Dividends 

Extending the Dividend Tax Rate

Dividends are an important component of shareholder value for the shareholder-owned electric utility industry. The electric power industry continues to pay out a higher percentage of earnings than any other U.S. business sector.

Investors in electric companies greatly benefited from the Jobs and Growth Tax Reconciliation Act of 2003, which temporarily reduced the top individual tax rate on dividends to 15 percent. Prior to enactment of this law, the maximum tax rate on dividend income was 38.6 percent. As a result, more companies are offering dividends—and dividends are larger.

EEI and the shareholder-owned electric utilities that we represent strongly support an extension of the dividend tax rate reduction beyond 2010. EEI is part of the national grassoroots advocacy campaign, Defend My Dividend, to help educate policymakers and the public about the benefits of the dividend tax rate reduction.

In April 2008, EEI and the American Gas Association released a Study, prepared by Ernst & Young, that principally uses IRS data to document the age and income demographics of the average utility shareholder. Among the study's findings:

• More than half of the tax returns with qualified dividends from direct and indirect utility stock holdings are from taxpayers age 50 and older and from taxpayers with incomes less than $75,000.

Resources

• The Dividend Tax Rate Reduction: A Demographic Profile of Utility Shareholders 
  Prepared by Ernst & Young for the Edison Electric Institute and the American Gas Association, April 2008.
• Defend My Dividend
  This national grassroots advocacy campaign gives utility investors a powerful and unified voice with a single mission: to make permanent the current 15 percent dividend tax rate beyond 2010.