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USA - Federal corporate tax - behind the buzzwords.

Publication: 
Editorial Staff
chiefofficersnet

A press release from the USA's Inland Revenue Service is headed "Many corporations will pay a blended federal income tax." For heaven's sake: what sounds like something special is nothing of the kind and is an example of buzzword-mania when simplicity would better serve the audience. It's time that government departments stopped trying to sound trendy and just said what they need to say.

Here's what the IRS needed to say.

If a company's financial year is 1 Jan to 31 Dec inclusive, then the corporate tax rate announced for each year will apply.

If a company's financial year straddles the calendar New Year, then the, if the tax rates in two successive years differ, then the tax payable is calculated according to a formula.

In relation to the new, reduced, corporate rate, the formula is as follows:

1. Calculate tax for the entire financial year using the old tax rates, then divide the total by 365.
2. Calculate tax for the entire financial year using the new tax rates, then divide the total by 365..
3. Multiply the amount at stage one by the number of days before and including 31 December.
4. Multiply the amount at stage two by the number of days after and including 1 January.
5. Add the amounts produced at 3 and 4 to give the tax payable.

Oh, and by the way, Mr IRS PR man, you meant "apportioning" not "proportioning." "Proportion" is not a verb.

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