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(7) For computation of tax where taxpayer restores substantial amount held under claim of right, see section 1341.
(8) For limitation on surtax attributable to claims against the United States involving acquisitions of property, see section 1347.
PART II-TAX ON CORPORATIONS
Sec. 11. Tax imposed.
Sec. 12. Cross references relating to tax on corporations.
SEC. 11. TAX IMPOSED.
(a) CORPORATIONS IN GENERAL.-A tax is hereby imposed for each taxable year on the taxable income of every corporation. The tax shall consist of a normal tax computed under subsection (b) and a surtax computed under subsection (c).
(b) NORMAL TAX.
(1) TAXABLE YEARS BEGINNING BEFORE JULY 1, 1961.—In the case of a taxable year beginning before July 1, 1961, the normal tax is equal to 30 percent of the taxable income.
(2) TAXABLE YEARS BEGINNING AFTER JUNE 30, 1961.-In the case of a taxable year beginning after June 30, 1961, the normal tax is equal to 25 percent of the taxable income.
(c) SURTAX.-The surtax is equal to 22 percent of the amount by which the taxable income (computed without regard to the deduction, if any, provided in section 242 for partially tax-exempt interest) exceeds $25,000.
(d) EXCEPTIONS.-Subsection (a) shall not apply to a corporation subject to a tax imposed by
(1) section 594 (relating to mutual savings banks conducting life insurance business),
(2) subchapter L (sec. 801 and following, relating to insurance companies),
(3) subchapter M (sec. 851 and following, relating to regulated investment companies and real estate investment trusts), or
(4) section 881 (a) (relating to foreign corporations not engaged in business in United States).
SEC. 12. CROSS REFERENCES RELATING TO TAX ON CORPORATIONS. (1) For tax on the unrelated business income of certain charitable and other corporations exempt from tax under this chapter, see section 511.
(2) For accumulated earnings tax and personal holding company tax, see parts I and II of subchapter G (sec. 531 and following).
(3) For doubling of tax on corporations of certain foreign countries, see section 891.
(4) For alternative tax in case of capital gains, see section 1201 (a). (5) For rate of withholding in case of foreign corporations, see section 1442.
(6) For withholding of tax on tax-free covenant bonds, see section 1451.
(7) For limitation on the $25,000 exemption from surtax provided in section 11 (c) see section 1551.
(8) For additional tax for corporations filing consolidated returns, see section 1503.
PART III-CHANGES IN RATES DURING A TAXABLE YEAR Sec. 21. Effect of changes.
SEC. 21. EFFECT OF CHANGES.
(a) GENERAL RULE.-If any rate of tax imposed by this chapter changes, and if the taxable year includes the effective date of the change (unless that date is the first day of the taxable year), then
(1) tentative taxes shall be computed by applying the rate for the period before the effective date of the change, and the rate for the period on and after such date, to the taxable income for the entire taxable year; and
(2) the tax for such taxable year shall be the sum of that proportion of each tentative tax which the number of days in each period bears to the number of days in the entire taxable year. (b) REPEAL OF TAX.-For purposes of subsection (a)
(1) if a tax is repealed, the repeal shall be considered a change of rate; and
(2) the rate for the period after the repeal shall be zero.
(c) EFFECTIVE DATE OF CHANGE.-For purposes of subsections (a) and (b)
(1) if the rate changes for taxable years "beginning after" or "ending after" a certain date, the following day shall be considered the effective date of the change; and
(2) if a rate changes for taxable years "beginning on or after" a certain date, that date shall be considered the effective date of the change.
(d) TAXABLE YEARS BEGINNING BEFORE JANUARY 1, 1954, and ENDING AFTER DECEMBER 31, 1953.-In the case of a taxable year beginning before January 1, 1954, and ending after December 31, 1953
(1) subsection (a) of this section does not apply; and
(2) in the application of subsection (j) of section 108 of the Internal Revenue Code of 1939, the provisions of such code referred to in such subsection shall be considered as continuing in effect as if this subtitle had not been enacted.
PART IV-CREDITS AGAINST TAX
Sec. 31. Tax withheld on wages.
Sec. 32. Tax withheld at source on nonresident aliens and foreign corporations and on tax-free covenant bonds.
Sec. 33. Taxes of foreign countries and possessions of the United
Sec. 34. Dividends received by individuals.
Sec. 35. Partially tax-exempt interest received by individuals.
Sec. 36. Credits not allowed to individuals paying optional tax or taking standard deduction.
Sec. 37. Retirement income.
Sec. 38. Overpayments of tax.
SEC. 31. TAX WITHHELD ON WAGES.
(a) WAGE WITHHOLDING FOR INCOME TAX PURPOSES.
(1) IN GENERAL.-The amount withheld under section 3402 as
tax on the wages of any individual shall be allowed to the recipient of the income as a credit against the tax imposed by this subtitle.
(2) YEAR OF CREDIT.-The amount so withheld during any calendar year shall be allowed as a credit for the taxable year beginning in such calendar year. If more than one taxable year begins in a calendar year, such amount shall be allowed as a credit for the last taxable year so beginning.
(b) CREDIT FOR SPECIAL REFUNDS OF SOCIAL SECURITy Tax.— (1) IN GENERAL.-The Secretary or his delegate may prescribe regulations providing for the crediting against the tax imposed by this subtitle of the amount determined by the taxpayer or the Secretary (or his delegate) to be allowable under section 6413 (c) as a special refund of tax imposed on wages. The amount allowed as a credit under such regulations shall, for purposes of this subtitle, be considered an amount withheld at source as tax under section 3402.
(2) YEAR OF CREDIT.-Any amount to which paragraph (1) applies shall be allowed as a credit for the taxable year beginning in the calendar year during which the wages were received. If more than one taxable year begins in the calendar year, such amount shall be allowed as a credit for the last taxable year so beginning. SEC. 32. TAX WITHHELD AT SOURCE ON NONRESIDENT ALIENS AND FOREIGN CORPORATIONS AND ON TAX-FREE COVENANT BONDS.
There shall be allowed as credits against the tax imposed by this chapter
(1) the amount of tax withheld at source under subchapter A of chapter 3 (relating to withholding of tax on nonresident aliens and on foreign corporations), and
(2) the amount of tax withheld at source under subchapter B of chapter 3 (relating to interest on tax-free covenant bonds).
SEC. 33. TAXES OF FOREIGN COUNTRIES AND POSSESSIONS OF THE UNITED STATES.
The amount of taxes imposed by foreign countries and possessions of the United States shall be allowed as a credit against the tax imposed by this chapter to the extent provided in section 901. SEC. 34. DIVIDENDS RECEIVED BY INDIVIDUALS.
(a) GENERAL RULE.-Effective with respect to taxable years ending after July 31, 1954, there shall be allowed to an individual, as a credit against the tax imposed by this subtitle for the taxable year, an amount equal to 4 percent of the dividends which are received after July 31, 1954, from domestic corporations and are included in gross income. (b) LIMITATION ON AMOUNT OF CREDIT.-The credit allowed by subsection (a) shall not exceed whichever of the following is the lesser:
(1) the amount of the tax imposed by this chapter for the taxable year, reduced by the credit allowable under section 33 (relating to foreign tax credit); or
(2) the following percent of the taxable income for the taxable year:
(A) 2 percent, in the case of a taxable year ending before January 1, 1955.
(B) 4 percent, in the case of a taxable year ending after December 31, 1954.
(c) NO CREDIT ALLOWED FOR DIVIDENDS FROM CERTAIN CORPORATIONS.-Subsection (a) shall not apply to any dividend from—
(1) a corporation organized under the China Trade Act, 1922 (see sec. 941);
(2) a corporation which, for the taxable year of the corporation in which the distribution is made, or for the next preceding taxable year of the corporation, is
(A) a corporation exempt from tax under section 501 (relating to certain charitable, etc., organizations) or section 521 (relating to farmers' cooperative associations); or
(B) a corporation to which section 931 (relating to income from sources within possessions of the United States) applies; or (3) a real estate investment trust which, for the taxable year of the trust in which the dividend is paid, qualifies under part II of subchapter M (sec. 856 and following).
(d) SPECIAL RULES FOR CERTAIN DISTRIBUTIONS.-For purposes of subsection (a)
(1) Any amount allowed as a deduction under section 591 (relating to deduction for dividends paid by mutual savings banks, etc.) shall not be treated as a dividend.
(2) A dividend received from a regulated investment company shall be subject to the limitations prescribed in section 854.
(e) CERTAIN NONRESIDENT ALIENS INELIGIBLE FOR CREDIT.-No credit shall be allowed under subsection (a) to a nonresident alien. individual with respect to whom a tax is imposed for the taxable year under section 871 (a).
(f) CROSS REFERENCES.
(1) For exclusion of certain dividends from gross income, see section 116.
(2) For special rules relating to the credit provided by subsection (a) see sections 642 (trusts and estates), 702 (partnerships) and 584 (common trust funds).
(3) For disallowance of credit where tax is computed by Secretary or his delegate, see section 6014.
SEC. 35. PARTIALLY
TAX-EXEMPT INTEREST RECEIVED BY INDI.
(a) IN GENERAL.-There shall be allowed to an individual, as a credit against the tax imposed by this subtitle for the taxable year, an amount equal to 3 percent of the amount received as interest on obligations of the United States or on obligations of corporations organized under Act of Congress which are instrumentalities of the United States, but only if
(1) such interest is included in gross income; and
(2) such interest is exempt from normal tax under the Act authorizing the issuance of such obligations.
(b) LIMITATION ON AMOUNT OF CREDIT.-The credit allowed by subsection (a) shall not exceed whichever of the following is the lesser:
(1) the amount of the tax imposed by this chapter for the taxable year, reduced by the sum of the credits allowable under sections 33 and 34; or
(2) 3 percent of the taxable income for the taxable year.
(c) CERTAIN NONRESIDENT ALIENS INELIGIBLE FOR CREDIT.-NO credit shall be allowed under subsection (a) to a nonresident alien individual with respect to whom a tax is imposed for the taxable year under section 871 (a).
(d) CROSS REFERENCE.
For reduction of credit under this section on account of amortizable
SEC. 36. CREDITS NOT ALLOWED TO INDIVIDUALS PAYING OPTIONAL
If an individual elects to pay the optional tax imposed by section 3,
(a) GENERAL RULE.-In the case of an individual who has received earned income before the beginning of the taxable year, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the amount received by such individual as retirement income (as defined in subsection (c) and as limited by subsection (d)), multiplied by the rate provided in section 1 for the first $2,000 of taxable income; but this credit shall not exceed such tax reduced by the credits allowable under section 32 (2) (relating to tax withheld at source on tax-free covenant bonds), section 33 (relating to foreign tax credit), section 34 (relating to credit for dividends received by individuals), and section 35 (relating to partially tax exempt interest).
(b) INDIVIDUAL WHO HAS RECEIVED EARNED INCOME.-For purposes of subsection (a), an individual shall be considered to have received earned income if he has received, in each of any 10 calendar years before the taxable year, earned income (as defined in subsection (g)) in excess of $600. A widow or widower whose spouse had received such earned income shall be considered to have received earned income.
(c) RETIREMENT INCOME. For purposes of subsection (a), the term "retirement income" means
(1) in the case of an individual who has attained the age of 65 before the close of the taxable year, income from—
(A) pensions and annuities,
(C) rents, and
(D) dividends, or
(2) in the case of an individual who has not attained the age of 65 before the close of the taxable year, income from pensions and annuities under a public retirement system (as defined in subsection (f)),
to the extent included in gross income without reference to this section, but only to the extent such income does not represent compensation for personal services rendered during the taxable year.
(d) LIMITATION ON RETIREMENT INCOME.-For purposes of subsection (a), the amount of retirement income shall not exceed $1,200 less