NORTH CAROLINA GENERAL ASSEMBLY
1969 SESSION
CHAPTER 1124
SENATE BILL 805
AN ACT TO AMEND SUBCHAPTER I OF CHAPTER 105 OF THE GENERAL STATUTES TO ALLOW CORPORATIONS DOMICILED IN NORTH CAROLINA TO DEDUCT DIVIDENDS RECEIVED FROM CERTAIN SUBSIDIARY CORPORATIONS FOR INCOME TAX PURPOSES.
The General Assembly of North Carolina do enact:
Section 1. The Corporation Income Tax Act, being Article 4, Schedule D, Division I of Chapter 105 of the General Statutes is hereby amended as follows:
(a) Subsection (c) of G.S. 105-130.5 as the same appears in the 1967 Cumulative Supplement to Volume 2D of the General Statutes is hereby amended by adding a new subparagraph (4) at the end thereof, as follows:
"(4) No deduction shall be allowed for any direct or indirect expense applicable to dividend income fully deductible under G.S. 105-130.7(5)."
(b) G.S. 105.130.7 as the same appears in the 1967 Cumulative Supplement to Volume 2D of the General Statutes is hereby further amended by adding new subparagraphs (5) and (6) at the end thereof as follows:
"(5) Notwithstanding the provisions of subsections (1) through (4) of this Section, a corporation which, at the close of its taxable year, has its commercial domicile within North Carolina shall be allowed to deduct all dividends received from corporations in which it owns more than fifty percent (50%) of the outstanding voting stock."
"(6) Notwithstanding any other provisions of this division, a corporation which is a shareholder in a holding company having its commercial domicile in North Carolina shall be allowed as a deduction an amount equal to those dividends received by it from such holding company, multiplied by a fraction, the numerator of which shall be the dividends received by such holding company attributable to North Carolina, and the denominator of which shall be the gross dividends received by such holding company. For purposes of this Section, 'dividends attributable to North Carolina' shall be the amount of dividend income received by the holding company on stock owned in other corporations equal to the total of the proportion of each of such corporation's dividends as shall be determined deductible by the Commissioner under subsections (1) through (4) of this Section; provided that a holding company having its commercial domicile in North Carolina which owns more than fifty percent (50%) of the outstanding voting stock of one or more holding companies as defined in this subsection shall be permitted a deduction for all dividends received from such holding companies and all other corporations in which it owns more than fifty percent (50%) of the outstanding voting stock. A shareholder of such a holding company shall determine the deductible portion of its dividends received from such holding company as hereinabove provided except that the amounts received from a subsidiary holding company as 'dividends attributable to North Carolina' shall be determined as though the subsidiary corporation of the subsidiary holding company had paid the dividends directly to the parent holding company.
For the purposes of this Section and unless the context clearly requires a different meaning, 'holding company' shall mean any corporation having its commercial domicile in North Carolina whose ordinary gross income consists of fifty percent (50%) or more of dividend income received from corporations in which it owns more than fifty percent (50%) of the outstanding voting stock, and 'subsidiary' shall mean any corporation, more than fifty percent (50%) of whose outstanding voting stock is owned by another corporation."
Sec. 2. All laws and clauses of laws in conflict with this Act are hereby repealed.
Sec. 3. This Act shall be effective for taxable years beginning on and after January 1, 1969.
In the General Assembly read three times and ratified, this the 30th day of June, 1969.