As per becker texbook page F7-20 VI-Treasury Stock

"a portion of retained earnings equal to the cost of treasury stock may be restricted and may not be used as a basis for the declaration or payment of dividends - depending on applicable state law"

Can somebody explain the bolded statement? i'm confused on whether should be subtracted as a separate line item to come up with total stockholders' equity or should be appropriated from the retained eanings.

refer to page F7-14 "sample of consolidated stockholders' equity"

Thanks