Auditor. Upon that value the State Auditor shall then calculate the amount of the said tax, as hereinbefore provided, and shall certify the same to the State Treasurer for collection. No county, city or town shall be allowed to collect any taxes under this section. Provided, that it is the intention of this section to levy upon railroads a license or privilege tax for the privilege of engaging in intrastate commerce carried on wholly within the State of North Carolina and not a part of interstate or foreign commerce; that the tax provided for in this section is not intended to be a tax on the privilege of engaging in interstate commerce, nor is it intended to be a tax on the business of interstate commerce, nor is it intended to be a tax having any relation to the interstate or foreign business or commerce in which any such railroad company may be engaged in addition to its business in this State.

1921, c. 34, s. 78; Ex. Session, 1921, c. 102, s. 2.

SUBCHAPTER II. INCOME TAX OR TAX ON PROFITS.

By constitutional amendment ratified in November, 1920, an important change was made in corporation taxation. By virtue of that amendment, Article V, Sec. 3, contains the following:

"The General Assembly may also tax trades, professions, franchise and income: Provided, the rate of tax on incomes shall not in any case exceed six percent."

Certain exemptions are allowed to individuals, but none to corporations.

The General Assembly on March 8th, 1921, enacted a comprehensive act putting in force the Constitutional Amendment above referred to. Schedule "D" of the Revenue Act, 1921, is devoted to the income tax; and imposes tax upon incomes received during 1921 to be paid in 1922. As this is a recent enactment, not yet construed by any court, it is here given in its entirety.

ART. 5. SHORT TITLE AND DEFINITIONS.

898. Short title. This act shall be known and may be cited as The Income Tax Act of 1921.

1921, c. 34, s. 100.

899. Purpose of act; when effective. The general purpose of this act is to impose a tax, for the use of the state government,

upon the net income for the calendar year 1921, in excess of exemptions herein set out, collectible in the year 1922, and annually thereafter.

1. Of every citizen of the state.

2. Of every domestic corporation.

3. Of every foreign corporation and of every nonresident individual having a business or agency in this state, in proportion to the net income of such business or agency.

Except as otherwise provided in this act the purpose is to conform to the definitions of income in the revenue laws of the United States government and regulations made under its authority, in so far as they apply.

The tax imposed upon the net income of corporations in this schedule is in addition to the tax imposed under schedule C of this act.

1921, c. 34, s. 101; Ex. Session 1921, c. 102, s. 4.

900. Definitions. For the purpose of this act and unless otherwise required by the context:

1. The word "commissioner" means the state commissioner of revenue.

2. The word "taxpayer" includes any individual, corporation or fiduciary subject to the tax imposed by this act.

3. The word "individual" means a natural person.

4. The word "fiduciary" means a guardian, trustee, executor, administrator, receiver, conservator, or any person, whether individual or corporation, acting in any fiduciary capacity for any person, estate or trust.

5. The word "person" includes individuals, fiduciaries, partnerships and corporations.

6. The word "corporation" includes joint-stock companies or associations and insurance companies.

7. The words "domestic corporation" mean any corporation organized under the laws of this state.

8. The words "foreign corporation" mean any corporation other than a domestic corporation.

9. The words "tax year" mean the calendar year in which the tax is payable.

10. The words "income year" mean the calendar year or the fiscal year, upon the basis of which the net income is computed under this act; if no fiscal year has been established they mean the calendar year.

11. The words "fiscal year" mean an income year, ending on the last day of any month other than December.

12. The word "paid" for the purposes of the deductions under this act means "paid or accrued" or "paid or incurred,” and the words "paid or accured," "paid or incurred," and "incurred," shall be construed according to the method of accounting upon the basis of which the net income is computed under this act. The word "received" for the purpose of the computation of the net income under this act means "received or accrued," and the words "received or accrued" shall be construed according to the method of accounting upon the basis of which the net income is computed under this act.

13. The word "resident" applies only to individuals, and includes for the purpose of determining liability to the tax imposed by this act, with reference to the income of any income year, any individual who shall be a resident of the state on the first day of the tax year. In the absence of other satisfactory indicia the residence of a person who has two or more places in which he occasionally dwells may be determined with reference to the place at which the individual lived the longest period of time during the income year.

14. The words "foreign country" mean any jurisdiction other than one embraced within the United States. The words "United States" when used in a geographical sense, include the States, the Territories of Alaska and Hawaii, the District of Columbia, and the possessions of the United States.

1921, c. 34, s. 102.

ART. 6. IMPOSITION OF TAX.

901. Tax on individuals. A tax is hereby imposed upon every resident of the state, which tax shall be levied, collected and paid. annually, with respect to the net income of the taxpayer as herein defined, and upon income earned within this state of every nonresident having a business or agency in the state, computed at the following rates, after deducting the exemptions provided in this act:

On the excess over the amount legally exempted up to twentyfive hundred dollars, one per cent:

On the excess above twenty-five hundred dollars and up to five thousand dollars, one and one-half per cent.

On the excess above five thousand dollars and up to seven thousand, five hundred dollars, two per cent.

On the excess above seven thousand, five hundred dollars and up to ten thousand dollars, two and one-half per cent.

On the excess over ten thousand dollars, three per cent. 1921, c. 34, s. 200.

902. Tax on corporations. Every corporation organized under the laws of this state shall pay annually an income tax equivalent to three per cent of the entire net income of such corporation, as herein defined, received by such corporation during the income year; and every foreign corporation doing business in this state shall pay annually an income tax equivalent to three per cent of a proportion of its entire net income, to be determined according to the following rules:

In cases of a company other than companies mentioned in the next succeeding section, deriving profits principally from the own ership, sale, or rental of real estate or from the manufacture, sale, or use of tangible personal property, such proportion of its entire net income as the fair cash value of its real estate and tangible personal property in this state on the date of the close of the fiscal year of such company in the income year is to be fair cash value of its entire real estate and tangible personal property then owned by it, with no deduction on account of incumbrances thereon.

In case of a corporation deriving profits principally from the holding or sale of intangible property, such proportion as its gross receipts in this state for the year ended on the date of the close of its fiscal year next preceding is to its gross receipts for such year within and without the state.

1921, c. 34, s. 201; Ex. Session 1921, c. 102, s. 5.

903. Railroads and public-service corporations; basis of ascertaining net income. The basis of ascertaining the net income of every corporation engaged in the business of operating a steam or electric railroad, express service, telephone or telegraph business, or other form of public service, when such company is required to keep records according to the standard classification of accounting of the interstate commerce commission, shall be the "net operating income" of such corporations as shown by their records kept in accordance with that standard classification of accounts, when their business is wholly within this state, and when their business is in part within and in part without the

state their net income within this state shall be ascertained by taking their gross "operating revenues" within this state, including in their gross "operating revenues" within this state the equal mileage proportion within this state of their interstate business and deducting from their gross "operating revenues" the proportionate average of "operating expenses," or "operating ratio," for their whole business, as shown by the interstate commerce commission standard classification of accounts. From the net operating income thus ascertained shall be deducted "uncollectible revenue," and taxes paid in this state for the income year, other than income taxes and war profits and excess profits taxes, and the balance shall be deemed to be their net income taxable under this act.

1921, c. 34, s. 202.

904. Car hire considered. In determining the taxable income of a corporation engaged in the business of operating a railroad. under the preceding section, section 202 (herein 903), in the case of a railroad located entirely within this state, the net operating income shall be increased or decreased to the extent of any credit or debit balance received or paid, as the case may be, on account of car hire; and when any railroad is located partly within and partly without this state, then said net operating income shall be increased or decreased to the extent of an equal mileage proportion within this state of any credit or debit balance, received or paid, as the case may be, on account of car hire. 1921, c. 35, s. 1.

905. Organizations that are exempt. The following organizations shall be exempt from taxation under this act:

(1) Fraternal beneficiary societies, orders or associations, (a) operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and (b) providing for the payment of life, sick, accident or other benefits to the members of such society, order or association or their dependents.

(2) Building and loan associations and co-oprative banks without capital stock, organized and operated for mutual purposes and without profits.

(3) Cemetery corporations and corporations organized for religious, charitable, scientific, or educational purposes, or for the prevention of cruelty to children or animals, no part of the net earnings of which inures to the benefit of any private stockholder or individual.