GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 1991
CHAPTER 921
The General Assembly of North Carolina enacts:
Section 1. G.S. 105-130.11 reads as rewritten:
"§ 105-130.11. Conditional and other exemptions.
(a) Exempt Organizations. - Except as provided in subsections (b) and (c), the following organizations and any organization that is exempt from federal income tax under the Code are exempt from the tax imposed under this Division.
(1) Fraternal beneficiary societies, orders or associations
a. Operating under the lodge system or for the exclusive benefit of the members of a fraternity itself operating under the lodge system, and
b. Providing
for the payment of life, sick, accident, or other benefits to the members of
such society, order or association, or their dependents; dependents.
(2) Every building Building
and loan associations [association], and savings and loan
associations subject to tax under Article 8D of this Chapter; and any cooperative
banks without capital stock organized and operated for mutual purposes and
without profit, profit; and electric and telephone membership
corporations organized under Chapter 117 of the General Statutes; Statutes.
(3) Cemetery corporations
and corporations organized for religious, charitable, scientific, literary, or
educational purposes, or for the prevention of cruelty to children or animals,
no part of the net earnings of which inures to the benefit of any private
stockholder or individual; individual.
(4) Business leagues,
chambers of commerce, merchants' associations, or boards of trade not organized
for profit, and no part of the net earnings of which inures to the benefit of
any private stockholder or individual; individual.
(5) Civic leagues or
organizations not organized for profit, but operated exclusively for the
promotion of social welfare; welfare.
(6) Clubs organized and
operated exclusively for pleasure, recreation, and other nonprofitable
purposes, no part of the net earnings of which inures to the benefit of any
private stockholder or member; member.
(7) Farmers' or other
mutual hail, cyclone, or fire insurance companies, mutual ditch or irrigation
companies, mutual or cooperative telephone companies, or like organizations of
a purely local character the income of which consists solely of assessments, dues
dues, and fees collected from members for the sole purpose of
meeting expenses; expenses.
(8) Farmers', fruit
growers', or like organizations organized and operated as sales agents for the
purpose of marketing the products of members and turning back to them the
proceeds of sales, less the necessary selling expenses, on the basis of the
quantity of product furnished by them; them.
(9) Mutual associations formed under G.S. 54-111 through 54-128 to conduct agricultural business on the mutual plan and marketing associations organized under G.S. 54-129 through 54-158.
Nothing in this subdivision shall be
construed to exempt any cooperative, mutual association association, or
other organization from an income tax on net income which that has
not been refunded to patrons on a patronage basis and distributed either in
cash, stock, or certificates, or in some other manner that discloses to
each patron the amount of his patronage each patron's refund.
Provided, in arriving at net income for purposes of this subdivision, no
deduction shall be allowed for dividends paid on capital stock. Patronage
refunds made after the close of the taxable year and on or before the fifteenth
day of the ninth month following the close of such the taxable year
shall be are considered as to be made on the last day of such
the taxable year to the extent the allocations are attributable to
income derived before the close of such the year; provided, that
no stabilization or marketing organization which that handles
agricultural products for sale for producers on a pool basis shall be deemed
is considered to have realized any net income or profit in the
disposition of a pool or any part of a pool until all of the products in that
pool shall have been sold and the pool shall have has been
closed; provided, further, that a pool shall not be deemed is not
considered closed until the expiration of at least 90 days after the sale
of the last remaining product in that pool. Such These cooperatives
and other organizations shall file an annual information return with the Secretary
of Revenue on forms to be furnished by the Secretary and shall include therein
the names and addresses of all persons, patrons and/or shareholders, patrons,
or shareholders whose patronage refunds amount to ten dollars ($10.00) or more;
and more.
(10) Insurance companies paying the tax on gross premiums as specified in G.S. 105-228.5.
(11) Corporations or organizations,
such as condominium associations, homeowner associations, or cooperative
housing corporations not organized for profit, the membership of which is
limited to the owners or occupants of residential units in the condominium,
housing development development, or cooperative housing
corporation, and operated exclusively for the management, operation,
preservation, maintenance maintenance, or landscaping of the
common areas and facilities owned by such the corporation or
organization or its members situated contiguous to such the houses,
apartments apartments, or other dwellings or for the management,
operation, preservation, maintenance maintenance, and repair of such
the houses, apartments apartments, or other dwellings
owned by the corporation or organization or its members, but only if no part of
the net earnings of such the corporation or organization inures
(other than through the performance of related services for the members of such
corporation or organization) to the benefit of any member of such corporation
or organization or other person.
(b) Unrelated Business
Income. - Except as provided in this subsection, an organization described in
subdivision (a)(1), Organizations described in subdivision (1), (3),
(4), (5), (6), (7), (8) (8), or (9) of subsection (a) of
this section and any organization exempt from federal income tax under the
Code is subject to the tax provided in G.S. 105-130.3 on its unrelated business
taxable income, as defined in section 512 of the Code, adjusted as provided in
G.S. 105-130.5. The tax does not apply, however, to net income derived
from any of the following:
(1) Research performed by a college, university, or hospital.
(2) Research performed for the United States or its instrumentality or for a state or its political subdivision.
(3) Research performed by an organization operated primarily to carry on fundamental research, the results of which are freely available to the general public.
shall be subject to the tax provided for in G.S. 105-130.3 to
the following extent:
Gross income derived by any organization from any trade or
business the conduct of which is not substantially related (aside from the need
of the organization for income) to the exercise or performance of those
functions constituting the basis for its exemption in subsection (a) of this
section, less all deductions allowed by this Division directly connected with
carrying on such trade or business and less one thousand dollars ($1,000);
provided, this paragraph does not apply to interest, royalties, dividends or
rents unless this income is determined to be "unrelated business taxable
income"under the Code; provided further, this paragraph shall not
apply to any trade or business (i) in which substantially all the work in
carrying on such trade or business is performed for the organization without
compensation; or (ii) which is the selling of merchandise, substantially all of
which is given to it; (iii) which is carried on by an organization described in
G.S. 105-130.11(a)(3) primarily for the convenience of its members, students,
patients or employees. Provided further, this paragraph shall not apply to net
income derived from research (i) performed by a college, university or
hospital; or (ii) performed for the United States, its instrumentalities or any
state or political subdivision thereof; or (iii) performed by an organization
operated primarily for the purpose of carrying on fundamental research, the
results of which are freely available to the general public.
(c) Homeowner
Association Income. - An organization Organizations described in
subdivision (11) of subsection (a) (a)(11) of this section shall
be is subject to the tax provided for in G.S. 105-130.3 on
its unrelated business income. For purposes of this subsection the term
"unrelated business income"means gross income (excluding any
membership income) gross income other than membership income less
the deductions allowed by this Article which that are directly
connected with the production of such unrelated business income. the
gross income other than membership income. The term 'membership income'
means the gross income from assessments, fees, charges, or similar amounts
received from members of the organization for expenditure in the preservation,
maintenance, and management of the common areas and facilities of or the
residential units in the condominium or housing development."
Sec. 2. This act is effective for taxable years beginning on or after January 1, 1992.
In the General Assembly read three times and ratified this the 10th day of July, 1992.
James C. Gardner
President of the Senate
Daniel Blue, Jr.
Speaker of the House of Representatives