Common Equity

Definition

Common equity is the residual ownership class of a company, usually common stock, entitled to whatever value remains after creditors and preferred holders are paid and typically carrying voting rights; its rights are set by state corporate law and the company's charter. Common stock is a security under federal securities law, so its sale must be registered or fit an exemption^[1], and dividends on it from domestic corporations can be qualified dividend income taxed at capital gain rates.^[2]

Federal law

Formed under state law. No Act of Congress creates it; the federal laws below apply to it as described.

1. Securities Act of 1933, Act of May 27, 1933, ch. 38, title I, § 2(1), 48 Stat. 74. Securities Act of 1933 § 2(1) (now § 2(a)(1)): 'security' includes stock, bringing common stock offerings under federal securities law. Official text: govinfo.gov, U.S. Government Publishing Office.
2. Jobs and Growth Tax Relief Reconciliation Act of 2003, Pub. L. 108-27, § 302, 117 Stat. 760. Created 'qualified dividend income' (26 U.S.C. § 1(h)(11)), taxing qualifying dividends from domestic corporations at capital gain rates. Official text: govinfo.gov, U.S. Government Publishing Office.
3. American Taxpayer Relief Act of 2012, Pub. L. 112-240, § 102, 126 Stat. 2318. Made the 2003 qualified-dividend rate treatment permanent by striking the sunset in Pub. L. 108-27 § 303. Official text: govinfo.gov, U.S. Government Publishing Office.