Harrisburg telegraph. [volume] (Harrisburg, Pa.) 1879-1948, 1919-03-06
Corporation Income Tax


ever 1t received as dividends on the
stock of domestic corporations
Thirdly, having arrived at net in
come within the meaning of the law,
a credit of the amount of the excess
profits tax which the corporation
will be required to pay is to be al
lowed as deduction from net in
come. Fourthly, from this amount
there is to be subtracted $4,000 In
the case of every domestic corpora
ton. The difference between the
amount arrived at as above outlined
and the $4,000 here mentioned is
subject to tax at the rate OF IL per
cent.
An Illustration
In order to make what has been
said much clearer, let us assume the
following case: A corporation re-
ceived in 1918 an income OF
100000. One of the items of in
domestic corporations. The corpor-
alton paid in 1918 an excess-profits
tax of 1900 on it's 1917 income
and an income tax of $4,000 on its
1917 income. Its profits tax
on it's 1918 income will be $4,000.
What is the amount of its corpora
ton income tax? The solution is
thus obtained. To the 100000
which the corporation has shown as
its income must be added the
amount of its income and excess
profits tax paid during the year.
From this amount is to be sub
tracted $4,000 dividends received
by it on stock of other corporations.
1t is on the amount thus obtained,
$4,000, that its excess-profit tax
for 1918, payable during 1919. is
to be ascertained. We have assumed
in this case that the tax amounts
to $4,000. The difference between
the 100000 and the $4,000, or
$4,000. is to be further credited
with a $4,000 specific deduction
which is permitted to every domes-
tic corporation. Therefore, the in
come which is subject TO the cor
poration 12 per cent. tax, in the case
assumed, is $4,000, and the amount
of that tax is $10,440.
All of those corporations which
by reason of their nature were ex-
empt from corporation taxes in the
past are exempt from tax under the
new law. There has been a slight
broadening of the exemption in the
case of corporations organized and
operated exclusively for religious,
charitable, scientific or educational
purposes, no part of the net inome
of which inures to the benefit of
any private stockholder or individ-
ua,l by including also such associa-
tions when organized for the pre-
vention of cruelty to children or
animals. There has likewise been a
considerable change in the wording
of the exempt clause of cooperative
societies, such as farmers and fruit
growers or like associations.
In each OF our income tax laws en-
acted since the adoption of the six
teenth amendment to the Constitu-
ton there has been a rather arbi-
trary limit on the amount of in
terest paid which a corporation
might deduct from its gross income
in arriving at income subject to
tax. The new Revenue Act permits
corporations, as we'll as individuals,
to deduct all interest paid within
the taxable year, except that paid
in order to carry securities, the in
come from which is tax-exempt both
under the excess profits tax law and
the income tax law. An exception
is made even in this Limitation, how
ever. by permitting a corporation to
deduct all interest paid in carrying
securities issued by the United States
Government since September 1,
1917