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
$0
$50,000
15%
$0
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%
0
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)