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United States Corporate - Taxes on corporate income

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In the United States, resident corporations are taxed based on worldwide income. Generally, a foreign corporation engaged in a US trade or business is taxed at regular US corporate tax rates on income from US sources that is effectively connected with that business and at 30% on US-source income not effectively connected with that business.

The US corporate income tax (CIT) rate is based on a progressive rate schedule; however, an alternative minimum tax (AMT) provides for a flat rate with fewer deductions.

2017 taxable income CIT
Over (USD*) But not over (USD) Pay (USD) + % on excess of the amount over (USD)
0 50,000 0 15 0
50,000 75,000 7,500 25 50,000
75,000 100,000 13,750 34 75,000
100,000 335,000 22,250 39 100,000
335,000 10,000,000 113,900 34 335,000
10,000,000 15,000,000 3,400,000 35 10,000,000
15,000,000 18,333,333 5,150,000 38 15,000,000
18,333,333     35 0

* United States dollars

The 39% tax rate applies to taxable income between USD 100,000 and USD 335,000 to eliminate the benefit of the 15% and 25% rates, and the 38% tax rate applies to taxable income between USD 15,000,000 and USD 18,333,333 to eliminate the benefit of the 34% rate. Special rules apply to personal service corporations and personal holding companies.

Alternative minimum tax (AMT)

An AMT is imposed on corporations other than S corporations (see below) and small C corporations (generally those with no three year average annual gross receipts exceeding USD 7.5 million). The tax is 20% of alternative minimum taxable income (AMTI) in excess of a USD 40,000 exemption amount (subject to a phase out). AMTI is computed by adjusting the corporation's regular taxable income by specified adjustments and 'tax preference' items. Tax preference or adjustment items could arise, for example, if a corporation has substantial accelerated depreciation, percentage depletion, intangible drilling costs, or non-taxable income.

S corporations

Corporations with 100 or fewer shareholders, none of whom may be corporations, that meet certain other requirements may elect to be taxed under Subchapter S of the Internal Revenue Code (IRC or 'the Code') and are thus known as S corporations. S corporations are taxed in a manner similar, but not identical, to partnerships (i.e. all tax items [e.g. income, deductions] flow through to the owners of the entity). Thus, S corporations generally are not subject to US federal income tax.

Gross transportation income taxes

Foreign corporations and non-resident alien individuals are subject to a yearly 4% tax on their US-source gross transportation income (USSGTI) that is not effectively connected with a US trade or business. Transportation income is any income derived from, or in connection with, (i) the use (or hiring or leasing) of any vessel or aircraft, or (ii) the performance of services directly related to the use of any vessel or aircraft.

Local income taxes

CIT rates vary from state to state and generally range from 1% to 12% (although some states impose no income tax). The most common taxable base is federal taxable income, which is modified by state provisions and generally is allocated to a state on the basis of a three-factor formula: tangible assets and rental expense, sales and other receipts, and payroll. State and municipal taxes are deductible expenses for federal income tax purposes.


Last Reviewed - 22 June 2017

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