State Company Revenue Tax Charges and Brackets for 2023

Key Findings

  • Forty-four states levy a corporate income tax. Charges vary from 2.5 p.c in North Carolina to 11.5 p.c in New Jersey.
  • 4 states—Alaska, Illinois, Minnesota, and New Jersey—levy prime marginal company revenue tax charges of 9 p.c or larger.
  • Eleven states—Arizona, Colorado, Indiana, Kentucky, Mississippi, Missouri, North Carolina, North Dakota, Oklahoma, South Carolina, and Utah—have prime charges at or beneath 5 p.c.
  • Nevada, Ohio, Texas, and Washington impose gross receipts taxes as an alternative of company revenue taxes. Delaware, Oregon, and Tennessee impose gross receipts taxes along with their company revenue taxes. Some localities in Pennsylvania, Virginia, and West Virginia likewise impose gross receipts taxes, that are typically understood to be extra economically dangerous than company revenue taxes.
  • South Dakota and Wyoming are the one states that levy neither a company revenue nor gross receipts tax.

Company revenue taxes are levied in 44 states. Although usually considered a serious tax kind, company revenue taxes accounted for a mean of simply 7.07 p.c of state tax collections and 4.04 p.c of state normal income in fiscal year 2021. And whereas these figures usually are not excessive, they symbolize a considerable improve over prior years. Company revenue taxes accounted for two.26 p.c of normal income in FY 2020, which is extra according to historic norms.

New Jersey levies the very best prime statutory company tax charge at 11.5 p.c, adopted by Minnesota (9.8 p.c) and Illinois (9.50 p.c). Alaska and Pennsylvania levy prime statutory company tax charges of 9.40 p.c and eight.99 p.c, respectively.

Conversely, North Carolina’s flat charge of two.5 p.c is the bottom within the nation, adopted by charges in Missouri and Oklahoma (each at 4 p.c) and North Dakota (4.31 p.c). Seven different states impose prime charges at or beneath 5 p.c: Colorado (4.55 p.c), Utah (4.85 p.c), Arizona and Indiana (4.9 p.c), and Kentucky, Mississippi, and South Carolina (5 p.c).

Nevada, Ohio, Texas, and Washington forgo company revenue taxes however as an alternative impose gross receipts taxes on companies, that are generally thought to be extra economically dangerous attributable to tax pyramiding, disparate impacts on low-margin companies, and non-transparency. Delaware, Oregon, and Tennessee impose gross receipts taxes along with company revenue taxes, as do a number of states, like Pennsylvania, Virginia, and West Virginia, which enable gross receipts taxes on the native (however not state) degree. South Dakota and Wyoming levy neither company revenue nor gross receipts taxes, and with the enactment of a price range that features the multiyear phaseout of its company revenue tax, North Carolina is because of be part of them by 2030.

Twenty-nine states and the District of Columbia have single-rate company tax methods. The larger propensity towards single-rate methods for company tax than particular person revenue tax is probably going as a result of there is no such thing as a significant “potential to pay” idea in company taxation. Jeffrey Kwall, professor of regulation at Loyola College Chicago College of Legislation, notes that:

Graduated company charges are inequitable—that’s, the dimensions of a corporation bears no needed relation to the revenue ranges of the house owners. Certainly, low-income companies could also be owned by people with excessive incomes, and high-income companies could also be owned by people with low incomes.

A single-rate system minimizes the inducement for corporations to interact in economically wasteful tax planning to mitigate the harm of upper marginal tax rates that some states levy as taxable income rises.

A number of states applied company revenue tax charge adjustments over the previous 12 months, amongst different revisions and reforms. Notable adjustments for tax 12 months 2023 embrace:

  • Arkansas noticed its prime charge of 5.9 p.c drop to five.3 p.c on January 1, as a result of enactment of H.B. 1002 in August of 2022 which accelerated beforehand deliberate particular person and company revenue tax charge reductions.
  • Iowa’s three-bracket company revenue tax was consolidated right into a two-bracket tax at first of the 12 months, with the highest charge lowering from 9.8 to 8.4 p.c. This was the results of the state assembly income triggers no less than 4 years earlier than initially anticipated.
  • New Hampshire’s Enterprise Earnings Tax (the state’s model of a company revenue tax) charge was lowered from 7.6 to 7.5 p.c starting in 2023 as a result of enactment of HB 1221 in June 2022.
  • Because of the enactment of HB 1342 in 2022, Pennsylvania noticed a charge discount from 9.99 p.c to eight.99 p.c on January 1. The speed will proceed to lower by 0.5 proportion factors every year till it reaches 4.99 p.c initially of 2031.

Moreover, Idaho’s company revenue tax charge was diminished from 6.5 to six.0 p.c retroactive to January 1, 2022, beneath H0436, adopted final 12 months.

2023 state corporate income tax rates and brackets see state corporate tax rates by state

State Company Revenue Tax Charges and Brackets as of January 1, 2023
StateCharges Brackets
Ala.6.5%>$0
Alaska0.0%>$0
 2.0%>$25,000
 3.0%>$49,000
 4.0%>$74,000
 5.0%>$99,000
 6.0%>$124,000
 7.0%>$148,000
 8.0%>$173,000
 9.0%>$198,000
 9.4%>$222,000
Ariz.4.9%>$0
Ark.1.0%>$0
 2.0%>$3,000
 3.0%>$6,000
 5.0%>$11,000
 5.3%>$25,000
California8.84%>$0
Colorado4.55%>$0
Connecticut (a)7.5%>$0
Delaware (b)8.7%>$0
Florida5.5%>$0
Georgia (c)5.75%>$0
Hawaii4.4%>$0
 5.4%>$25,000
 6.4%>$100,000
Idaho5.8%>$0
Illinois. (d)9.5%>$0
Indiana4.9%>$0
Iowa5.5%>$0
 8.4%>$100,000
Kansas4.0%>$0
 7.0%>$50,000
Kentucky5.0%>$0
Louisiana3.5%>$0
 5.5%>$50,000
 7.5%>$150,000
Maine3.50%>$0
 7.93%>$350,000
 8.33%>$1,050,000
 8.93%>$3,500,000
Maryland8.25%>$0
Massachusetts8.0%>$0
Michigan6.0%>$0
Minnesota9.8%>$0
Mississippi4.0%>$5,000
 5.0%>$10,000
Missouri4.0%>$0
Montana6.75%>$0
Nebraska5.58%>$0
 7.25%>$100,000
Nevada (b) 
New Hampshire7.5%>$0
New Jersey (e)6.5%>$0
 7.5%>$50,000
 9.0%>$100,000
 11.5%>$1,000,000
New Mexico4.8%>$0
 5.9%>$500,000
New York6.50%>$0
 7.25%>$5,000,000
North Carolina2.5%>$0
North Dakota1.41%>$0
 3.55%>$25,000
 4.31%>$50,000
Ohio (b) 
Oklahoma4.0%>$0
Oregon (a)6.6%>$0
 7.6%>$1,000,000
Pennsylvania8.99%>$0
Rhode Island7.0%>$0
South Carolina5.0%>$0
South Dakota None 
Tennessee (b)6.5%>$0
Texas (b) 
Utah4.85%>$0
Vermont6.0%>$0
 7.0%>$10,000
 8.5%>$25,000
Virginia6.0%>$0
Washington (b) 
West Virginia6.5%>$0
Wisconsin7.9%>$0
Wyoming None 
Washington, D.C.8.25%>$0

(a) Connecticut has traditionally charged a ten% surtax on a enterprise’s tax legal responsibility if it has gross proceeds of $100 million or extra, or if it information as a part of a mixed unitary group. This surtax expired on January 1. Legislators have prolonged the surtax prior to now and can determine whether or not to take action once more this session.

(b) Nevada, Ohio, Texas, and Washington do not need a company revenue tax however do have a gross receipts tax with charges not strictly similar to company revenue tax charges. Delaware, Oregon, and Tennessee have gross receipts taxes along with company revenue taxes, as do a number of states like Pennsylvania, Virginia, and West Virginia, which enable gross receipts taxes on the native (however not state) degree.

(c) Georgia’s company revenue tax charge will revert to six% on January 1, 2026.

(d) Illinois’ charge contains two separate company revenue taxes, one at a 7% charge and one at a 2.5% charge. 

(e) In New Jersey, the charges indicated apply to a company’s complete internet revenue quite than simply revenue over the edge. A brief and retroactive surcharge is in impact from 2020 to 2023, bringing the speed to 11.5% for companies with revenue over $1 million.

Observe: Along with common revenue taxes, many states impose different taxes on companies akin to gross receipts taxes and capital inventory taxes. Some states additionally impose an alternate minimal tax and particular charges on monetary establishments.

Sources: Tax Basis; state tax statutes, varieties, and directions; Bloomberg Tax.

Source

Leave a Reply

Your email address will not be published. Required fields are marked *