Corporate tax regulation is important for all tax professionals to understand because it is a foundational element of the U.S. tax code. Approximately 10 percent of federal revenue comes from corporate taxes, accounting for over $334 billion in 2018. Recent changes to tax regulations have made understanding tax responsibilities a challenge.
Understanding corporate taxation
In the fully online Master of Science in Taxation program from Northeastern University, you can develop the skills and knowledge needed to support the financial goals and compliance standards of corporate organizations. Studying 15 to 20 hours a week in an online environment, you can learn how recent tax reform impacts the corporate world and how to strategize for common tax issues.
The program features the following courses dedicated to the principles and challenges of corporate taxation, including tax issues specific to international transactions.
ACCT 6231—Corporations and Shareholders
Corporations play an important role in the federal income tax system, and you’ll need a deep understanding of the tax issues related to this type of business to succeed in your career. This comprehensive course covers a wide variety of topics, including:
- Capital formation and structure
- Operations of the corporation
- Distributions, dividends, and redemptions
- Sales and liquidations
- Taxable and tax-free reorganizations
Recent sweeping changes to the U.S. tax code have shifted the way tax professionals work with corporate taxes. Understanding how the Tax Cuts and Jobs Act of 2017 (TCJA) impacted business owners and investors is essential knowledge for new and veteran tax professionals to obtain.
For example, many of the updated regulations passed through TCJA are set to expire in 2025—but not all of them. The new corporate tax rate of 21 percent is not only lower than it was in 2017, but it is also a flat rate now. That means C corporations that were previously taxed at 15 percent may be paying more tax now. However, the majority of U.S. corporations saw a decrease in taxes owed, many falling from a previous high of 35 percent.
Aside from declining tax rates, the TCJA made a number of other complex changes to corporate tax, such as limiting allowed deductions on business interest. This and many other contemporary topics are highly relevant to anyone who wants to move forward in their tax career.
ACCT 6243—Advanced Flow Through Entities
The income of flow-through entities is treated as the income of the entity’s investors and owners. Knowledge of this legal body is essential to the avoidance of dividend tax and double taxation. This course provides instruction on the most common types of entities: partnerships, S corporations, and LLCs. Covered subjects include:
- Allocation rules
- Liability sharing rules
- Disguised sales rules
- Partnership debt workouts
- S corporation election
- Tax treatment of shareholders in an S corporation
The TCJA also made several alterations to the way flow-through entities get taxed at the federal level. Tax professionals who have previously worked with partnerships and S corporations may still be catching up with these updates, as they can be complicated to understand.
For example, under the TCJA, some pass-through businesses may see a bigger deduction now compared with their situation in 2017. However, not all entities have gained this benefit. Flow-through business owners can deduct up to 20 percent of qualified business income if they meet certain qualifications.
Generally speaking, married couples who earn less than $350,000 and individuals who earn less than $157,500 in taxable income can take the whole deduction. However, if the flow-through business offers a service—e.g. doctor’s offices, accounting offices—the deduction may not apply at all. Rules around income brackets and the definition of a service complicate matters further. Tax advisors must have a thorough understanding of these complexities to offer sound advice to their clients.
ACCT 6240—International Taxation: Inbound Transactions
In today’s globalized economy, it’s important for tax professionals to expand their knowledge beyond domestic tax issues. Northeastern’s Online MST program provides you with two elective courses that cover complex international taxation themes. The first course focuses on foreign corporations receiving income from sources, or conducting business, in the U.S. Topics include:
- Sourcing of income
- Taxation of passive income
- Taxation of income connected to U.S. trade or business
- Branch-level taxes
- Issues of foreign-owned U.S. corporations
- Income tax treaties
- Transfer pricing
Foreign companies that invest in the U.S. were also impacted by changes brought about by the TCJA. In fact, many provisions can increase the tax burdens placed on non-U.S. multinational corporations investing in the U.S.
For instance, non-U.S. organizations that generate annual gross receipts of more than $500 million are now subject to a 10 percent minimum tax on the amount of any base erosion tax benefits, with rates rising to 12.5 percent in 2025. These base erosion benefits may include any deduction resulting from a payment by a U.S. company as well as depreciation or amortization from purchased assets. Considerations such as these only get more complicated when corporations are owned by both U.S. and non-U.S. citizens, which makes it vital for tax professionals to understand exactly how recent regulations impact their clients.
ACCT 6241—International Taxation: Outbound Transactions
The second course that focuses on international taxation deals with subjects pertaining to the federal taxation of U.S. citizens receiving income from sources, or conducting business, in foreign jurisdictions. Tax professionals frequently encounter corporations with operations abroad, which makes the knowledge gained in this course essential for career success. The course covers the following topics:
- Sourcing of income
- Allocation and apportionment of deductions
- Foreign tax credits
- Taxation of U.S. citizens abroad
- Controlled federal corporations
- Passive foreign investment companies
- Foreign currency translations and transactions
- Special entities
Before the TCJA was passed, the U.S. taxed multinational corporations on a worldwide system. Companies were subject to U.S. income tax for global profits, then the domestic portions were taxed at 35 percent, minus foreign tax credits. Under the old system, organizations were discouraged from repatriating foreign profits, because doing so would incur higher taxes. Likewise, companies could keep their assets abroad indefinitely, thereby avoiding U.S. tax altogether.
Now, tax professionals need to understand how the TCJA altered this paradigm. In the new system, foreign profits paid back to the U.S. are exempt from domestic taxation. Of course, these exemptions come with complex qualifications.
Corporate tax is a key pillar of the U.S. tax system, but its complexities can seem opaque to professionals just beginning their careers. The Online MST program from the D’Amore-McKim School of Business at Northeastern University can prepare you with core knowledge and skills to support clients in achieving their tax goals. Learn more about the program today.