Excess profits tax

Additional federal taxes placed on the earnings of a business, used only in time of national emergency such as war.

Excess Profits Tax

A tax imposed on a company's profits over a certain amount. Excess profit taxes are imposed in order to generate more revenue for the government, especially during national emergencies. In the United States, excess profit taxes have been implemented during wartime. There are also periodic debates on whether to impose an excess profit tax on private industries thought to be necessary for consumers in order to discourage profiteering or price gouging. Particularly, oil and gas companies have been targeted for this form of the excess profit tax. See also: Windfall Tax.

excess profits tax

A temporary tax levied on business profits during a period of national emergency. For example, the federal government may levy an additional corporate income tax during wartime to generate extra government revenues.

Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

References in periodicals archive

[section] 901(b)(1) of the Internal Revenue Code and noted that "income, war profits, and excess profits taxes ...

Tax law - U.K. windfall tax constitutes U.S. income tax under I.R.C. 901(b)(1) - PPL Corp. v. Commissioner

Nonetheless, McLure and Zodrow demonstrate that from an economic standpoint, both of these taxes are equivalent to an excess profits tax. A substance-over-form approach could result in these taxes' being deemed creditable.

The creditability of foreign taxes: form vs. substance

The corporate tax reform movement stalled in part because the focus turned to repealing the excess profits tax. The excess profits tax had long been opposed by business, but this opposition only grew stronger with the end of the war.

The rise and fall of post-world War II corporate tax reform

Both cases raise questions about what constitutes an excess profits tax, when foreign taxes are creditable, and even how Treasury regulations should be interpreted.

When is a foreign tax creditable under sec. 901?

Initial plans levy on financial transactions but it is not believed that the IMF is giving serious consideration to that and is now said to be looking at two central tax recommendations - the excess profits tax and a balance sheet tax that has been proposed by Barack Obama's administration and already implemented in Sweden.

Excess banks' profits in line for tax levy

[5] An additional "declared value" excess profits tax, based on profits in excess of a percentage of the value of corporate stock, was in effect from 1933 through 1945.

Footnotes

[7] From June 1940 to the end of 1945, a tax on profits in excess of average prewar earnings was also imposed, it was taken into account, as either a deduction or a credit, for the income tax and the other excess profits tax.

Footnotes

excess profits taxes was capped at a given percentage of income

Table 24. U.S. corporation income tax: tax brackets and rates, 1909-2010

This is possible because IRC section 56(b)(1)(A) requires the taxpayer, in computing the AMT taxable income, to add back to taxable income any tax described in IRC section 164(a)(3) (state and local, and foreign, income, war profits, and excess profits taxes) and IRC section 164(b)(5)(A)(i), which includes, by inference, state and local general sales taxes in IRC section 164(a)(3), causing the deduction for state and local general sales taxes to also be added back in computing AMT.

American Jobs Creation Act of 2004 and state income taxes

22 Federal income and excess profits taxes, IRS 358.4

Relation of Corporate Profits, Taxes, and Dividends in the National Income and Product Accounts to Corresponding Measures as Published by the Internal Revenue Service

Finally, the instructions require the translation of the provision for income, war profits, and excess profits taxes (line 20 of Schedule C) at the average exchange rate for the year.

Supplemental comments on Form 5471