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.
Shareholders of a corporation are taxed on dividends distributed by the corporation.
Corporations may be subject to foreign income taxes, and may be granted a foreign tax credit for such taxes.
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.
Certain income, and some corporations, are subject to a tax exemption.Certain localities also impose corporate income tax.Corporate income tax is imposed on all domestic corporations and on foreign corporations having income or activities within the jurisdiction.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”).Most states tax domestic and foreign corporations on taxable income derived from business activities apportioned to the state on a formulary basis. Most states do not tax non-business income of out of state corporations.The first federal income tax was enacted in 1861, and expired in 1872, amid constitutional challenges.A corporate income tax was enacted in 1894, but a key aspect of it was shortly held unconstitutional.Shareholders of most corporations are not taxed directly on corporate income, but must pay tax on dividends paid by the corporation.However, shareholders of S corporations and mutual funds are taxed currently on corporate income, and do not pay tax on dividends.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.