328
Opinion of the Court
a stated rate of one quarter of one percent, residents were entitled to calculate their tax liability by taking a taxable percentage deduction equal to the fraction of the issuing corporation's income subject to tax in North Carolina. Ibid. This figure was set by applying a corporate income tax apportionment formula averaging the portion of the issuing corporation's sales, payroll, and property located in the State. See § 105-130.4(i).
Thus, a corporation doing all of its business within the State would pay corporate income tax on 100% of its income, and the taxable percentage deduction allowed to resident owners of that corporation's stock under the intangibles tax would likewise be 100%. Stock in a corporation doing no business in North Carolina, on the other hand, would be taxable on 100% of its value. For the intermediate cases, holders of stock were able to look up the taxable percentage for a large number of corporations as determined and published annually by the North Carolina Secretary of Revenue (Secretary). In 1990, for example, the Secretary determined the appropriate taxable percentage of IBM stock to be 95%, meaning that IBM did 5% of its business in North Carolina, with its stock held by North Carolina residents being taxable on 95% of its value. N. C. Dept. of Revenue, Stock and Bond Values as of December 31, 1990, p. 39.
Petitioner Fulton Corporation is a North Carolina company owning stock in other corporations that do business out of state. In the 1990 tax year, at issue in this case, Fulton owned shares in six corporations, five of which did no business or earned no income in North Carolina and therefore were not subject to the State's corporate income tax. Fulton's stock in these corporations was accordingly subject to the intangibles tax on 100% of its value. Fulton also owned stock in Food Lion, Inc., which did 46% of its business in North Carolina, with the result that its stock was subject to the intangibles tax on 54% of its value. App. 11.
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