2024 State Company Revenue Tax Charges & Brackets

23 January 2024

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Key Findings

Forty-four states levy a company revenue taxA company revenue tax (CIT) is levied by federal and state governments on enterprise earnings. Many firms will not be topic to the CIT as a result of they’re taxed as pass-through companies, with revenue reportable underneath the particular person revenue tax.
. High charges vary from a 2.5 p.c flat fee in North Carolina to a 9.8 p.c prime marginal fee in Minnesota.
4 states—Alaska, Illinois, Minnesota, and New Jersey—levy prime marginal company revenue taxA tax is a compulsory fee or cost collected by native, state, and nationwide governments from people or companies to cowl the prices of common authorities providers, items, and actions.
charges of 9 p.c or increased.
Twelve states—Arizona, Arkansas, Colorado, Indiana, Kentucky, Mississippi, Missouri, North Carolina, North Dakota, Oklahoma, South Carolina, and Utah—have prime charges at or under 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 usually 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 taxA gross receipts tax is a tax utilized to an organization’s product sales, with out deductions for a agency’s enterprise bills, like prices of products bought and compensation. In contrast to a gross sales tax, a gross receipts tax is assessed on companies and apply to business-to-business transactions along with last shopper purchases, resulting in tax pyramiding.
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Company revenue taxes are levied in 44 states. Although usually regarded as a serious tax sort, company revenue taxes accounted for under 7.07 p.c of state tax collections and three.32 p.c of state common income in fiscal yr (FY) 2021. And whereas these figures will not be excessive, they signify a considerable enhance over prior years. Company revenue taxes accounted for two.27 p.c of common income in FY 2020, which is extra in step with historic norms.

Minnesota levies the very best prime statutory company tax fee at 9.8 p.c, adopted by Illinois (9.5 p.c) and Alaska (9.4 p.c). New Jersey, which levied the very best company fee within the nation of 11.5 p.c from 2021-2023, now has the fourth-highest fee (9 p.c), because the state’s 2.5 percentage-point company enterprise tax surcharge expired on the finish of 2023. Going again a number of years, Iowa shed a prime marginal fee of 12 p.c (albeit with deductibility for federal taxes paid) and Pennsylvania started phasing its 9.99 p.c fee right down to—ultimately—4.99 p.c.

Conversely, North Carolina’s flat fee 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). Eight different states impose prime charges at or under 5 p.c: Colorado (4.4 p.c), Utah (4.65 p.c), Arkansas (4.8 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 usually thought to be extra economically dangerous as a result of tax pyramidingTax pyramiding happens when the identical last good or service is taxed a number of instances alongside the manufacturing course of. This yields vastly totally different efficient tax charges relying on the size of the provision chain and disproportionately harms low-margin corporations. Gross receipts taxes are a primary instance of tax pyramiding in motion.
, disparate impacts on low-margin companies, and non-transparency. In Nevada and Ohio, nonetheless, these taxes are imposed at comparatively low charges, and this yr, Ohio carried out new thresholds that exempt many smaller companies from gross receipts taxation. Delaware, Oregon, and Tennessee impose gross receipts taxes along with company revenue taxes, and a number of other extra states—Pennsylvania, Virginia, and West Virginia—allow gross receipts taxes on the native (however not state) stage. South Dakota and Wyoming levy neither company revenue nor gross receipts taxes, and with the enactment of a funds in 2021 that features the multiyear phaseout of its company revenue tax, North Carolina is because of be a part of them by 2030.

Twenty-nine states and the District of Columbia have single-rate company tax methods. The higher propensity towards single-rate methods for company tax than particular person revenue taxA person revenue tax (or private revenue tax) is levied on the wages, salaries, investments, or different types of revenue a person or family earns. The U.S. imposes a progressive revenue tax the place charges enhance with revenue. The Federal Revenue Tax was established in 1913 with the ratification of the sixteenth Modification. Although barely 100 years previous, particular person revenue taxes are the largest supply of tax income within the U.S.
is probably going as a result of there isn’t a significant “means to pay” idea in company taxation. Jeffrey Kwall, professor of legislation at Loyola College Chicago College of Legislation, notes that:

Graduated company charges are inequitable—that’s, the dimensions of a company bears no mandatory 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 motivation for corporations to interact in economically wasteful tax planning to mitigate the harm of upper marginal tax charges that some states levy as taxable revenueTaxable revenue is the quantity of revenue topic to tax, after deductions and exemptions. For each people and companies, taxable revenue differs from—and is lower than—gross revenue.
rises.

Notable State Company Revenue Tax Adjustments for 2024

Quite a few states have enacted company revenue tax fee modifications over the previous few years. The next company revenue tax fee modifications—that are all fee reductions slightly than will increase—took impact on January 1, 2024.

Arkansas

In recent times, Arkansas has taken nice strides to enhance its tax competitiveness by lowering revenue tax charges and consolidating brackets. That progress is continuous in 2024 with the elimination of Arkansas’s prime company revenue tax bracketA tax bracket is the vary of incomes taxed at given charges, which generally differ relying on submitting standing. In a progressive particular person or company revenue tax system, charges rise as revenue will increase. There are seven federal particular person revenue tax brackets; the federal company revenue tax system is flat.
and the discount of the highest marginal fee from 5.1 p.c for tax yr 2023 to 4.8 p.c for tax yr 2024. This alteration is the results of S.B. 8, enacted in September 2023, which accelerated beforehand deliberate particular person and company revenue tax fee reductions. Previous to the passage of S.B. 8, laws enacted in April 2023 retroactively diminished Arkansas’s prime marginal company revenue tax fee from 5.3 to five.1 p.c for 2023. Previous these reforms, Arkansas’s prime marginal fee was 5.9 p.c in 2022, 6.2 p.c in 2021, and 6.5 p.c in a few years prior.

Iowa

Iowa’s current complete tax reforms—adopted in 2018, 2021, and 2022—are persevering with to part in this yr with the state’s prime marginal company revenue tax fee lowering from 8.4 p.c in 2023 to 7.1 p.c in 2024. Underneath present legislation, Iowa’s company fee will proceed lowering over time, topic to income availability, till it reaches a flat 5.5 p.c. These fee reductions have contributed to a exceptional enchancment in Iowa’s tax competitiveness. Prior to the implementation of the 2018 reforms, Iowa had the highest prime marginal company revenue tax fee within the nation at 12 p.c.

Kansas

Kansas is one other state that noticed a company revenue tax fee discount initially of the yr. Kansas levies what’s functionally a two-rate company revenue tax, although it’s carried out as a set statutory fee with a 3 percentage-point surtaxA surtax is an extra tax levied on prime of an already present enterprise or particular person tax and might have a flat or progressive fee construction. Surtaxes are usually enacted to fund a selected program or initiative, whereas income from broader-based taxes, just like the particular person revenue tax, usually cowl a mess of applications and providers.
on company taxable revenue in extra of $50,000. By 2023, the statutory fee was 4 p.c, that means companies uncovered to the 3-percentage level surtax paid a prime marginal fee of seven p.c. Starting in 2024, the statutory fee has been diminished to three.5 p.c, that means the highest marginal fee for companies uncovered to the three percentage-point surtax is now 6.5 p.c. This alteration is the results of an financial improvement incentive invoice enacted in 2022 that requires a 0.5 percentage-point discount to the statutory fee in any yr by which the Kansas Secretary of Commerce certifies {that a} certified agency started development on a professional enterprise facility in Kansas in the course of the earlier yr, designed to tie fee reductions to efficiently attracting main new companies to the state.

Nebraska

Nebraska has made pro-growth tax reform a precedence lately and is within the means of phasing down its company revenue tax to a flat 3.9 p.c by 2027. As of January 1, 2024, the highest marginal company revenue tax fee skilled a big discount from 7.25 to five.84 p.c, reaching that concentrate on prime marginal fee three years earlier than initially deliberate. That is the results of LB 754, enacted in Could 2023, which accelerated beforehand enacted reductions to Nebraska’s company and particular person revenue taxes. Subsequent yr, Nebraska’s company revenue tax fee is scheduled to be transformed from a two-rate tax to a flat 5.2 p.c tax, and the flat fee is scheduled to lower to 4.55 p.c in 2026 and three.99 p.c in 2027.

New Jersey

After being in impact for six years, New Jersey’s non permanent 2.5 percentage-point company enterprise tax surcharge was allowed to run out on the finish of 2023, ensuing within the discount of New Jersey’s prime marginal company revenue tax fee from 11.5 p.c in 2023 to 9 p.c in 2024. Beforehand, this surcharge utilized to enterprise revenue exceeding $1 million. Consequently, New Jersey went from having the very best prime marginal company revenue tax fee within the nation in 2023 to the fourth highest this yr.

Pennsylvania

Pennsylvania’s company web revenue tax fee stays on a downward trajectory, lowering from 8.99 p.c in 2023 to eight.49 p.c in 2024. This alteration is the results of H.B. 1342, enacted in July 2022, which diminished the speed from 9.99 p.c in 2022 to eight.99 p.c in 2023 and prescribed future reductions of 0.5 share factors annually till the speed reaches 4.99 p.c in 2031.

Retroactive Adjustments

Along with these modifications in January 2024, Utah’s company revenue tax fee was diminished from 4.85 to 4.65 p.c, retroactively efficient as of January 1, 2023, because of H.B. 54, enacted in March 2023, after our prior version of this publication. This follows comparable laws that was enacted in 2022 to scale back the company fee from 4.95 to 4.85 p.c, retroactively efficient as of January 1, 2022.