| Out of the 48 states, California is the one to tax | | | | taxed on shareholders PIT returns, pay a reduced tax |
| corporate profits. Whereas, the bank and corporation | | | | rate of 1.5 percent. |
| tax of California remains the third largest source of | | | | . In cases of loss, there is a right to carry forward a |
| General Fund revenues of the state. The raise in | | | | percentage of the net operating losses or NOL during |
| 1999-00 amounted to about $6.1 billion or 9 percent of | | | | the year, in order to reduce taxable profits in |
| the total. All corporations that earn income derived | | | | subsequent years. |
| from the sources in California are allied to BCT. But, | | | | . They provide a wide range of exclusions, deductions, |
| insurance companies and nonprofit corporations like | | | | income exemptions, as well as tax credits. |
| churches and charitable organizations are exempted, | | | | Relationship to Federal Law |
| since they do pay a gross premium tax. | | | | The Federal Corporate Tax Law provides more |
| Somewhere around half million corporations file BCT | | | | beneficent depreciation allowances, does not duty an |
| returns in California, but only 60 percent from them | | | | entity-level tax on Subchapter S corporations and |
| actually report profit and only those pay taxes to BCT. | | | | allows 100 percent of NOL to be carried forward. |
| Whereas, the rest of them result in loss and are | | | | Taxation of S Corporations |
| subjected to pay only the minimum tax of the state. | | | | Businesses that obtain the restricted liability benefits of |
| Profit recovering firms are further distributed among | | | | a corporation are termed as S corporations and are |
| the different industry sectors. Manufacturing firms are | | | | taxed like a partnership. |
| subjected to pay almost one-third of all BCT taxes. | | | | . They pay a reduced corporate income tax rate of 1.5 |
| The corporate franchise tax, corporate income tax | | | | percent. |
| and bank tax are three different types of taxes | | | | . They cant go for alternative minimum tax, but need to |
| described by BCT. In order to do business in California, | | | | choose the same minimum tax requirement like other |
| most businesses in the state are liable to pay | | | | corporations do. |
| corporate income tax, while those businesses that do | | | | Taxing National and International Corporations |
| not have adequate presence or activity in the state | | | | In terms of calculating taxable profits, for the corporate |
| also need to pay this tax as a part of franchise tax. | | | | businesses in California, the process is very simple. In |
| Financial institutions and banks pay the bank tax. | | | | such cases, California profits coordinate the difference |
| BCT includes three components and is mainly | | | | within receipts and permissible deductions. The |
| calculated on income, with the franchise tax dominating | | | | businesses that file under BCT are California-based |
| the accounts for over 98 percent of BCT revenues. | | | | corporations. But 75 percent of corporate income is |
| Key Features of BCT | | | | accumulated from multi-state and multinational |
| . Depending on the profit, a basic tax rate of 8.84 | | | | corporations. |
| percent and a minimum of $800 tax during the two | | | | Comparisons to Other States |
| years of operation of the firm need to be paid. | | | | As compared to other states the basic BCT rate of |
| Whereas, a higher rate of 10.84 percent is applied to | | | | California which is 8.84% is relatively high. This BCT |
| banks and financial institutions, in order to exempt them | | | | burden is a bit above average as compared to the |
| from certain local levies. | | | | U.S, 0.7 percent versus 0.5 percent. |
| . Similar to the personal income tax or PMT, | | | | The BCT Future |
| corporations are also subjected to an Alternative | | | | The growth of BCT has occurred substantially in these |
| Minimum Tax or AMT. But, the tax is applied at a | | | | recent two years. The NOL that generated previously, |
| slightly lower rate of 6.64 percent. | | | | but not yet claimed also affect the future BCT growth. |
| . The corporations whose income flows-through and is | | | | |