The new tax law's business impact - 1993 budget effect on business tax

Nation's Business, Oct, 1993 by Joan C. Szabo

Among the intangible assets excluded from coverage are interests in land, certain computer software, and professional sports franchises.

The new rule applies to intangibles acquired after the law's enactment date of Aug. 10, 1993.

New Individual Tax Rates

The new individual income tax rates-which also apply to companies organized as S corporations-begin with the 1993 tax year. With S corporations, income passes to shareholders in proportion to their ownership of the firm and is taxed at personal-income rates.

Married Taxpayers Filing Joint Returns
Taxable Income                   Rate
Up to $36,900                    15%
Over $36,900 to $89,150          28%
Over $89,150 to $140,000         31%
Over $140,000 to $250,000        36%
Over $250,000                    39.6%(*)

(*) Married taxpayers will not be able to avoid the top bracket by filing separate returns. The 39.6 percent bracket applies to taxable income over $125,000 for married taxpayers filing separately as well as those filing jointly.

Single Taxpayers

Taxable Income               Rate
Up to $22,100                 15%
Over $22,100 to $53,500       28%
Over $53,500 to $115,000      31%
Over $115,000 to $250,000     36%
Over $250,000                 39.6%

Individuals Filing As Head Of Household

Taxable Income               Rate
Up to $29,600                 15%
Over $29,600 to $76,400       28%
Over $76,400 to $127,500      31%
Over $127,500 to $250,000     36%
Over $250,000                 39.6%

SOURCE FOR ALL CHARTS: OMNIBUS BUDGET RECONCILIATION ACT OF 1993

New Corporate Tax Rates

A new 35 percent bracket is effective Jan. 1, 1993. A corporation that operates on a fiscal year and falls into the 35 percent bracket is required to use a blended rate for a fiscal year that includes Jan. 1, 1993.

Taxable Income                             Rate
Under $50,000                              15%
Over $50,000 to $75,000                    25%
Over $75,000 to $100,000                   34%
Over $100,000 to $335,000                  39% (*)
Over $335,000 to $10 million               34%
Over $10 million to $15 million            35%
Over $15 million to $18.3 million          38%
Over $18.3 million                         35%

(*) A corporation with taxable income over $100,000 must increase its tax liability by either 5 percent of the excess or $11,750-whichever amount is lower. This increase in effect phases out the benefits of the 15 percent and the 25 percent tax rates for corporations with taxable income between $100,000 and $335,000 and results in a marginal rate of 39 percent.L

The 34 percent rate begins phasing out when the corporate taxable income exceeds $15 million. A surtax results in a marginal rate of 38 percent for corporate income between $15 million and $18.3 million.

New Estate And Trust Income Tax Rates

The 1993 tax law establishes higher tax rates for taxable income from estates and trusts effective Jan. 1, 1993. Taxable income over $7,500 is taxed at the top marginal rate of 39.6 percent, compared with 28 percent previously.