Corporate Tax in the United States

The United States imposes a flat federal corporate income tax (CIT) rate of 21% on C corporations, with a 15% Corporate Alternative Minimum Tax (CAMT) for large corporations. State corporate taxes add 0-11.5%, resulting in an effective blended rate of approximately 21-27%.

Federal Corporate Income Tax Rate

The federal corporate income tax rate is a flat 21% of taxable income for C corporations. This rate was established by the Tax Cuts and Jobs Act of 2017 and applies to all taxable income levels. S corporations and LLCs are pass-through entities and are not subject to CIT at the entity level.

Corporate Alternative Minimum Tax (CAMT)

For tax years beginning after December 31, 2022, a 15% Corporate Alternative Minimum Tax applies to corporations with average annual adjusted financial statement income exceeding $1 billion over a 3-year period. The CAMT is the excess of 15% of adjusted financial statement income over the regular corporate tax.

State Corporate Taxes

State corporate income tax rates range from 0% (in states like Nevada, Ohio, South Dakota, Texas, Washington, and Wyoming) to 11.5% (New Jersey). The average state corporate tax rate is approximately 6%. States use different apportionment formulas to determine taxable income.

Taxable Income

Taxable income is calculated as gross revenue minus allowable deductions. The tax year generally follows the calendar year or the company's fiscal year.

Deductible Expenses

• Operating expenses directly related to business activities
• Depreciation and amortization (MACRS for most assets)
• Interest expense (limited to 30% of EBITDA/EBIT for large corporations)
• Employee salaries, bonuses, and benefits
• Rent and lease payments
• Marketing and advertising costs
• Research and development expenses (may qualify for credit)

Non-Deductible Expenses

• Fines and penalties paid to government entities
• Dividends paid to shareholders
• Lobbying and political contributions
• Excessive executive compensation (over $1 million for top executives)
• Capital expenditures (must be capitalized and depreciated)

Tax Incentives

• Research & Development Credit: 20% of qualified research expenses
• Section 179 Depreciation: Immediate expensing up to $1,220,000 (2026)
• Bonus Depreciation: 80% bonus first-year depreciation for qualifying assets
• Foreign-Derived Intangible Income (FDII): Reduced effective rate for export-related IP
• Opportunity Zones: Tax deferral for investments in designated communities

Filing Requirements

• Form 1120: Annual corporate tax return due April 15 (calendar year filers)
• Extensions: Automatic 6-month extension available
• Estimated Tax Payments: Quarterly installments based on current year liability
• Information Returns: Form W-2, 1099, 1096 as applicable

International Taxation

US corporations are taxed on worldwide income. The system includes:

• Global Intangible Low-Taxed Income (GILTI): Inclusion of certain foreign income at reduced rate
• Base Erosion and Anti-Abuse Tax (BEAT): Additional tax for large corporations making base-eroding payments
• Foreign Tax Credit: Available for income taxes paid to foreign jurisdictions
• Transfer Pricing: Arm's length principle required under Section 482