Video Transcript: Corporate Income Taxes

Hello, welcome. We're going to discuss corporate income taxes, corporate tax  rates. Corporate tax rates in the United States are progressive marginal rates  from 15% to 39% depending on taxable income. US Corporate tax rate structure has eight brackets. There are a number of tax bubbles. These occur when tax  rate schedules recapture savings from prior brackets. So if you move up in a tax bracket and you capture savings from changing tax brackets, that's going to be  beneficial for your corporation. For corporations with large income more than  18.33 million, the rate is a flat 35% in the United States. This was filmed in 2018  so our tax rate actually just moved down to 20% for corporations so nearly cut it  in half. Qualified personal service corps is taxed flat at 35% corporate capital  gains. A corporation can choose from two alternative tax treatments on capital  gains. You can either tax it as ordinary income, or you can elect to pay an  alternative 35% on net long term capital gain. So tax at ordinary income,  depending on how much it is or how much capital gains you made. It may be  less to tax it at ordinary income, or you can pay an alternative tax at 35% and  pay it on a net long term capital gain basis, essentially equivalent to maximum  regular corporate tax. Is no tax benefit to these corporate gains, long term  corporate gains bottom line, there is no difference in tax on ordinary income, first capital income for corporations, now for individuals, capital gains in the United  States are taxed at 15% whereas ordinary income for individuals can be taxed  anywhere from zero to 38% but capital gains for individuals are taxed at 15%  but capital gains for corporations are taxed at ordinary income or 35% so  dividends received deduction. Right? We can deduct dividend from dividends  from our tax returns. Right, corporations are allowed a deduction for a  percentage of the dividends received from other corporations. So attempt to  alleviate triple taxation. So when the dividends are received, first the revenue is  taxed, then you have to pay another tax on retained earnings, and to prevent the triple taxation, once the dividends are received by another corporation, they are  allowed to deduct the dividends received. So when it's taxed, they'll receive the  deduction, which will make that tax zero. So we don't want to divert funds from  investing in equities by triple taxing dividends. It's taxed twice already through  the income statement before is dispersed out as capital gains or dividends.  Dividends received deduction is allowed based upon ownership. So if it's less  than 20% ownership in a company, you get a 70% deduction. If it's between 20  and 80% you receive an 80% deduction. And if it's greater than your ownership  percentage is greater than 80% you receive a full 100% deduction.  Organizational expenditures and startup costs. Organizational expenditures  pertain to LLCs or limited liability corporations, corporations and partnerships.  Start up costs can be incurred by an organization, including a sole proprietorship and entities mentioned above. Examples of these type of costs include  investigatory costs to look at a business before deciding whether or not to  pursue it, legal accounting services, incidental to organization, cost of a 

temporary board of directors and state incorporation fees, those incurred prior to opening, such as advertising expenses, employee training costs, etc. These are  all startup costs and expenditures, also investigatory expenses, those incurred  to decide whether to actually pursue the business opportunity or not to pursue it. Amortization of organizational cost, the expenditure and startup cost, so  organizational expenditure. Measures and startup costs are capitalized and then amortized over an 180 month period. So amortization, we're going to pay these  off, and the amortization chart will flow with interest expense being higher in the  beginning and depreciating as payments are made moving into the full and  moving forward, and then principal amount will be paid off at a greater rate as  we move down the amortization chart. Now, however, firms can elect to deduct  up to $5,000 of organization costs in the year the firm begins business. This  $5,000 amount is usually reduced to $1 for each $1 that organizational  expenses exceed $50,000 that's it