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 WAR 13 1917 
 
 The Excess Profits 
 Tax Law 
 
 Act Approved March 3, 1917 
 
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 Guaranty Trust Company 
 of New York 
 
The Excess Profits 
 Tax Law 
 
 Act approved March 3, 1917 
 
 Guaranty Trust Company 
 of New York 
 
 140 Broadway 
 
 Fifth Avenue Office 
 Fifth Avenue and 43d Street 
 
 London Office Paris Office 
 
 32 Lombard Street, E. C. Rue des Italiens 1 & 3 
 
 (Opens May, 1917) 
 
■t- 
 
 ^i€<A 
 
 COPYRIGHT, 1917 
 BY GUARANTY TRUST COMPANY OF NEW YORK 
 
Contents 
 
 
 
 PAGE 
 
 Foreword 
 
 5 
 
 Synopsis of Law 
 
 7 
 
 Full Text of Law 
 
 14 
 
 355987 
 
Digitized by the Internet Arcinive 
 
 in 2008 witin funding from 
 
 IVIicrosoft Corporation 
 
 littp://www.arcliive.org/details/excessprofitstaxOOguarricli 
 
Foreword 
 
 The tax on excess profits is in addition to all 
 taxes heretofore imposed, and is eight per cent- 
 um upon the amount of annual net income in 
 excess of the sum of $5,000 and eight per 
 centum of the actual capital invested. 
 
 For example, a domestic corporation having 
 $200,000 actual capital invested, and $40,000 
 annual net earnings, would calculate the amount 
 of its tax as follows : 
 
 Net annual income 
 
 
 $40,000 
 
 Amount exempt: 
 
 
 
 Specific exemption 
 
 $5,000 
 
 
 8% of $200,000 
 
 16,000 
 
 
 Total exemption 
 
 
 $21,000 
 
 Balance subject to 8% tax 
 
 $19,000 
 
 Amount of Tax 
 
 
 $1,520 
 
 Foreign corporations and partnerships, as well 
 as resident corporations and partnerships, are 
 subject to the tax, except that the tax is assessed 
 against foreign corporations and partnerships 
 only on income received from sources within the 
 United States, and exemptions are allowed pro- 
 portionately. 
 
 Net income, as shown by corporations on 
 returns filed pursuant to the provisions of the 
 
 [5] 
 
Income Tax Law, Act of September 8, 1916, is 
 used as the basis for the assessment of the tax 
 and returns filed for the year of 1917, by cor- 
 porations having a net income in excess of 
 $5,000, shall include a full statement of capital 
 invested. Partnerships having a net income of 
 $5,000, or over must file returns setting forth the 
 actual capital invested and the gross income for 
 the taxable year. For the purpose of computing 
 net income, partnerships are allowed the same 
 deductions allowed individuals under Sections 
 five and six of the Income Tax Law. 
 
 Corporations exempt from the Federal In- 
 come Tax and partnerships similarly engaged 
 are exempt from taxation under the Excess 
 Profits Tax Law. Partnerships whose income 
 is derived from agriculture or from personal 
 services are also exempt. 
 
 The first taxable year is the calendar year end- 
 ing December thirty-first, 1917, but corporations 
 and partnerships having a fiscal year other than 
 the taxable year provided by law may make 
 returns for their fiscal year in accordance with 
 the provisions of the Income Tax Law. 
 
 March 3, 1917 
 
 [6] 
 
Synopsis of 
 
 The Excess Profits Tax Law 
 
 /. Definitions — (Sec. 200). 
 
 1. "Corporation" — the term "corporation" 
 includes joint stock companies or associ- 
 ations, and insurance companies. 
 
 2. "United States"— the term "United 
 States" means only the States, the Terri- 
 tories of Alaska and Hawaii, and the Dis- 
 trict of Columbia. 
 
 3. " Taxable Year" — the term "taxable year" 
 means twelve months ending December 
 thirty-first, except in the case of a corpora- 
 tion or partnership allowed to fix its own 
 fiscal year, in which case it means such 
 fiscal year. 
 
 4. "First Taxable Year"— the "first taxable 
 year" shall be the year ending December 
 thirty-first, nineteen hundred and seven- 
 teen. 
 
 [7] 
 
11. Corporations and Partnerships subject to 
 Tax— (Sec. 201). 
 
 1. Domestic corporations and partnerships 
 
 are subject to a tax of 8 per centum on the 
 amount by which the net income exceeds 
 the sum of (a) $5,000 and (b) 8 per centum 
 of the actual capital invested. 
 
 Excerption — Income derived from business 
 of life, health and accident insurance 
 combined in one policy on weekly pay- 
 ment plan is exempt. 
 
 2. Foreign corporations and partnerships 
 including those located in the Philippine 
 Islands and Porto Rico are subject to tax 
 as follows: 
 
 a. Where actual capital is invested and 
 used or employed in the business in 
 the United States, a tax of 8 per 
 centum upon the amount of net in- 
 come received from all sources with- 
 in the United States in excess of the 
 sum of (1) 8 per centum of the actual 
 capital invested and used or em- 
 [8] 
 
ployed in the business in the United 
 States, and (2) that proportion of 
 $5,000, which the entire actual 
 capital invested and used or em- 
 ployed in the business in the United 
 States bears to the entire actual 
 capital invested. 
 
 b. Where no actual capital is used or 
 employed in the business in the 
 United States, a tax of 8 per centum 
 upon that portion of net income 
 received from sources within the 
 United States in excess of the sum 
 of (1) 8 per centum of that propor- 
 tion of the entire actual capital 
 invested and used or employed in 
 the business which the net income 
 from sources within the United 
 States bears to the entire net income, 
 and (2) that proportion of $5,000, 
 which the net income from sources 
 within the United States bears to 
 the entire net income. 
 
 [9] 
 
III. Actual Capital Invested Includes — 
 
 {Sec. 202). 
 
 1. Actual cash paid in, 
 
 2. Actual cash value, at the time of payment, 
 of assets other than cash paid in, and 
 
 3. Paid in or earned surplus and undivided 
 profits used or employed in the business. 
 
 4. Provided that money or property borrowed 
 
 shall not be included. 
 
 IV. Net Income— {Sec. 203). 
 
 1. Tax shall be computed on the basis of net 
 income shown by income tax return made 
 in pursuance of the Income Tax Law, Act 
 of Congress lapproved Sept. 8, 1916, and 
 shall be assessed and collected at the same 
 time and in the same manner. 
 
 2. A partnership shall have the same privi- 
 lege with respect to fixing its fiscal year as 
 a corporation under the Income Tax Law. 
 
 3. Where a corporation or partnership makes 
 return prior to March 1, 1918, covering its 
 
 [10] 
 
own fiscal year, and includes therein any 
 income received during the calendar year 
 ending December 31, 1916, the tax shall be 
 that proportion of the tax based upon such 
 full fiscal year which the time from Janu- 
 ary 1, 1917, to the end of such fiscal year 
 bears to the full fiscal year. 
 
 V. Corporations and Partnerships Exempt — 
 
 {Sec. 204). 
 
 1. Corporations exempt from tax under Sec- 
 
 tion 11, Federal Income Tax Law. 
 
 2. Partnerships doing or carrying on the same 
 
 business as exempt corporations, and 
 
 3. Partnerships whose income is derived from 
 agriculture or from personal services are 
 exempt from the provisions of the Excess 
 
 Profits Tax Law. 
 
 VI. Returns— (Sec. 205). 
 
 1. Corporations — Every corporation having a 
 net income of $5,000, or more, for the tax- 
 able year shall include in its income tax 
 
 [11] 
 
return a detailed statement of the actual 
 capital invested. 
 2. Partnerships — ^Every partnership having a 
 net income of $5,000 or more for the tax- 
 able year shall file a return setting forth 
 specifically the actual capital invested and 
 the gross income for the taxable year. For 
 the purpose of computing net income, part- 
 nerships shall be allowed like deductions as 
 are allowed to individuals under Sections 
 5 and 6 of the Income Tax Law, Act of 
 Congress approved September 8, 1916. 
 
 VII. Assessment, Remission, Collection and 
 Refund of Taxes — (Sec. 206). 
 All administrative, special and general 
 provisions of law, including the laws in re- 
 lation to the assessment, remission collec- 
 tion, and refund of internal revenue taxes 
 not inconsistent with the provisions of this 
 Law, and likewise all provisions of the In- 
 come Tstx Law relating to returns and pay- 
 ment of the tax imposed, including pro- 
 visions relating to penalties, are made ap- 
 plicable to taxes required by this law. 
 [12] 
 
VIII. Regulations of the Commissioner of 
 Internal Revenue — (Sec. 207). 
 
 The Commissioner of Internal Revenue, 
 with the approval of the Secretary of the 
 Treasury, shall make all necessary regula- 
 tions for carrying out the provisions of the 
 Law, and may require any corporation or 
 partnership subject to the provisions of the 
 Law to furnish him with such facts, data 
 and information as are necessary to collect 
 the tax. 
 
 [13] 
 
Definitions 
 
 "Corpor- 
 ation" 
 
 "United 
 States" 
 
 "Taxable 
 Year" 
 
 "First 
 
 Taxable 
 
 Year" 
 
 Taxable 
 Income 
 
 The 
 Excess Profits Tax Law 
 
 Title II of an Act entitled "An Act to provide increased 
 revenue to defray the expenses of the increased appropri- 
 ations for the Army and Navy and the extensions of fortifi- 
 cations, and for other purposes," Approved March 3, 1917. 
 
 Sec. 200. That when used in this title — 
 
 The term "corporation" includes joint-stock 
 companies or associations, and insurance com- 
 panies; 
 
 The term *' United States" means only the 
 States, the Territories of Alaska and Hawaii, and 
 the District of Columbia; and 
 
 The term "taxable year" means the twelve 
 months ending December thirty-first, except in 
 the case of a corporation or partnership allowed 
 to fix its own fiscal year, in which case it means 
 such fiscal year. The first taxable year shall be 
 the year ending December thirty-first, nineteen 
 hundred aind seventeen. 
 
 Sec. 201. That in addition to the taxes under 
 existing laws there shall be levied, assessed, col- 
 lected, and paid for each taxable year upon the 
 net income of every corporation and partnership 
 organized, authorized, or existing under the laws 
 of the United States, or of any State, Territory, 
 or District thereof, no matter how created or 
 organized, excepting income derived from the 
 
 [14] 
 
business of life, health, and accident insurance Domestic 
 combined in one policy issued on the weekly Corporations 
 premium payment plan, a tax of eight per centum g^- g ®^" 
 of the amount by which such net income exceeds 
 the sum of (a) $5,000 and (b) eight per centum of 
 the actual capital invested. 
 
 Every foreign corporation and partnership. Foreign 
 including corporations and partnerships of the and^lS'tner^ 
 Philippine Islands and Porto Rico, shall pay for ships 
 each taxable year a like tax upon the amount by 
 which its net income received from all sources 
 within the United States exceeds the sum of (a) 
 eight per centum of the actual capital invested Actual 
 and used or employed in the business in the United ^^^^^ i^' 
 States, and (b) that proportion of $5,000 which United 
 the entire actual capital invested and used or em- 
 ployed in the business in the United States bears 
 to the entire actual capital invested; and in case no 
 such capital is used or employed in the business 
 in the United States the tax shall be imposed upon Actual 
 
 that portion of such net income which is in excess Capital 
 
 . , - / \ . 1 • , not Invested 
 
 of the sum of (a) eight per centum of that propor- in United 
 
 tion of the entire actual capital invested and used States 
 
 or employed in the business which the net income 
 
 from sources within the United States bears to 
 
 the entire net income, and (b) that proportion of 
 
 $5,000 which the net income from sources within 
 
 the United States bears to the entire net income. 
 
 [15] 
 
 il 
 
•'Actual 
 Capital 
 Invested" 
 Defined 
 
 Computation 
 of Tax 
 
 Income Tax 
 Return as 
 Basis of 
 Assessment 
 
 Partnership 
 Fixing Fiscal 
 Year 
 
 Adjustment 
 of Tax where 
 Returned 
 Prior to 
 March 1,1918 
 
 Sec. 202. That for the purpose of this title, 
 actual capital invested means (1) actual cash paid 
 in, (2) the actual cash value, at the time of pay- 
 ment, of assets other than cash paid in, and (3) 
 paid in or earned surplus and undivided profits 
 used or employed in the business; but does not 
 include money or other property borrowed by the 
 corporation or partnership. 
 
 Sec. 203. That the tax herein imposed upon 
 corporations and partnerships shall be computed 
 upon the basis of the net income shown by their 
 income tax returns under Title I of the Act en- 
 titled "An Act to increase the revenue, and for 
 other purposes," approved September eighth, 
 nineteen hundred and sixteen, or under this title, 
 and shall be assessed and collected at the same 
 time and in the same manner as the income tax 
 due under Title I of such Act of September eighth, 
 nineteen hundred and sixteen: Provided, That 
 for the purpose of this title a partnership shall 
 have the same privilege with reference to fixing 
 its fiscal year as is accorded corporations under 
 section thirteen (a) of Title I of such Act of Sep- 
 tember eighth, nineteen hundred and sixteen: 
 And provided further. That where a corporation or 
 partnership makes return prior to March first, 
 nineteen hundred and eighteen, covering its own 
 fiscal year and includes therein any income re- 
 
 [16] 
 
ceived during the calendar year ending December 
 thirty-first, nineteen hundred and sixteen, the tax 
 herein imposed shall be that proportion of the tax 
 based upon such full fiscal year which the time 
 from January first, nineteen hundred and seven- 
 teen, to the end of such fiscal year bears to the 
 full fiscal year. 
 
 Sec. 204. That corporations exempt from tax Corporations 
 under the provisions of section eleven of Title I andPartner- 
 I. 1 A 1 r^ • 1 1 • shipsExempt 
 
 oi the Act approved September eighth, mneteen 
 
 hundred and sixteen, and partnerships carrying 
 on or doing the same business shall be exempt 
 from the provisions of this title, and the tax im- 
 posed by this title shall not attach to incomes of 
 partnerships derived from agriculture or from 
 personal services. 
 
 Sec. 205. That every corporation having a net Statement of 
 income of $5,000 or more for the taxable year ^^^^^, 
 making a return under Title I of such Act of Sep- invested by 
 
 tember eighth, nineteen hundred and sixteen, shall Corporation 
 «, Pi-»i»ii» 1 tobeincluded 
 
 tor the purposes oi this title include m such return in Return 
 
 a detailed statement of the actual capital invested. 
 
 Every partnership having a net income of $5,000 Return of 
 or more for the taxable year shall render a correct Partnership 
 return of the income of the partnership for the 
 taxable year, setting forth specifically the actual 
 capital invested and the gross income for such 
 year and the deductions hereinafter allowed. 
 Such returns shall be rendered at the same time 
 
 [17] 
 
Deductions 
 allowed Part- 
 nership 
 
 Administra- 
 tive, Special 
 and General 
 Provisions 
 of Law made 
 Applicable 
 Hereto 
 
 Regulations 
 
 Production 
 of Inform- 
 ation and 
 Data 
 
 and in the same manner and form as is prescribed 
 for income-tax returns under Title I of such Act 
 of September eighth, nineteen hundred and six- 
 teen. In computing net income of a partnership 
 for the purposes of this title there shall be allowed 
 like deductions as are allowed to individuals in 
 sections five (a) and six (a) of such Act of Septem- 
 ber eighth, nineteen hundred and sixteen. 
 
 Sec. 206. That all administrative, special, and 
 general provisions of law, including the laws in 
 relation to the assessment, remission, collection, 
 and refund of internal-revenue taxes not hereto- 
 fore specifically repealed and not inconsistent with 
 the provisions of this title are hereby extended and 
 made applicable to all the provisions of this title 
 and to the tax herein imposed, and all provisions 
 of Title I of such Act of September eighth, nine- 
 teen hundred and sixteen, relating to returns and 
 payment of the tax therein imposed, including 
 penalties, are hereby made applicable to the tax 
 required by this title. 
 
 Sec. 207. That the Commissioner of Internal 
 Revenue, with the approval of the Secretary of the 
 Treasury, shall make all necessary regulations for 
 carrying out the provisions of this title, and may 
 require any corporation or partnership subject to 
 the provisions of this title to furnish him with such 
 facts, data, and information as in his judgment are 
 necessary to collect the tax provided for in this title. 
 [18] 
 
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