Recent IRS guidance reduces the minimum aggregate amount of cash required for certain distributions of stock and cash to qualify for the dividends paid deduction.

In order to enhance liquidity of publicly offered real estate investment trusts (REITs) and regulated investment companies (RICs), the Internal Revenue Service (IRS) has published Revenue Procedure 2020-19, which temporarily reduces to 10% the minimum aggregate amount of cash required to be offered to shareholders for distributions of stock and cash to be treated as dividends. This modifies the safe harbor in Revenue Procedure 2017-45, which requires a minimum of 20% cash in the aggregate to be offered to shareholders. The modified rules apply to distributions declared on or after April 1, 2020, and on or before December 31, 2020.