivision thereof.

                         (2) Preferred stock

        (A) In general

            The term ``preferred stock'' means stock issued before 
        October 1, 1942, which during the whole of the taxable year (or 
        the part of the taxable year after its issue) was stock the 
        dividends in respect of which were cumulative, limited to the 
        same amount, and payable in preference to the payment of 
        dividends on other stock.

        (B) Certain stock issued on or after October 1, 1942

            Stock issued on or after October 1, 1942, shall be deemed 
        for purposes of this paragraph to have been issued before 
        October 1, 1942, if it was issued to refund or replace bonds or 
        debentures issued before October 1, 1942, or to refund or 
        replace other preferred stock (including stock which is 
        preferred stock by reason of this subparagraph or subparagraph 
        (D)), but only to the extent that the par or stated value of the 
        new stock does not exceed the par, stated, or face value of the 
        bonds or debentures issued before October 1, 1942, or the other 
        preferred stock, which such new stock is issued to refund or 
        replace.

        (C) Determination under regulations

            The determination of whether stock was issued to refund or 
        replace bonds or debentures issued before October 1, 1942, or to 
        refund or replace other preferred stock, shall be made under 
        regulations prescribed by the Secretary.

        (D) Issuance of stock

            For purposes of subparagraph (B), issuance of stock includes 
        issuance either by the same or another corporation in a 
        transaction which is a reorganization (as defined in section 
        368(a)) or a transaction subject to part VI of subchapter O 
        (relating to exchanges in SEC obedience orders), or the 
        respectively corresponding provisions of the Internal Revenue 
        Code of 1939.

(Aug. 16, 1954, ch. 736, 68A Stat. 75; Pub. L. 94-455, title XIX, 
Sec. 1901(a)(35), Oct. 4, 1976, 90 Stat. 1770; Pub. L. 95-600, title 
III, Sec. 301(b)(4), Nov. 6, 1978, 92 Stat. 2820; Pub. L. 101-508, title 
XI, Sec. 11801(c)(8)(C), Nov. 5, 1990, 104 Stat. 1388-524; Pub. L. 104-
188, title I, Sec. 1704(t)(49), Aug. 20, 1996, 110 Stat. 1890.)

                       References in Text

    The Internal Revenue Code of 1939, referred to in subsec. (b)(2)(D), 
is act Feb. 10, 1939, ch. 2, 53 Stat. 1, as amended. Prior to the 
enactment of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], 
the 1939 Code was classified to former Title 26, Internal Revenue Code. 
For table of comparisons of the 1939 Code to the 1986 Code, see Table I 
preceding section 1 of this title.


                               Amendments

    1996--Subsec. (b)(2)(D). Pub. L. 104-188 provided that section 
11801(c)(8)(C) of Pub. L. 101-508 shall be applied as if 
``reorganizations'' appeared instead of ``reorganization'' in the 
material proposed to be stricken. See 1990 Amendment note below.
    1990--Subsec. (b)(2)(D). Pub. L. 101-508 which directed that ``, a 
transaction to which section 371 (relating to insolvency reorganization) 
applies,'' be struck out was executed by striking out ``, a transaction 
to which section 371 (relating to insolvency reorganizations) applies,'' 
after ``(as defined in section 368(a))''. See 1996 Amendment note above.
    1978--Subsec. (a)(2)(B). Pub. L. 95-600 substituted ``the highest 
rate of tax specified in section 11(b)'' for ``the sum of the normal tax 
rate and the surtax rate for the taxable year specified in section 11''.
    1976--Subsec. (b)(2). Pub. L. 94-455 divided existing provisions 
into subpars. (A), (B), (C), and (D), added headings for subpars. (A), 
(B), (C), and (D), and, in subpar. (C) as so redesignated, substituted 
``prescribed by the Secretary'' for ``prescribed by the Secretary or his 
delegate''.


                    Effective Date of 1978 Amendment

    Amendment by Pub. L. 95-600 applicable to taxable years beginning 
after Dec. 31, 1978, see section 301(c) of Pub. L. 95-600, set out as a 
note under section 11 of this title.


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-455 effective for taxable years beginning 
after Dec. 31, 1976, see section 1901(d) of Pub. L. 94-455, set out as a 
note under section 2 of this title.


                            Savings Provision

    For provisions that nothing in amendment by Pub. L. 101-508 be 
construed to affect treatment of certain transactions occurring, 
property acquired, or items of income, loss, deduction, or credit taken 
into account prior to Nov. 5, 1990, for purposes of determining 
liability for tax for periods ending after Nov. 5, 1990, see section 
11821(b) of Pub. L. 101-508, set out as a note under section 29 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 172, 244, 246 of this title.
