Characteristics and Income Taxation of Business Entities - Special Taxes
Accumulated Earnings Tax (AET)
- Designed to encourage corporations to pay dividends
- Corporations can accumulate $250,000 without establishing a business need
- Tax is in addition to normal corporate tax
- If the corporation retains earnings and profits to avoid income tax to its shareholders and increase share price, it is subject to an annual AET penalty equal to 15% of its accumulated taxable income for the year
Dividend Received Deduction
- "Corporate shareholders" are allowed an income exclusion for dividends received from another corporation
- 100% exclusion if ownership in the dividend paying firm is 80% or greater
- 80% exclusion if ownership in the dividend paying firm is between 20 to 80%
- 70% exclusion if ownership in the dividend paying is 20% or less
Corporate Tax Rates
|If Taxable Income Is||The Tax Is:|
|Not over $50,000||15% of the taxable income|
|Over $50,000||but not over $75,000||$7,500 plus||25% of the amount over $50,000|
|Over $75,000||but not over $100,000||$13,750 plus||34% of the amount over $75,000|
|Over $100,000||but not over $335,000||$22,250 plus||39% of the amount over $100,000|
|Over $335,000||but not over $10,000,000||$113,900 plus||34% of the amount over $335,000|
|Over $10,000,000||but not over $15,000,000||$3,400,000 plus||35% of the amount over $10,000,000|
|Over $15,000,000||but not over $18,333,333||$5,150,000 plus||38% of the amount over $15,000,000|
|Over 18,333,333||35% of the taxable income|
|Qualified personal service corporations are taxed at a flat rate of 35% of taxable income|
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