Dividends that meet Internal Revenue Service regulations for exclusion or partial exclusion from federal income taxes, or that benefit from a reduced tax rate. For example, corporations are permitted to exclude a portion of all of the qualifying dividends received from stock owned in domestic corporations. The Jobs and Growth Tax Relief Reconciliation Act of 2003 offered a reduced tax rate on qualifying dividends paid by an American company or a qualified foreign company. A minimum holding period is required in order to benefit from the reduced tax rate.