47 N.C.A.G. 146.

• Case Date: January 09, 1978
• Court: North Carolina

North Carolina Attorney General Opinions 1978. 47 N.C.A.G. 146. January 9, 1978Opinion No. 47 N.C.A.G. 146Subject: Taxation; Excise Tax; Savings and Loan Associations; New Income; Interest Upon Obligations of the United States; G.S. 105-228.24; G.S. 105-130.3; G.S. 105-130.5(b)(1)Requested By: W. L. Cole, Administrator Savings and Loan Division North Carolina Department of CommerceQuestion: Is a savings and loan association required to include in its net taxable income for excise tax purposes interest income earned on participation certificates and mortgagebacked bonds guaranteed by the Government National Mortgage Association? Conclusion: Yes. G.S. 105-228.24 imposes upon savings and loan associations an annual excise tax computed on net taxable income, which is defined as "net income" for corporate income tax purposes. "Net income, in turn, is defined in G.S. 105-130.3 to mean "taxable income as defined in the Internal Revenue Code in effect on January 1, 1975, subject to the adjustments provided in G.S. 105-130.5." Taxable income, as defined in § 63 of the Code, means gross income less certain deductions not here relevant. The gross income definition in §61 of the Code specifically includes interest as an item falling within gross income. The particular securities in question are Mortgage Participation Certificates issued and guaranteed by the Federal National Mortgage Association (now obligations of GNMA) and Mortgage Backed Bonds issued by FNMA and the Federal Home Loan Mortage Corporation and guaranteed by GNMA. It appears from the statutes discussed above that interest paid to holders of such securities is includable in federal gross income and federal taxable income and, therefore, in G.S. 105-130.3 net income also, provided it is not deleted by G.S. 105-130.5(b). G.S. 105-130.5(b)(1) provides that for purposes of computing State net income, federal taxable income must be reduced by the amount of interest received on obligations of the United States. Consequently, savings and loan associations holding these securities would be liable for excise tax on the...