An excess-profits tax is a special tax imposed on profits that exceed a specified threshold. This tax is typically enacted during national emergencies to help increase government revenue in times of economic distress. The excess-profits tax is calculated in addition to the standard corporate income tax.
The excess-profits tax is primarily used in corporate taxation. It applies to businesses that generate profits exceeding a certain level, which is determined by specific criteria set by law. This tax may involve various forms and procedures that users can manage with resources like US Legal Forms, which provides templates drafted by experienced attorneys.
Here are a couple of examples of abatement:
For instance, a corporation with a taxable net income of $1 million may have an excess-profits credit of $200,000. After applying this credit, the adjusted excess profits net income would be $800,000, which would then be subject to the excess-profits tax. (hypothetical example)
Examples of state differences (not exhaustive):
| State | Excess-Profits Tax Rate | Notes |
|---|---|---|
| California | Varies based on income | State-specific adjustments may apply. |
| New York | Flat rate of 5% | Additional local taxes may apply. |
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
If you believe the excess-profits tax may affect your business, consider the following steps:
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It aims to increase government revenue during national emergencies by taxing profits above a certain level.