§ 105-130.11. Conditional and other exemptions. - North Carolina Statutes

§105‑130.11.  Conditional and other exemptions.

(a)        ExemptOrganizations. – Except as provided in subsections (b) and (c), the followingorganizations and any organization that is exempt from federal income tax underthe Code are exempt from the tax imposed under this Part.

(1)        Fraternalbeneficiary societies, orders or associations

a.         Operating under thelodge system or for the exclusive benefit of the members of a fraternity itselfoperating under the lodge system, and

b.         Providing for thepayment of life, sick, accident, or other benefits to the members of suchsociety, order or association, or their dependents.

(2)        Cooperative bankswithout capital stock organized and operated for mutual purposes and withoutprofit; and electric and telephone membership corporations organized underChapter 117 of the General Statutes.

(3)        Cemeterycorporations and corporations organized for religious, charitable, scientific,literary, or educational purposes, or for the prevention of cruelty to childrenor animals, no part of the net earnings of which inures to the benefit of anyprivate stockholder or individual.

(4)        Business leagues,chambers of commerce, merchants' associations, or boards of trade not organizedfor profit, and no part of the net earnings of which inures to the benefit ofany private stockholder or individual.

(5)        Civic leagues ororganizations not organized for profit, but operated exclusively for thepromotion of social welfare.

(6)        Clubs organized andoperated exclusively for pleasure, recreation, and other nonprofitablepurposes, no part of the net earnings of which inures to the benefit of anyprivate stockholder or member.

(7)        Farmers' or othermutual hail, cyclone, or fire insurance companies, mutual ditch or irrigationcompanies, mutual or cooperative telephone companies, or like organizations ofa purely local character the income of which consists solely of assessments,dues, and fees collected from members for the sole purpose of meeting expenses.

(8)        Farmers', fruitgrowers', or like organizations organized and operated as sales agents for thepurpose of marketing the products of members and turning back to them theproceeds of sales, less the necessary selling expenses, on the basis of thequantity of product furnished by them.

(9)        Mutual associationsformed under G.S. 54‑111 through 54‑128 to conduct agriculturalbusiness on the mutual plan and marketing associations organized under G.S. 54‑129through 54‑158.

      Nothingin this subdivision shall be construed to exempt any cooperative, mutual association,or other organization from an income tax on net income that has not beenrefunded to patrons on a patronage basis and distributed either in cash, stock,or certificates, or in some other manner that discloses the amount of eachpatron's refund. Provided, in arriving at net income for purposes of thissubdivision, 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 thefifteenth day of the ninth month following the close of the taxable year areconsidered as to be made on the last day of the taxable year to the extent theallocations are attributable to income derived before the close of the year;provided, that no stabilization or marketing organization that handlesagricultural products for sale for producers on a pool basis is considered tohave realized any net income or profit in the disposition of a pool or any partof a pool until all of the products in that pool have been sold and the poolhas been closed; provided, further, that a pool is not considered closed untilthe expiration of at least 90 days after the sale of the last remaining productin that pool. These cooperatives and other organizations shall file an annualinformation return with the Secretary on forms to be furnished by the Secretaryand shall include the names and addresses of all persons, patrons, orshareholders whose patronage refunds amount to ten dollars ($10.00) or more.

(10)      Insurance companiespaying the tax on gross premiums as specified in G.S. 105‑228.5.

(11)      Corporations ororganizations, such as condominium associations, homeowner associations, orcooperative housing corporations not organized for profit, the membership ofwhich is limited to the owners or occupants of residential units in thecondominium, housing development, or cooperative housing corporation, andoperated exclusively for the management, operation, preservation, maintenance,or landscaping of the common areas and facilities owned by the corporation ororganization or its members situated contiguous to the houses, apartments, orother dwellings or for the management, operation, preservation, maintenance,and repair of the houses, apartments, or other dwellings owned by thecorporation or organization or its members, but only if no part of the netearnings of the corporation or organization inures (other than through theperformance of related services for the members of such corporation ororganization) to the benefit of any member of such corporation or organizationor other person.

(b)        Unrelated BusinessIncome. – Except as provided in this subsection, an organization described insubdivision (a)(1), (3), (4), (5), (6), (7), (8), or (9) of this section andany organization exempt from federal income tax under the Code is subject tothe tax provided in G.S. 105‑130.3 on its unrelated business taxableincome, 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 performedby a college, university, or hospital.

(2)        Research performedfor the United States or its instrumentality or for a state or its politicalsubdivision.

(3)        Research performedby an organization operated primarily to carry on fundamental research, theresults of which are freely available to the general public.

(c)        HomeownerAssociation Income. – An organization described in subdivision (a)(11) of thissection is subject to the tax provided in G.S. 105‑130.3 on its grossincome other than membership income less the deductions allowed by this Articlethat are directly connected with the production of the gross income other thanmembership income. The term "membership income" means the grossincome from assessments, fees, charges, or similar amounts received frommembers of the organization for expenditure in the preservation, maintenance,and management of the common areas and facilities of or the residential unitsin the condominium or housing development.

(d)        Real EstateMortgage Investment Conduits. – An entity that qualifies as a real estatemortgage investment conduit, as defined in section 860D of the Code, is exemptfrom the tax imposed under this Part, except that any net income derived from aprohibited transaction, as defined in section 860F of the Code, is taxable tothe real estate mortgage investment conduit under G.S. 105‑130.3 and G.S.105‑130.3A, subject to the adjustments provided in G.S. 105‑130.5.This subsection does not exempt the holders of a regular or residual interestin a real estate mortgage investment conduit as defined in section 860G of theCode from any tax on the income from that interest. (1939, c. 158, s. 314; 1945,c. 708, s. 4; c. 752, s. 3; 1949, c. 392, s. 3; 1951, c. 937, s. 1; 1955, c.1313, s. 1; 1957, c. 1340, s. 4; 1959, c. 1259, s. 4; 1963, c. 1169, s. 2;1967, c. 1110, s. 3; 1973, c. 476, s. 193; c. 1053, s. 4; 1975, c. 19, s. 28;c. 591, s. 2; 1981, c. 450, s. 2; 1983, c. 28, s. 1; c. 31; 1985 (Reg. Sess.,1986), c. 826, s. 5; 1991 (Reg. Sess., 1992), c. 921, s. 1; 1993, c. 494, s. 2;1998‑98, ss. 1(b), 69.)