Excess-Profits Tax Law and Legal Definition

Excess-profits tax is a levy on any profit above a certain amount. It is a special tax levied during a time of national emergency and is intended to increase revenue during periods of distress.

The excess profits tax is computed as an additional tax over and above the corporate income tax. In general the computation of the excess profits tax is as follows: (a) First, the income tax is imposed on the entire amount of taxable net income. (b) Second, the normal tax net income, after certain adjustments is reduced by the excess profits credit, that is, the portion of the corporation's income which for the purposes of this tax is considered normal, and any unused excess profits credit carried forward or back to the taxable year. The result is called the adjusted excess profits net income. (c) Third, an additional tax is imposed on this adjusted excess profits net income. [Ladish Co. v. United States, 301 F.2d 257 (7th Cir. 1962)].