After you figure a corporation's taxable income, you figure its tax on Schedule J (Form 1120) or Part I (Form 1120-A). This section discusses the tax rate schedule, credits, recapture taxes, and the alternative minimum tax.

Tax Rate Schedule

Most corporations figure their tax by using the following tax rate schedule. This section discusses an exception to that rule for qualified personal service corporations. Other exceptions are discussed in the instructions for Schedule J (Form 1120) or Part I(Form 1120-A).

Tax Rate Schedule

If taxable income (line 30, Form 1120, or line 26, Form 1120-A) is:		Tax is:	Of the amount over--
Over--	But not over--
$0	50,000	15%	-0-
$50,000	75,000	$ 7,500 + 25%	$50,000
75,000	100,000	13,750 + 34%	75,000
100,000	335,000	22,250 + 39%	100,000
335,000	10,000,000	113,900 + 34%	335,000
10,000,000	15,000,000	3,400,000 + 35%	10,000,000
15,000,000	18,333,333	5,150,000 + 38%	15,000,000
18,333,333	----------	35%	-0-

Qualified personal service corporation. A qualified personal service corporation is taxed at a flat rate of 35% on taxable income. A corporation is a qualified personal service corporation if it meets both of the following tests.

1. Substantially all of the corporation's activities involve the performance of personal services (as defined earlier under Personal services).
2. At least 95% of the corporation's stock, by value, is owned, directly or indirectly, by any of the following.
   1. Employees performing the personal services.
   2. Retired employees who had performed the personal services.
   3. Any estate of the employee or retiree described above.
   4. Any person who acquired the stock of the corporation as a result of the death of an employee or retiree (but only for the 2-year period beginning on the date of the employee's or retiree's death).

See section 1.448-1T(e) of the regulations for details.

Credits

A corporation's tax liability is reduced if it takes any credits. The following list includes some credits available to corporations.

• Credit for federal tax on fuels used for certain nontaxable purposes (see Publication 378, Fuel Tax Credits and Refunds).
• Credit for prior year minimum tax (see Form 8827).
• Foreign tax credit (see Form 1118).
• General business credit (see General business credit, next).
• Nonconventional source fuel credit (see section 29 of the Internal Revenue Code).
• Qualified electric vehicle credit (see Form 8834).

General business credit. Your general business credit for the year consists of your carryforward of business credits from prior years plus your total current year business credits. Current year business credits include the following credits.

• Alcohol used as fuel credit (Form 6478).
• Contributions to selected community development corporations credit (Form 8847).
• Disabled access credit (Form 8826).
• Employer social security and Medicare taxes paid on certain employee tips credit (Form 8846).
• Empowerment zone employment credit (Form 8844).
• Enhanced oil recovery credit (Form 8830).
• Indian employment credit (Form 8845).
• Investment credit (Form 3468).
• Low-income housing credit (Form 8586).
• Orphan drug credit (Form 8820).
• Renewable electricity production credit (Form 8835).
• Research credit (Form 6765).
• Welfare-to-work credit (Form 8861).
• Work opportunity credit (Form 5884).

Your general business credit for the current year may be increased by the carryback or carryforward of business credits from other years.

To claim a general business credit, you must first get the form or forms you need to claim your current year business credits. The above list identifies current year business credits. The form used to claim each credit is shown in parentheses. In addition to the credit form, you may also need to file Form 3800.

Who must file Form 3800. You must file Form 3800 if any of the following apply.

• You have more than one of the credits listed earlier (other than the empowerment zone employment credit).
• You have a carryback or carryforward of any of these credits (other than the empowerment zone employment credit).
• Any of these credits (other than the low-income housing credit or the empowerment zone employment credit) is from a passive activity. (For information about passive activity credits, see Form 8582-CR.)

The empowerment zone employment credit is subject to special rules. This credit is figured separately on Form 8844 and is not carried to Form 3800. For more information, see the instructions for Form 8844.

See the Form 3800 instructions for more information about the general business credit.

Recapture Taxes

A corporation's tax liability is increased if it must recapture credits that it has taken in prior years. The following list includes credits a corporation may need to recapture.

• Indian employment credit (see the instructions for Form 8845).
• Investment credit (see the instructions for Form 4255).
• Low-income housing credit (see the instructions for Form 8611).
• Qualified electric vehicle credit (see the instructions for Form 8834).

Alternative Minimum Tax (AMT)

The tax laws give special treatment to some types of income and allow special deductions and credits for some types of expenses. These laws enable some corporations with substantial economic income to significantly reduce their regular tax. The purpose of the corporate alternative minimum tax (AMT) is to ensure corporations pay a minimum amount of tax on their economic income. A corporation owes AMT if its tentative minimum tax is more than its regular tax.

Tentative minimum tax of a small corporation. For tax years beginning after 1997, the tentative minimum tax of a small corporation is zero. This means that a small corporation will not owe AMT.

Small corporation exemption. A corporation is treated as a small corporation exempt from the AMT for its tax year beginning in 2000 if that year is the corporation's first tax year in existence or:

1. It was treated as a small corporation exempt from the AMT for all prior tax years beginning after 1997, and
2. Its average annual gross receipts for the 3-tax-year period (or portion thereof) ending before its tax year beginning in 2000 did not exceed $7.5 million ($5 million if the corporation had only 1 prior tax year).

For more information, see the instructions for Form 4626.

Form 4626. Use Form 4626 to figure the tentative minimum tax of a corporation that is not a small corporation for AMT purposes.

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