INCREASE IN RATE OF CORPORATION NORMAL TAX.

SEC. 121. INCREASE IN RATE OF CORPORATION NORMAL TAX. (a) Amendment of Section 13.—Subsections (a) and (b) of section 13 (relating to normal tax on corporations) are hereby amended to read as follows: “(a) Definitions.—For the purposes of this chapter— “(1) Adjusted net income.—The term ‘adjusted net income’ means the net income minus the credit provided in section 26 (a), relating to interest on certain obligations of the United States and Government corporations. “(2) Normal-tax net income.— The term ‘normal-tax net income’ means the adjusted net income minus the sum of the following credits: “(A) The credit for dividends received provided in section 26 (b); “(B) In the case of a public utility, the credit for dividends paid on its preferred stock provided in section 26 (h); and 65 Stat. 466 “(C) In the case of a western hemisphere trade corporation (as defined in section 109), the credit provided in section 26 (i). “(b) Imposition of Tax.—There shall be levied, collected, and paid for each taxable year upon the normal-tax net income of every corporation (except a corporation subject to a tax imposed by section 231 (a), Supplement G, or Supplement Q)— “(1) Calendar year 1951.—In the case of a taxable year beginning on January 1, 1951, and ending on December 31, 1951, a tax of 28¾ per centum of the normal-tax net income. “(2) Taxable years beginning after march 31, 1951, and before April 1, 1954.—In the case of taxable years beginning after March 31, 1951, and before April 1, 1954, a tax of 30 per centum of the normal-tax income. “(3) Taxable years beginning after march 31, 1954.—In the case of taxable years beginning after March 31, 1954, a tax of 25 per centum of the normal-tax net income.” (b) Maximum Tax.—Section 430 (a) (2) (relating to the limitation on the rate of the excess profits tax) is hereby amended as follows: (1) By inserting after “(2)” the following: “(A) in the case of taxable years ending before April 1, 1951,”. (2) By striking out the period at the end of paragraph (2) and inserting “, or” and by adding after paragraph (2) the following: “(B) in the case of taxable years beginning on January 1, 1951, and ending on December 31, 1951, an amount equal to 17¼ per centum of the excess profits net income for the taxable year, except that in the case of an affiliated group of includible corporations making or required to make a consolidated return for the taxable year under section 141, such amount shall be reduced by an amount which bears the same ratio (but not in excess of 100 per centum) to the increase of 2 per centum in the surtax imposed by reason of section 141 (c) as the amount of the consolidated excess profits net income bears to the amount of the consolidated corporation surtax net income, or “(C) in the case of taxable years beginning after March 31, 1951, an amount equal to 18 per centum of the excess profits net income for the taxable year, except that in the case of an affiliated group of includible corporations making or required to make a consolidated return for the taxable year under section 141, such amount shall be reduced by an amount which bears the same ratio (but not in excess of 100 per centum) to the increase of 2 per centum in the surtax imposed by reason of section 141 (c) as the amount of the consolidated excess profits net income bears to the amount of the consolidated corporation surtax net income, or”. (c) Mutual Insurance Companies Other Than Life or Marine.— (1) Section 207 (a) (1) (relating to normal tax and surtax on mutual insurance companies, other than life or marine) is hereby amended by striking out subparagraphs (A) and (B) and inserting in lieu thereof the following: “(A) Taxable Years Beginning After December 31, 1950, and Before April 1, 1951.— In the case of taxable years beginning after December 31, 1950, and before April 1, 1951, and ending after March 31, 1951— “(i) Normal tax.—A normal tax of 28¾ per centum of the normal-tax net income, or 57½ per centum of the 65 Stat. 467 amount by which the normal-tax net income exceeds $3,000, whichever is the lesser; plus “(ii) Surtax.—A surtax of 22 per centum of the corporation surtax net income in excess of $25,000. “(B) Taxable Years Beginning After March 31, 1951, and Before April 1, 1954.— In the case of taxable years beginning after March 31, 1951, and before April 1, 1954— “(i) Normal tax.—A normal tax of 30 per centum of the normal-tax net income, or 60 per centum of the amount by which the normal-tax net income exceeds $3,000, whichever is the lesser; plus “(ii) Surtax.—A surtax of 22 per centum of the corporation surtax net income in excess of $25,000. “(C) Taxable Years Beginning After March 31, 1954.— In the case of a taxable year beginning after March 31, 1954— “(i) Normal tax.—A normal tax of 25 per centum of the normal-tax net income, or 50 per centum of the amount by which the normal-tax net income exceeds $3,000, whichever is the lesser; plus “(ii) Surtax.—A surtax of 22 per centum of the corporation surtax net income in excess of $25,000.” (2) Section 207 (a) (3) (relating to a normal tax and surtax on interinsurers and reciprocal underwriters) is hereby amended by striking out subparagraphs (A) and (B) and inserting in lieu thereof the following: “(A) Taxable Years Beginning After December 31, 1950, and before April 1, 1951.— In the case of taxable years beginning after December 31, 1950, and before April 1, 1951, and ending after March 31, 1951— “(i) Normal tax.—A normal tax of 28¾ per centum of the normal-tax net income, or 57½ per centum of the amount by which the normal-tax net income exceeds $50,000, whichever is the lesser; plus “(ii) Surtax.—A surtax of 22 per centum of the corporation surtax net income in excess of $25,000, or 33 per centum of the amount by which the corporation surtax net income exceeds $50,000, whichever is the lesser. “(B) Taxable Years Beginning After March 31, 1951, and Before April 1, 1954.— In the case of taxable years beginning after March 31, 1951, and before April 1, 1954— “(i) Normal tax.—A normal tax of 30 per centum of the normal-tax net income, or 60 per centum of the amount by which the normal-tax net income exceeds $50,000, whichever is the lesser; plus “(ii) Surtax.—A surtax of 22 per centum of the corporation surtax net income in excess of $25,000, or 33 per centum of the amount by which the corporation surtax net income exceeds $50,000, whichever is the lesser. “(C) Taxable Years Beginning After March 31, 1954.— In the case of a taxable year beginning after March 31, 1954— “(i) Normal tax.—A normal tax of 25 per centum of the normal-tax net income, or 50 per centum of the amount by which the normal-tax net income exceeds $50,000, whichever is the lesser; plus “(ii) Surtax.—A surtax of 22 per centum of the corporation surtax net income in excess of $25,000, or 33 per centum of the amount by which the corporation surtax net income exceeds $50,000, whichever is the lesser.” 65 Stat. 468 (d) Regulated Investment Companies.—Section 362 (b) (relating to tax on regulated investment companies) is hereby amended by striking out paragraphs (3) and (4) and inserting in lieu thereof the following: “(3) In the case of taxable years beginning after December 31, 1950, and before April 1, 1951, and ending after March 31, 1951, there shall be levied, collected, and paid for each taxable year upon its Supplement Q net income a tax equal to 28¾ per centum of the amount thereof. In the case of taxable years beginning after March 31, 1951, and before April 1, 1954, there shall be levied, collected, and paid for each taxable year upon its Supplement Q net income a tax equal to 30 per centum of the amount thereof. In the case of taxable years beginning after March 31, 1954, there shall be levied, collected, and paid for each taxable year upon its Supplement Q net income a tax equal to 25 per centum of the amount thereof. “(4) In the case of taxable years beginning after December 31, 1950, there shall be levied, collected, and paid for each taxable year upon its Supplement Q surtax net income a tax equal to 22 per centum of the amount thereof in excess of $25,000.” (e) Business Income of Certain Section 101 Organizations.—Section 421 (a) (1) (relating to imposition of tax on business income of certain section 101 organizations) is hereby amended by inserting before the period at the end thereof the following: except that (A) in the case of taxable years beginning before April 1, 1951, and ending after March 31, 1951, the normal tax shall be 28¾ per centum of the Supplement U net income, and (B) in the case of taxable years beginning after March 31, 1951, and before April 1, 1954, the normal tax shall be 30 per centum of the Supplement U net income”. (f) Amendment of Section 15.—Section 15 (relating to surtax on corporations) is hereby amended to read as follows: “SEC. 15. SURTAX ON CORPORATIONS. “(a) Corporation Surtax Net Income.—For the purposes of this chapter, the term ‘corporation surtax net income’ means the net income minus the sum of the following credits: “(1) The credit for dividends received provided in section 26(b); “(2) In the case of a public utility, the credit for dividends paid on its preferred stock provided in section 26 (h); “(3) In the case of a western hemisphere trade corporation (as defined in section 109), the credit provided in section 26 (i). “(b) Imposition of Tax.—There shall be levied, collected, and paid for each taxable year upon the corporation surtax net income of every corporation (except a corporation subject to a tax imposed by section 231 (a), Supplement G, or Supplement Q) a surtax of 22 per centum of the amount of the corporation surtax net income in excess of $25,000. “(c) Disallowance of Surtax Exemption and Minimum Excess Profits Credit.—If any corporation transfers, on or after January 1, 1951, all or part of its property (other than money) to another corporation which was created for the purpose of acquiring such property or which was not actively engaged in business at the time of such acquisition, and if after such transfer the transferor corporation or its stockholders, or both, are in control of such transferee corporation during any part of the taxable year of such transferee corporation, then such transferee corporation shall not for such tax- 65 Stat. 469 able year (except as may be otherwise determined under section 129 (b)) be allowed either the $25,000 exemption from surtax provided in subsection (b) or the $25,000 minimum excess profits credit provided in the last sentence of section 431, unless such transferee corporation shall establish by the clear preponderance of the evidence that the securing of such exemption or credit was not a major purpose of such transfer. For the purposes of this subsection, control means the ownership of stock possessing at least 80 per centum of the total combined voting power of all classes of stock entitled to vote or at least 80 per centum of the total value of shares of all classes of stock of the corporation. In determining the ownership of stock for the purpose of this subsection, the ownership of stock shall be determined in accordance with the provisions of section 503, except that constructive ownership under section 503 (a) (2) shall be determined only with respect to the individual’s spouse and minor children. The provisions of section 129 (b), and the authority of the Secretary under such section, shall, to the extent not inconsistent with the provisions of this subsection, be applicable to this subsection. This subsection shall not apply to any taxable year with respect to which the tax imposed by subchapter D of this chapter is not in effect” (g) Technical Amendment.—Section 14 (relating to normal tax on special classes of corporations in the case of taxable years beginning before July 1, 1950) is hereby repealed.