Shareholders of corporations are taxed separately upon the distribution of corporate earnings and profits as a dividend. Corporations may be subject to withholding tax obligations upon making certain varieties of payments to others, including wages and distributions treated as dividends.Tax rates on dividends are at present lower than on ordinary income for both corporate and individual shareholders. These obligations are generally not the tax of the corporation, but the system may impose penalties on the corporation or its officers or employees for failing to withhold and pay over such taxes.
On December 20, 2017, the US Senate and House of Representatives passed the Tax Cut and Jobs Act, setting a flat nominal corporate tax rate of 21% on all businesses that was implemented on January 1, 2018.
on all entities treated as corporations (see Entity classification below), and by 47 states and the District of Columbia.
Also, tax deductions for interest and certain other expenses paid to related parties are subject to limitations. Generally, a tax year must be 12 months or 52/53 weeks long.
The tax year need not conform to the financial reporting year, and need not coincide with the calendar year, provided books are kept for the selected tax year.
Corporate tax is imposed in the United States at the federal, most state, and some local levels on the income of entities treated for tax purposes as corporations.
Since January 1, 2018, the nominal corporate tax rate in the United States of America is a flat 21 percent due to the passage of the "Tax Cuts and Jobs Act" on December 20, 2017.
Many of the states compute taxable income with reference to federal taxable income, with specific modifications.
The states do not allow a tax deduction for income taxes, whether federal or state.
In 1909, Congress enacted an excise tax on corporations based on income.
After ratification of the Sixteenth amendment to the U. Constitution, this became the corporate provisions of the federal income tax.
Further, most states deny tax exemption for interest income that is tax exempt at the federal level. Constitution, states are prohibited from taxing income of a resident of another state unless the connection with the taxing state reach a certain level (called “nexus”).