Under the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) of 2003 (Public Law 108-27), the general rate of tax applicable to net capital gain for individuals is reduced from 20% to 15% and 10% to 5% for certain individuals on or after May 6, 2003. These new capital gains rates also apply to qualified dividend income under new section 1(h)(11). The new rates apply to capital gains (including installment payments) occurring on or after May 6, 2003, and to all qualified dividends paid in 2003. For Post-May 5 capital gains, the 8% rate for 5-year gain is replaced by the new 5% rate, which applies to all property held for more than 1 year.

For 2003, Form 1099-DIV was reformatted to two forms per page to allow reporting of qualified dividends and capital gain distributions at the new rates. You are required to report the dividends that qualify for the 5% and 15% capital gains rates in new Box 1b, Qualified dividends. Capital gain distributions that qualify for the 5% and 15% capital gains rates are reported in new Box 2b, Post-May 5 capital gain distr.

Application of the new law to dividends of foreign corporations, regulated investment companies, and real estate investment trusts is discussed in the instructions below.

In addition to these specific instructions, you should also use the 2003 General Instructions for Forms 1099, 1098, 5498, and W-2G. Those general instructions include information about:

You can get the general instructions from the IRS website at www.irs.gov or by calling 1-800-TAX-FORM (1-800-829-3676).