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by Answerbag Staff on December 20th, 2009

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What is a corporate tax credit?

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Answers. 2 helpful answers below.

  • by Shawn Glover on December 20th, 2009

    Answerbag Experts

    Great Answer

    Professionally Researched. (What's this?)

    A corporate tax credit is an incentive in the form of a deduction or exemption from certain taxes to entice companies to conduct business.

    Identification

    Tax credits reduce a company's taxable income. This means that the company makes more money because it is paying taxes on a smaller amount of taxable income.

    Function

    Legislators make tax credits to entice businesses to perform a certain action. For instance, offering tax credits for the improvement of emission standards will cause some businesses to work toward the creation of cleaner fuel sources.

    Refundable Tax Credits

    Refundable tax credits are paid to a corporation even if it lowers the taxable income percentage of a company below zero, resulting in a tax refund from the government. They lower the amount of taxable income a corporation has.

    Non-Refundable Tax Credits

    Non-refundable tax credits can be wasted. This is because they cannot drop the tax liability below zero percent and expire if they will drop the tax liability of a corporation below zero.

    Potential

    Corporations can continue to conduct business longterm only if they are profitable. Since tax credits lower the amount income that is taxable, they aid corporations in the improvement of their profit margins.

    Source:

    Tax Information For Corporations

    Corporate Taxation: The Concise Encyclopedia of Economics

    Interpreting Tax Law: Corporate Tax Incentives - Financial Web

    More Information:

    Integration of the Individual and Corporate Tax Systems

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  • by Heather108 on January 20th, 2010

    Heather108

    Please allow me to add to your understanding of basic economics.
    I will keep this as brief and to the point as possible because it will serve only as a reminder of something you may already know. A fact that is basic to any and all economics students from the high school level on up the educational ladder to the very top.
    -
    That fact being: “It is absolutely impossible to tax, or charge fees or fines, to any business that provides a service or manufactures a product.” (a great big bold PERIOD)
    -
    Any junior cost accountant would be able to tell you that the price charged for any such products or services is the sum total of all costs involved in delivering the finished product to the end user.
    You and I as consumers pay all such costs because we customers, collectively, are the only source of income for any and all such businesses that are taxed, fined, or whatever the additional cost of doing business might be.
    Charge a power company a $10 per ton tax, fine, or fee on coal and your power bill goes up $20 to cover it higher cost of making electric power.
    If the Fed charges banks a fee, the fees on your checking account go up.
    You and I, as the end users of all products and services, pay all the costs.
    A "corporate tax credit" is an oxymoron by government morons because corporations do not pay taxes, only their customers pay taxes hidden within higher market prices.

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