The Abbeville press and banner. [volume] (Abbeville, S.C.) 1869-1924, 1918-01-15
EXAMPLE HOW TO CALCULATE
WAR EXCESS PROFITS TAX


C. Howard, Collector of Internal
Revenue, Columbia, S. G., as lnfor-
nation to those who may be inter
ested.
Under Title 2, of the Act of Oct
ober 8, 1917, there is imposed upon
corporations, joint stock companies
partnerships, and individuals, a tax
known as the War Excess Profits
Tax"
It is intended by this Title, under
Section 201, to impose a tax only
upon that portion of the net earn
ings of a corporation, joint stock
company, partnership, or individual
for the year 1917, and subsequent
wears, as exceed the average net
earnings for the three prewar years,
namely, 1911, 1912, and 1913, upon
like invested capital, or upon the
same ratio as the average net earn
ings bear to the invested capital,
(but in no case to be less than Z
per cent, nor more than Q per cent.
upon the capital invested), plus a
specific deduction of $4,000 for a
corporation, or joint stock company
andi the sum of $4,000, for a domes-
tic partnership or individual. That
is to say if the average net earnings
for the three prewar years were less
than 7 per cent. upon the invested
capital for those years, and the net
earnings for 1917 were in excess
of the average earnings for the
three prewar years, but were not
in excess of 7 per cent. of the in
vested capital, there would be no
tax liability. \
If the average net earnings for
the three prewar years was 9 per
cent. upon the invested capital, and
the net earnings for 1917 do not
exceed 9 per cent. upon the invest
ed capital, there would be no tax
liability. However, of the average
net earnings for the three prewa,
years were Is per cent upon the in
vested capital, and the net earnings
for 1917, amounted to Is per cent
upon the invested capital, there
would be tax liability upon tn:
graduated scale prescribed in the
law upon that portion of the ne1
earnings exceeding 9 per cent. or
the invested capital for 1917, less
the specific deduction allowed by
law. That is to say no tax will be
imposed under this section where
the net earnings are less than 7 pei
cent. upon the invested capital fol
that year, but a tax will be imposed
in all cases where the net earnings
exceed per cent. upon the invest
ed capital for 1917. In all acres
where the net earnings are between
z per cent. and 9 per cent in 1917
upon the invested capital the taa
liability will depend upon the fact
as to whether the average net earn
ings for the three prewar years
were in excess of the percentage
shown in 1917, or less than the per.
centage shown. If it is shown that
the percentage of earnings on in.
vested capital was greater than the
percentage shown for 1917 between
7 per cent and 9 per cent on the in
vested capital, then there will be
no tax imposed. But, if it is shown
that the earnings for 1917 are be-
tween and 9 per cent, and greater
than the average percent earned on
invested capital in the three prewar
years, a tax will be imposed on the
excess for 1917, less the specific de-
duction. Or, in case of a corpora
ton, joint stock company, partner
ship, or individual may so select,
they can use 7 per cent on invested
capital for 1917 as a basis for ap-
plying the Excess Profits Tax in
stead of arriving at comparative
statement between the three prewar
years, and the calendar year 1917.
Invested capital lis construed to
mean so much of the capital, sur
plus, and undivided profits learned
prior to January 1st, 1910 as are
used or employed in the business in