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Most corporations that are not

paid by the attorney-in-fact that is related

corporation is taxed at 30% (or at a lower

members of a controlled group and are

to the income received by the

treaty rate) under section 881. If the

not filing a consolidated return figure their

attorney-in-fact from the reciprocal in the

corporation has this income, attach a

tax by using the Tax Rate Schedule

tax year.

schedule showing the kind and amount of

below.

income, the tax rate, and the amount of

See section 835 and the related

tax. Enter the tax on line 10. However,

regulations for special rules and

see Reduction of section 881 tax below.

Tax Rate Schedule

information regarding the statements

Note. Interest received from certain

required to be attached to the return.

If the amount on line 1 or line 2, Form 1120-PC,

portfolio debt investments that were

Line 6. Alternative minimum tax (AMT).

page 1 is:

issued after July 18, 1984, is not subject

A corporation that is not a small

to the tax. See section 881(c).

Of the

corporation exempt from the AMT

But not

amount

See section 842 for more information.

may be required to file Form 4626

Over —

over —

Tax is:

over —

CAUTION

Minimum effectively connected net

if it claims certain credits, even though it

$50,000

15%

investment income. See section 842(b)

does not owe any AMT. See Form 4626.

50,000

75,000

$ 7,500 + 25%

50,000

and Notice 89-96, 1989-2 C.B. 417, for

13,750 + 34%

75,000

100,000

75,000

Unless the corporation is treated as a

the general rules for computing this

100,000

335,000

22,250 + 39%

100,000

small corporation exempt from the AMT, it

amount. Also, see Rev. Proc. 2011-45,

335,000

10,000,000

113,900 + 34%

335,000

may owe the AMT if it has any of the

3,400,000 + 35% 10,000,000

10,000,000

15,000,000

2011-39 I.R.B. 449, for the domestic

adjustments and tax preference items

15,000,000

18,333,333

5,150,000 + 38% 15,000,000

asset/liability percentages and domestic

listed on Form 4626. The corporation

18,333,333

- - - - -

35%

investment yields needed to compute this

must file Form 4626 if its taxable income

amount.

(or loss) before the NOL deduction,

Deferred tax under section 1291. If the

Any additional income required by

combined with these adjustments and tax

corporation was a shareholder in a

section 842(b) must be included in

preference items is more than the smaller

passive foreign investment company

taxable income (for example, Schedule A,

of $40,000 or the corporation’s allowable

(PFIC) and received an excess

line 13).

exemption amount (from Form 4626). For

distribution or disposed of its investment

this purpose, taxable income does not

Reduction of section 881 tax.

in the PFIC during the year, it must

include the NOL deduction.

Additional taxes resulting from the net

include the total increase in taxes due

investment income adjustment may offset

See Form 4626 for definitions and

under section 1291(c)(2) in the amount

a corporation’s section 881 tax on

details on how to figure the tax.

entered on line 4. On the dotted line next

U.S.-source income. The tax reduction is

to line 4, enter “Section 1291” and the

Line 8a. Foreign tax credit. To find out

determined by multiplying the section 881

amount.

when a corporation can take the credit for

tax by the ratio of the amount of income

payment of income tax to a foreign

Do not include on line 4 any interest

adjustment to income subject to the

country or U.S. possession, see Form

due under section 1291(c)(3). Instead,

section 881 tax, computed without the

1118, Foreign Tax Credit — Corporations.

show the amount of interest owed in the

exclusion for interest on state and local

bottom margin of page 1 and enter

Line 8b. Credit from Form 8834, line

bonds or income exempted from taxation

“Section 1291 interest.”

30. Enter any qualified electric vehicle

by treaty. See section 842(c)(2). Attach a

passive activity credits from prior years

See the instructions for Form 8621,

statement showing how the reduction

allowed for the current tax year from Form

Part IV, line 11f.

under section 881 was figured. Enter the

8834, Qualified Plug-In Electric and

Additional tax under section 197(f). A

net tax imposed by section 881 on line

Electric Vehicle Credit, line 30. Also

corporation that elects to pay tax on the

10.

include on line 8b any credits from Form

gain from the sale of an intangible under

Line 11. Personal holding company

5735, American Samoa Economic

the related person exception to the

tax. A corporation (other than a

Development Credit. See the Instructions

anti-churning rules should include any

corporation described in section 542(c)) is

for Form 5735.

additional tax due under section

taxed as a personal holding company

Line 8c. General Business Credit.

197(f)(9)(B) in the total for line 4. On the

(PHC) under section 542 if:

Enter on line 8c the allowable credit from

dotted line next to line 4, enter “Section

•

At least 60% of its adjusted ordinary

Form 3800, Part II, line 38.

197” and the amount.

gross income for the tax year is PHC

The corporation is required to file Form

Line 5. Enter amount of tax that a

income, and

3800, General Business Credit, to claim

•

reciprocal must include. A mutual

At any time during the last half of the

most business credits. For a list of

insurance company that is an interinsurer

tax year more than 50% in value of its

allowable credits, see Form 3800. Also,

or reciprocal underwriter may elect, under

outstanding stock is directly or indirectly

see the applicable credit form and its

section 835, to limit the deduction for

owned by five or fewer individuals.

instructions.

amounts paid or incurred to a qualifying

See Schedule PH (Form 1120), U.S.

Line 8d. Credit for prior year minimum

attorney-in-fact to the amount of the

Personal Holding Company (PHC) Tax,

tax. To figure the minimum tax credit

deductions of the attorney-in-fact

for definitions and details on how to figure

and any carryforward of that credit, use

allocable to the income received by the

the tax.

Form 8827, Credit for Prior Year Minimum

attorney-in-fact from the reciprocal. If this

Line 12. Other Taxes

Tax — Corporations.

election is made, any increase in taxable

income of a reciprocal as a result of this

Line 8e. Bond credits from Form 8912.

Include any of the following taxes and

limitation is taxed at the highest rate of

interest in the total on line 12. Check the

Enter the allowable credits from Form

tax specified in section 11(b).

appropriate box(es) for the form, if any,

8912, Credit to Holders of Tax Credit

used to compute the total.

Bonds, line 12.

Make no entry on line 5 if the mutual

insurance company’s taxable income

Line 10. Foreign corporations. A

Recapture of investment credit. If the

before including the section 835(b)

foreign corporation carrying on an

corporation disposed of investment credit

amount is $100,000 or more. Otherwise,

insurance business in the United States is

property or changed its use before the

this tax is 35% of the section 835(b)

taxed as a domestic insurance company

end of its useful life or recovery period, it

amount. If an entry is made on line 5,

on its income effectively connected with

may owe a tax. See Form 4255,

attach a statement showing how the tax

the conduct of a trade or business in the

Recapture of Investment Credit.

was computed.

United States (see sections 864(c) and

Recapture of low-income housing

897 for definition).

Reciprocal underwriters making the

credit. If the corporation disposed of

section 835(a) election are allowed a

Generally, any other U.S.-source

property (or there was a reduction in the

credit on line 14h for the amount of tax

income received by the foreign

qualified basis of the property) for which it

-7-

Instructions for Form 1120-PC (2011)

Instructions For Form 1120-Pc - U.s. Property And Casualty Insurance Company Income Tax Return Page 7

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