Explanation of Terms

Accounts Payable

[Page 6, Schedule L, Line 16(d)]

This balance sheet account consists of relatively shortterm liabilities arising from the conduct of trade or business and not secured by promissory notes.

Additional Inventory (Section 263A) Costs

[Form 1125-A, Line 4]

This component of cost of goods sold includes certain inventory costs capitalized by taxpayers using a simplified method of accounting under the uniform capitalization rules of Code Section 263A. However, the statistics found here do not follow the uniform capitalization rules with respect to several deduction items. These rules require certain accrued expenses, such as depreciation, to be capitalized. These accrued expenses are included as current deductions whenever they could be identified. (See “Cost of Goods Sold.”)

Additional Paid-In Capital

[Page 6, Schedule L, Line 23(d)]

This corporate balance sheet item consists of additions to capital from sources other than earnings. These sources include receipts from the sale of capital stock in excess of stated value, stock redemptions or conversions, and similar transactions. The amounts shown are after any negative amounts were deducted.

Adjustments to Shareholders’ Equity

[Page 6, Schedule L, Line 26(d)]

See “Retained Earnings, Unappropriated.”

Advertising

[Page 1, Line 22]

Code Section 162(a) allowed advertising expenses as a deduction if they were ordinary, necessary, and bore a reasonable relationship to the corporation’s trade or business. Under Code Section 263A, these expenses include advertising identified as part of the cost of goods sold or capitalized, and advertising reported separately as a business deduction. Also included are combined advertising expenses, such as

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

advertising and promotion, and advertising and publicity. Excluded from the data are the costs incurred by publishers, broadcasters, and similar businesses in preparing advertisements for others. These are generally treated as part of the cost of goods sold.

Allowance for Bad Debts

[Page 6, Schedule L, Line 2b(c)]

This balance sheet account was the allowance or reserve set aside to cover uncollectable or doubtful notes, accounts, and loans usually shown on Form 1120 as an adjustment to notes and accounts receivable. A few corporations, however, reported only net receivables and thus did not show their allowance for bad debts. Many banks and savings and loan associations included reserves for uncollectable mortgages and real estate loans in the allowance for bad debts. These amounts were transferred to this item if they were identified on supporting schedules during statistical processing.

The allowance for bad debts was a book account not necessarily related to the deduction for bad debts allowed for tax purposes. (See “Bad Debts.”)

Amortization Δ

Amortization is a deduction for the recovery of the costs of long-lived intangible assets, which is similar to the depreciation deduction to recover the costs of tangible assets. It is also used in the IR Code for recovering the costs of some tangible assets, usually as a tax preference for those assets. Most amortization is calculated on a straight-line basis over recovery periods specified in the Code. Although amortization is not a line item on the tax return, for statistical purposes, specific types of amortization were edited from attached schedules (for other costs or other deductions, for example) and included in this item in the tables. Because it is not a separate line item, the statistics for this item may be less reliable than for other deduction items.

Taxpayers also reported amortization by the following specific type using the Form 4562, Depreciation and Amortization (Including Information on Listed Property):

(3) Pollution control facilities (Section 169). Twenty per cent of the basis of depreciable property used to reduce pollution could be written off over 5 years instead of being depreciated. (4) Bond premiums (Section 171). Premiums on bonds ac quired before 1988 were amortized over the life of the bond. For bonds acquired after 1987, the prorate bond premium was an offset to the interest earned and was not included here. (5) Research and experimental expenditures (Section 174).

Taxpayers must capitalize and amortize their domestic research and experimental costs over a 5-year period, with foreign costs deducted over a 15-year period. (6) Lease acquisition costs (Section 178). Such costs could

be amortized over the term of the lease. (7) Qualified reforestation expenses (Section 194).

Taxpayers can elect to amortize up to $10,000 of reforestation costs either paid or incurred before October 22, 2004, for qualified timber property over a 7-year period. (8) Business startup expenditures (Section 195). For costs

either paid or incurred before October 23, 2004, taxpayers could elect an amortization period of 5 years or more. For costs paid or incurred after October 22, 2004, taxpayers could elect to deduct a limited amount of startup costs. Costs not deducted currently could be amortized ratably over a 15-year period. (9) Goodwill and certain other intangibles (Section 197).

(1) Optional write-off of certain tax preferences (Section

59(e)). Taxpayers could avoid including some tax preference items in the minimum tax by electing to capitalize and amortize rather than deduct expenses. These options included 3-year amortization of circulation expenses (Code Section 173); 10-year amortization of research and experimental expenditures (Code Section 174); 5-year amortization of intangible drilling costs (Code Section 263); and 10-year amortization of mining exploration and development expenses (Code Sections 616 and 617). (2) Geological and Geophysical expenditures (Section

167(h)). Expenditures associated with the exploration for, or development of, oil and gas.

Purchased goodwill and other “going concern” intangibles, customer-based intangibles, licenses, franchises, and most other purchased intangible assets not included elsewhere were amortizable over a 15-year period. (10) Organizational expenditures of corporations (Section

248). As with business startup expenditures for costs paid or incurred before October 23, 2004, taxpayers could elect an amortization period of 5 years or more. For costs paid or incurred after October 22, 2004, taxpayers could elect to deduct a limited amount of organizational costs. Costs not deducted currently could be amortized ratably over a 15-year period. (11) Organizational expenditures/costs for a partnership

(Section 709). Expenditures or costs connected to the creation of the partnership, but not for starting or operating the partnership trade or business, such as legal fees, accounting fees, and filing fees. Amortization of intangible drilling costs was excluded from this heading when it could be identified; instead, it was included in “Other deductions” in the statistics.

Amount Owed at Time of Filing

[Page 1, Line 35]

See “Overpayment or Amount Owed.”

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2022 Corporate Tax Returns Complete Report Explanation of Terms

Bad Debts

[Page 1, Line 15]

Bad debts incurred during the tax year were allowed as a deduction under Code Section 166. For most businesses, the deduction was allowed only for debts written off as uncollectable. Additions to reserves, even as the taxpayer’s normal method of accounting for bad debts, were not deductible. However, “small” banks with total assets of $500,000,000 or less could deduct additions to bad-debt reserves under Code Section 585 based on their own experience of bad-debt losses. Regulated investment companies did not report bad debts.

Balance Sheets

[Page 6, Schedule L]

Balance sheet data are the amounts reported by the taxpayer (when available) as of the end of the taxpayer’s accounting year. Taxpayers were instructed to provide data that agreed with their books of account but were given few other guidelines. Thus, the statistics for balance sheets contain considerably more reporting variability than those for income statement and tax computation items. These were the subject of more detailed instructions and more intense scrutiny during IRS processing. Beginning in TY 2002, corporations with less than $250,000 in total receipts, and less than $250,000 in total assets at the end of the tax year, were not required to file Balance Sheets per Books (Form 1120, Schedule L).

Since balance sheet data were from the taxpayers’ books, they were generally governed by general accounting principles rather than the special rules of tax accounting. Where these rules diverged significantly, balance sheet statistics could show little relationship to the income statement accounts. Inventories, accumulated depletion, depreciation, amortization, accrued tax, other liability accounts, and other capitalized items were often recorded on different bases for tax and book purposes.

Several steps were taken during statistical processing to reduce the variability due to taxpayer reporting practices. Misreported amounts were transferred to their proper accounts; amounts from attached schedules were edited into the Schedule L format; and missing balance sheets were either supplied from reference books (if possible) or statistically imputed based on other data on the return and the company’s characteristics.

Some balance sheets were suppressed (or not imputed) during statistical processing. (These companies appear in the tables in the “zero assets” category.) Except for foreign insurance companies, which are required to report U.S. assets segregated from foreign ones, the balance sheets of foreign corporations were excluded from the data because it is not possible to separate U.S. assets from foreign assets. Final returns of corporations going out of existence were not permitted balance sheets, because they should have had either zero assets (if liquidating) or assets included in some other

corporation’s return (if merging). Also, balance sheet data were not included from most part-year returns because the same company’s end-of-year data could have been subject to inclusion from its complete return.

Branch Profits Tax

[Form 1120-F, Page 1, Line 3; and/or Page 6, Line 6]

This was an additional tax imposed under Code Section 884 on after-income-tax U.S. earnings and profits of a foreign corporation that were not invested in a U.S. trade or business. The tax also applied to certain interest payments from income earned in U.S. operations. The provisions were designed to impose a tax on foreign companies’ branches similar to the withholding tax on dividends and interest imposed on foreign-owned subsidiaries incorporated in the United States. Like the withholding tax, the rate was set in the law at 30%, but this rate only applied if the U.S. had no tax treaty setting a different rate (which could be zero) with the companies’ home country.

The branch profits tax was imposed on the “dividend equivalent” amount of earnings and profits of a U.S. branch of a foreign corporation that was attributable to its income effectively connected (or treated as effectively connected under Code Section 897) with a U.S. trade or business. The effectively connected earnings and profits were: (1) reduced to reflect any reinvestment of the branch’s earnings in assets in the U.S. trade or business (or reduce liabilities in the U.S. trade or business), and (2) increased to reflect any prior reinvested earnings considered remitted to the home office of the foreign corporation.

Certain earnings and profits attributable to income effectively connected with a U.S. trade or business were exempt from the branch profits tax. The following types of income are not included in computing effectively connected earnings and profits (ECEP):

(1) Income from the operation of ships or aircraft exempt

from taxation under Section 883(a)(1) or (2). (2) Foreign Sales Corporation (FSC) income and distri butions treated as effectively connected income (ECI) under Section 921(d) or 926(b), as in effect before their repeal, that are not otherwise ECI. (3) Gain on the disposition of an interest in a domestic

corporation that is a U.S. real property interest under Section 897(c)(1)(A)(ii) if the gain is not otherwise ECI. (4) Related person insurance company income that a tax payer elects to treat as ECI under Section 953(c)(3)(C) if the income is not otherwise ECI. (5) Income that is exempt from tax under Section 892. (6) Interest income derived by a possession bank from

U.S. obligations if the interest is treated as ECI under Section 882(e) and is not otherwise ECI.

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

The branch profits tax is the sum of the tax imposed on the earnings, profits, and interest payments of the foreign corporation. The branch tax was reported on Form 1120-F, U.S. Income Tax Return of a Foreign Corporation. The tax was included in total income tax in the statistics. It is also shown separately in Table 11.

Business Receipts

[Page 1, Line 1(c)]

Business receipts are the gross operating receipts of the corporation reduced by the cost of returned goods and allowances. Generally, they represent all of a corporation’s receipts except investment and incidental income. Business receipts may also include sales and excise taxes that were included in the sales price of products—some corporations reported this way, while others reported their receipts after adjustment for these taxes. Business receipts include rents reported by real estate operators and other corporations for which rent made up a significant portion of income. The latter included manufacturers that rented their products; lessors of docks, warehouses, pipelines, and other public utility facilities; and companies engaged in rental services, such as providing lodging places and automobile or clothing rentals.

For banks and other financial institutions whose principal income was interest, business receipts consisting of fees, commissions, credit card income, and other operating receipts as principal income were reported under that heading and included in the statistics. Banks’ business receipts also included profit from federal funds transactions. If the bank reported gross sales and purchases, then the amounts were netted during statistical processing. Likewise, security dealers included profit from security trades in business receipts. If the gross amounts were reported, then costs and sales proceeds were netted during statistical processing. Regulated investment companies and real estate investment trusts did not report business receipts, although all their income was included in the investment income categories in the statistics.

Business receipts for insurance companies consisted of premium income. Some small property and casualty insurance companies, however, could elect to be taxed only on investment income and thus would have reported no business receipts. Other, smaller companies were exempt from tax altogether. Property and casualty insurance companies with premium income of $2,200,000 or less could elect (under Code Section 831(b)(2)) to be taxed on only investment income.

Generally, companies with gross receipts of $600,000 or less were exempt from tax under Code Section 501(c)(15).

For all industries, business receipts excluded gains from the sale of assets. See “Net Gain (or Loss), Noncapital Assets” and “Net Capital Gains.”

Capital Gains Tax (1120-RIC)

[Form 1120-RIC, Page 2, Schedule J, Line 2b]

Regulated Investment Companies (RICs) are passthrough entities that are subject to special tax treatment provided they meet certain requirements. They can take a deduction from capital gain income equal to the amount of such income they distribute to their shareholders in the form of capital gain dividends. Under IRC Section 852(b)(3)(A), any undistributed amount of capital gain income is subject to taxation at the corporate rate. This tax is a component of “Total Income Tax Before Credits.”

Capital Stock

[Page 6, Schedule L, Line 22(d)]

This end-of-year balance sheet equity item includes amounts shown for outstanding shares of both common and preferred stock.

Cash

[Page 6, Schedule L, Line 1(d)]

This balance sheet asset item includes the amount of actual money, or instruments and claims that were usable and acceptable as money on hand at the end of the taxable year, including certificates of deposit.

Charitable Contributions Δ

[Page 1, Line 19]

Contributions or gifts to charitable, religious, educational, and similar organizations were deductible under Code Section 170(c). In general, the deduction was limited to 10% of taxable income computed without regard to:

(1) A temporary suspension of the 10% limitation rule for

certain disaster-related contributions permitted corporations to deduct contributions made to a qualified charitable organization after December 31, 2019, and before February 26, 2021, for relief efforts in one or more qualified disaster areas without regard to the 10% taxable limit.

(1) the deduction for contributions (2) special deductions for dividends received and for divi dends paid on certain preferred stock of public utilities (3) any net operating loss carryback under Code Section

172 (4) any capital loss carryback to the tax year under Code

Section 1212(a)(1) (5) the deduction of bond premium on repurchase under

Code Section 249 and (6) the deduction for income attributable to domestic pro duction activities of specified agricultural or horticultural cooperatives Amounts over the 10% limit could be carried over to the next 5 tax years. However, there were also multiple exceptions and suspension to this 10% limitation that were in effect:

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2022 Corporate Tax Returns Complete Report Explanation of Terms

(2) Per the CARES Act, corporations were allowed to

deduct qualified cash contributions without regard to the 10% limitation rule. The 10% limit does not apply to contributions made after December 31, 2019, and before February 26, 2021. The total amount of the contribution claimed could not exceed 25% of the excess of the corporation’s taxable income over all other allowable charitable contributions. Contributions over this 25% limitation could be carried forward to the next 5 tax years. (3) Qualified farmers and ranchers that did not have pub licly traded stock and contributed qualified conservation property, as well as Native Corporations that contributed qualified conservation property, which was land conveyed under the Alaska Native Claims Settlement Act, were allowed to deduct contributions of such property without regard to the 10% limit. The total amount of such contributions claimed could not exceed 100% of the excess of the corporation’s taxable income over all other allowable charitable contributions. Any excess contributions could be carried forward to the next 15 tax years. A corporation could receive a larger deduction for contributing inventory and other property, including qualified contributions of “apparently wholesome food,” used for the care of infants, the ill, or the needy, and for scientific equipment used by an institution of higher education or certain scientific research organizations for research. The deduction for scientific equipment applied to all except S Corporations, personal holding companies, and corporations whose businesses were the performance of services.

Regulated investment companies and real estate investment trusts did not report contributions. Contributions made by S corporations were passed through to the shareholders to be deducted on the shareholders’ individual income tax returns. The amount shown in the statistics includes contributions identified as part of cost of goods sold or capitalized under Section 263A. It also includes contributions reported as a business deduction.

Compensation of Officers

[Page 1, Line 12]

Salaries, wages, stock bonuses, bonds, and other forms of compensation were included in this deduction item if they were identified as having been paid to officers for personal services rendered. The item included amounts reported as a part of cost of goods sold or capitalized under IR Code Section 263A. This deduction item did not include qualified deferred compensation, such as contributions to a 401(k) plan or a salary reduction agreement. These were included in the statistics for pensions and profit-sharing plans.

The deductible compensation of certain officers of publicly held corporations was limited under Code Section 162(m) to $1,000,000 or less, except for covered health

providers, which were limited by the provisions of the Affordable Care Act to $500,000. However, the limit did not apply to commissions or other compensation based on performance, or if the officer worked under a binding contract in effect on February 17, 1993. Under the CARES Act, firms that are receiving direct support from the Treasury must follow Section 4004 compensation restrictions. This amount, along with salaries and wages, was reduced by the amount of any CARES Act employee retention credit the corporation claimed on its employment tax return.

Consolidated Returns

Consolidated income tax returns contained combined financial data for two or more corporations. All corporations on the return had to meet the following requirements:

(1) A common parent corporation owned at least 80% of

the voting power of all classes of stock and at least 80% of each class of nonvoting stock (except stock which was limited and preferred as to dividends) of at least one member of the group, and (2) These same proportions of stock of each group member

were owned within the group. Corporations electing to file consolidated returns in one year had to also file consolidated returns in subsequent years, with certain exceptions. The consolidated filing privilege could be granted to all affiliated domestic corporations connected through stock ownership with a common parent corporation except:

(1) regulated investment companies (RICs) (2) real estate investment trusts (REITs) that did not con solidate with qualified REIT subsidiaries (3) corporations designated tax-exempt under Code

Section 501 (4) Domestic International Sales Corporations (DISCs)

and (5) S Corporations.

Under Code Section 1504(c), insurance companies could file consolidated returns with other insurance companies without restriction. Also, a noninsurance parent could include an insurance subsidiary subject to certain restrictions (e.g., the insurance company must have been a member of the controlled group for at least 5 years).

A consolidated return filed by the common parent company was treated as a unit, and each statistical classification was determined on the basis of the combined data of the affiliated group. Therefore, filing changes to or from a consolidated return basis affected year-to-year comparability of certain statistics, including data classified by industry and size of total assets.

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

Cost of Goods Sold

[Form 1125-A, Line 8]

Cost of goods sold represented the costs incurred by the corporation in producing the goods or providing the services that generated the corporation’s business receipts. Included were costs of materials used in manufacturing, costs of goods purchased for resale, direct labor, and a share of overhead expenses, such as rent, utilities, supplies, maintenance, and repairs. (Overhead expenses, however, were not included in these statistics as the taxpayers reported them; see “Uniform Capitalization Rules.”)

The basic cost of goods sold calculation, shown in Form 1125-A, consisted of adding beginning inventory to the current-year purchases, labor, additional inventory costs (Section 263a), and other costs, and then subtracting ending inventory. Each of the individual items included in cost of goods sold is shown separately in Table 12.

Cost of goods sold was imputed for those companies engaged in manufacturing or trade activities that reported gross receipts, but not the cost of goods sold. This was done by using the attachments for “Other Deductions.” For other nonfinance industries, a cost was imputed only for companies that reported gross receipts and included inventories on the balance sheet.

Generally, returns of corporations in the finance sector were not expected to have cost of goods sold unless they were consolidated returns including nonfinance subsidiaries. Security dealers sometimes reported the cost of securities traded on their own accounts as cost of goods sold (and reported the gross sales proceeds as business receipts). Such amounts were netted during statistical processing, with the net gain reported as receipts and cost of goods made zero. The same handling was given to bank returns reporting gross receipts and costs from federal funds transactions.

Insurance companies were made to conform to the Form 1120 format using premium income as gross business receipts and showing benefits paid as cost of goods sold. For most life insurance companies, cost of goods sold was equal to death benefits. For other insurance companies, it was equal to losses incurred. These items are shown separately in Table 12.

Uniform Capitalization Rules

A taxpayer reporting of cost of goods sold was governed by the “uniform capitalization rules” of Code Section 263A. Most companies producing goods for sale were required to capitalize inventory costs under the uniform capitalization rules. Corporations subject to the rules were required to capitalize direct costs and an allocable portion of most indirect costs that related to the goods produced or acquired for resale. Some of the indirect costs that were required to be allocated to capital accounts were administration expenses, taxes, depreciation, insurance costs, compensation of officers, and contributions to pension, stock bonus, profit sharing, and

deferred compensation plans. Special rules were provided for the capitalization of interest expense paid or incurred during production. A small business taxpayer is not required to capitalize costs under Section 263A. A small business taxpayer is a taxpayer that has average annual gross receipts of $25 million or less for the three prior tax years and is not a tax shelter. Special rules were provided for farmers and for timber property.

For statistical purposes, many components of cost of goods sold were moved to the equivalent deduction item. For this reason, these appear in the tables as current deductions rather than components of cost of goods sold. Expenses for advertising, amortization, bad debts, compensation of officers, contributions to charitable organizations, employee benefit programs, ESOP Dividends, and pension plans were transferred to their respective deduction categories when identified on the attachments for cost of goods sold. These were also transferred: depletion, depreciation, interest, rent of buildings or real estate, and taxes. Intangible drilling costs were removed from cost of goods sold and included in other deductions.

Therefore, in this report, cost of goods sold appears smaller, and many deduction accounts appear larger, than what was reported by taxpayers. However, those listed above were the only accounts affected. Inventories were not adjusted, and net income, deficits, and taxable income were not affected.

Cost of Labor

[Form 1125-A, Line 3]

This component of cost of goods sold included the portions of the company’s payroll representing direct labor costs, and some indirect costs allocated to inventory under the uniform capitalization rules. Some labor costs were reported in other accounts, such as Other Costs. (See “Cost of Goods Sold.”)

Cost of Treasury Stock

[Page 6, Schedule L, Line 27(d)]

This item was the total value of issued common or preferred stock that had been reacquired and was held at the end of the accounting year by the issuing corporations. The stock, which was available for resale or cancellation, may have been purchased by the corporation or acquired through donation or as settlement of a debt. Treasury stock was a part of capital stock outstanding; it did not include unissued capital stock.

Credit for Prior Year Minimum Tax

[Page 3, Schedule J, Line 5d]

The refundable portion of the minimum tax credit does not apply for tax years beginning after 2019. Corporations can have an unused portion of the regular minimum tax credit that can be carried forward in later years.

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2022 Corporate Tax Returns Complete Report Explanation of Terms

Credit to 2023 Estimated Tax

[Page 1, Line 37a]

This item was the amount of the taxpayer’s 2022 overpayment applied to the firm’s estimated tax for TY 2023. See also “Overpayment or Amount Owed.”

Credit to Holders of Tax Credit Bonds

[Page 3, Schedule J, Line 5e]

Form 8912, Credit to Holders of Tax Credit Bonds, is used to claim credit for the following tax credit bonds: Clean renewable energy bond (CREB), New clean renewable energy bond (NCREB), Qualified energy conservation bond (QECB), Qualified zone academy bond (QZAB), Qualified school construction bond (QSCB), and Build America bond (BAB). The credit is not available for bonds issued after December 31, 2017.

Death Benefits

[Form 1120-L, Page 1, Line 9]

See “Cost of Goods Sold.”

Deduction for Dividends Paid

[Form 1120-REIT, Page 1, Line 21b; Form 1120-RIC, Page 1, Line 25a]

See “Statutory Special Deductions.”

Deficit

See “Net Income (or Deficit).”

Depletable Assets and Accumulated Depletion

[Page 6, Schedule L, Lines 11a and b]

Depletable assets represented, in general, the gross endof-year value of mineral property, oil and gas wells, other natural deposits, standing timber, intangible development and drilling costs capitalized, and leases and leaseholds, each subject to depletion. Accumulated depletion represented the cumulative adjustment to these assets shown on the corporation’s books of account.

The value of depletable assets and accumulated depletion may not be closely related to the current-year depletion deduction. The depletable assets and accumulated depletion balance sheet accounts reflected book values; the depletion deduction reflected the amount claimed for tax purposes. Regulated investment companies and real estate investment trusts did not report these items.

Depletion

[Page 1, Line 21]

This deduction was allowed for the exhaustion of mines, oil and gas wells, other natural deposits, and timber. The IR Code provided two methods for computing the deduction:

(1) Regulated domestic natural gas (2) Natural gas sold under a fixed contract that has been in

effect since February 1, 1975 and (3) Natural gas from geopressured brine that was produced

from a well for which drilling began after September 1978 and before 1984 and which was determined to be produced from geopressured brine in accordance with Section 503 of the Natural Gas Policy Act of 1978. All other oil and gas producers were required to use cost depletion.

Generally, for gas and oil wells, the gross income was the actual sales price, or representative market or field price, if the gas or oil were later converted or manufactured prior to sale. For other natural deposits, gross income was defined to include income from mining or extraction, transporting ores and minerals for treatment (generally up to 50 miles), and certain treatment processes. Percentage rates for each type of natural deposit were listed in Code Sections 613 and 613A and ranged from 5% to 25% of gross income. However, percentage depletion generally could not exceed 50% of the taxable income (100% for oil and gas property) from the property computed without the depletion deduction and the Section 199A deduction.

The depletion deduction for natural deposits other than oil and gas could also have been limited by provisions designed to recapture previously deducted mine exploration and development costs. These capital expenditures were deductible when incurred but had to be recaptured if the mine became productive or was sold. One method that taxpayers could elect to recapture these deductions was to forgo depletion deductions on the mine until recapture was complete.

For leased property, the depletion deduction was divided between the lessor and lessee.

The statistics for depletion also did not include amounts shown by the corporation as a deduction in computing net gain or loss from sale of depletable assets under Sections 631(a) or 1231. Regulated investment companies and real estate investment trusts did not report depletion.

The amounts shown in the statistics included any identifiable depletion reported as part of the cost of goods sold or capitalized under Code Section 263A. Amortization of

(1) cost depletion, in which a share of the cost of acquiring or developing a property was written off each year; and (2) percentage depletion, which involved simply deducting a fixed percentage of the gross income from the property each year. For standing timber, depletion was computed based on cost. In the case of most natural deposits, the depletion was computed on either a cost or percentage basis. For oil and gas wells, however, percentage depletion was allowed only to “independent” producers (producing less than 75,000 barrels of oil or an equivalent amount of gas a day) and royalty owners, and then only for the first 1,000 barrels produced each day, and wells that produce natural gas that is either:

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

intangible drilling costs was not included in the statistics for depletion but was included in “Other Deductions.”

Depreciable Assets and Accumulated Depreciation

[Page 6, Schedule L, Lines 10a and b]

Depreciable assets from the corporation’s end of year balance sheet were the book value of tangible property subject to depreciation (such as buildings and equipment with a useful life of 1 year or more). This item could include fully depreciated assets still in use and partially completed assets for which no deduction was yet allowed if the corporation reported them as depreciable on its balance sheet. The amounts shown as accumulated depreciation represented the portion of the assets that were written off in the current year and all prior years.

In general, depreciable assets were the gross amounts before adjustment for accumulated depreciation. Some corporations reported only the net amount of depreciable assets after deducting accumulated depreciation. Certain insurance companies were included among the corporations that reported only a net amount of depreciable assets. Life insurance companies and some property and casualty insurance companies reported their balance sheet information in the format required by state insurance regulations. This format usually provided for the reporting of only net depreciable assets and only the home and branch office buildings and equipment were included. Other real estate holdings of these corporations were reported as “Other Investments.”

The statistics for depreciable assets excluded depletable and intangible assets, which were reported in their respective items, and accumulated amortization.

Generally, the value of depreciable assets and accumulated depreciation were not closely related to the currentyear depreciation deduction. The depreciable assets and accumulated depreciation balance sheet accounts reflected book values; the depreciation deduction reflected the amount claimed in the current year for tax purposes.

Depreciation Δ

[Page 1, Line 20]

Depreciation is a method of recovering the cost of investments in tangible assets that lose value as they are used to produce income. The depreciation deduction allowed under Code Sections 167 and 168 approximated this loss in value by prescribing the rates at which various types of assets could be depreciated and the period over which the investment could be recovered. Public Law (P.L.) 115-97 amended some of the depreciation rules, although those in effect for property placed in service before September 27, 2018, were basically the same as those enacted in 1986. Since the tax depreciation rules have changed many times over the years, and some assets were still in use in 2022 that were originally placed in

service under prior-year rules, the depreciation claimed on 2022 returns included in these statistics could have represented amounts computed by several different sets of rules.

In 2022, the basic depreciation system was the “Modified Accelerated Cost Recovery System,” or MACRS, that provided two systems for computing the depreciation deduction. The “General Depreciation System,” or GDS, specified recovery periods of 3, 5, 7, or 10 years for livestock, fruit trees, most machinery, equipment, and tangible personal property, and prescribed the 200% declining-balance method of determining the amount to be written off each year. Public utility property, water transportation equipment, and farm buildings were placed in the 15-year, 20-year, or 25-year category and were to be depreciated by the 150% declining-balance method. Buildings were to be depreciated by the straight-line method and over recovery periods of 27.5 years for residential buildings, 31.5 years for nonresidential buildings placed in service before May 13, 1993, and 39 years for nonresidential buildings placed in service after May 12, 1993. Railroad roadbeds and tunnels were prescribed a recovery period of 50 years and the straight-line depreciation method.

MACRS also provided for an “Alternative Depreciation System,” or ADS, that was less accelerated than GDS and thus could help avoid the alternative minimum tax. The Tax Cuts and Jobs Act of 2017 reduced the recovery period for residential property under ADS from 40 years to 30 years.

Also included here were amounts the corporation elected to expense under IR Code Section 179. For 2022, the maximum deduction was $1,080,000 ($1,115,000 for qualified enterprise zone property). This limitation is reduced by the amount by which the cost of Section 179 property placed in service during the tax year exceeded $2,700,000. P.L. 115-97 expanded the definition of Section 179 property to include certain improvements to nonresidential real property.

Taxpayers may deduct bonus depreciation for equipment, computer software, and certain improvements to nonresidential real property up to 50% for equipment placed in service before September 27, 2017, and 100% for business property acquired and placed in service after September 27, 2017, and before 2023.

This item included amounts of depreciation reported as a part of cost of goods sold or capitalized under IR Code Section 263A.

A corporation can elect to claim pre-2006 unused minimum tax credits in lieu of the special depreciation allowance for round 4 extension property.

Dividends

[Page 2, Schedule C] Dividends Received from Domestic Corporations

Dividends received from domestic corporations was a statistic computed from amounts reported on Schedule

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2022 Corporate Tax Returns Complete Report Explanation of Terms

C (Form 1120), Dividends and Special Deductions. The amounts making up this statistic are shown in detail in Table 11 and represent most distributions from the earnings and profits of companies incorporated in the United States. Dividends received from domestic corporations were generally those used in computing the special deduction from net income for dividends received. This is discussed under “Statutory Special Deductions” in this section.

Deductible dividends from Interest Charge (IC-DISCs) and from former DISCs were included as domestic dividends received.

Dividend distributions among member corporations electing to file a consolidated return were eliminated from the statistics as part of the consolidated reporting of tax accounts. For tax purposes, dividends reported on these returns represented amounts outside the tax-defined affiliated group.

If portfolio stock was wholly or partially financed by debt, no dividend received deduction was allowed on the debt-financed portion of the stock. There was a separate line item and a separate deduction calculation for dividends on debt-financed portfolio stock. This amount was included as part of domestic dividends even though it also represented debt-financed stock of foreign corporations.

Dividends or other distributions other than those detailed in Table 11 were included in “Other Receipts.”

Dividends received by S corporations were passed through to shareholders and reported on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc., and are not included in the statistics for this item in Table 11. These statistics are presented in Table 7 as “Dividend Income” under “Portfolio Income (less deficit) Distributed to Shareholders.”

Dividends Received from Foreign Corporations

These were dividends paid from the earnings and profits of companies incorporated in foreign countries. The amounts making up this statistic are shown in detail in Table 11.

Dividends from specified 10%-owned foreign corporations were 100% deductible. Likewise, dividends received from foreign corporations out of U.S.-source earnings and profits or from foreign sales corporations (FSCs) were usually eligible for the dividends received deduction, as described in “Statutory Special Deductions.”

Because Subpart F inclusions—Global Intangible Low Taxed Income (GILTI), Section 965 inclusion, and foreign dividend gross-up—were not actual receipts, they were excluded from dividends received for statistical purposes. Instead, these amounts were combined and presented in the statistics as “Foreign Deemed Income.”

Dividends received from foreign corporations by S corporations were not included in these statistics.

Dividends Received Deduction

[Page 2, Schedule C, Line 24]

See “Statutory Special Deductions.”

Effectively Connected Income (ECI) Deductions

[Form 1120-F, Page 4, Line 26]

A foreign corporation’s expenses are deductible against U.S. taxable income only if they are connected with income effectively connected with the conduct of trade or business in the United States (ECI). Deductions definitely related and indirectly allocated and apportioned to effectively connected income that are not includible on more specific deduction lines are included. The proper allocation and apportionment of deductions for this purpose are generally determined under the provisions of IRC Section 1.861-8 and Temporary Regulations Section 1.861-8T.

Employee Benefit Programs

[Page 1, Line 24]

Contributions made by employers to employee plans, such as death benefits, insurance, health, accident, sickness, and other welfare plans were deductible under Code Sections 419 and 419A. Generally, such programs were not an incidental part of a pension, profit-sharing, or other funded deferred compensation plan. Deductions for a welfare benefit fund were limited to the qualified cost of the fund for the taxable year, as described under Code Section 419. Direct payments for employees’ welfare were not included as employee benefits; only payments into a fund for employee benefits were included in the statistics.

Included in the statistics for this item were amounts identified as part of the cost of goods sold or capitalized under Section 263A. Regulated investment companies and real estate investment trusts do not report employee benefits. Some mining companies could have reported an amount for a combination of welfare/retirement plans. When identified, the combined amount was included in the statistics for contributions to employee benefit plans.

Estimated Tax Penalty

[Page 1, Line 34]

See “Overpayment or Amount Owed.”

Excess Net Passive Income Tax

[Form 1120-S, Page 1, Line 22a]

A Subchapter S corporation that had accumulated earnings and profits from a prior Subchapter C status and had net passive income greater than 25% of its gross receipts was taxed on the excess (net of related expenses) at the regular corporate tax rate. Passive investment income, in general, was gross receipts derived from rents, royalties, dividends, interest, annuities, or the sales or exchanges of stock or securities.

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

Foreign Deemed Deductions Section 965 Deduction

Taxpayers are allowed a deduction that results in a 15.5% tax on the portion of their Section 965 inclusion related to their cash assets and an 8% tax on the portion of their Section 965 inclusion related to their noncash assets.

Section 250 Deduction

This special deduction is the sum of the deduction for GILTI (see “Foreign Deemed Income”) and the deduction for foreign derived intangible income (FDII). For 2021, the GILTI deduction was 50% of the GILTI inclusion, resulting in a maximum tax rate on this income of 10.5%.

The FDII deduction results in a lower tax rate on intangible income produced in the U.S. but derived from abroad. To compute the deduction, taxpayers multiply their domestic intangible income in excess of 10% of tangible depreciable assets by the estimated portion of that income derived from foreign sales and use. The FDII deduction, at 37.5% for taxable years beginning before January 1, 2025, results in a maximum tax rate of 13.125% on foreign derived intangible income.

Deduction for Subpart F Inclusions

Subpart F inclusions derived from the sale by a controlled foreign corporation (CFC) of the stock of a lower-tier foreign corporation treated as a dividend were 100% deductible. For more on Subpart F inclusions, see “Foreign Deemed Income.”

Foreign Deemed Income

This item was the portion of income from U.S-owned foreign corporations deemed dividend income to their U.S. shareholders under Code Sections 951-965. This item includes the sum of Subpart F income (including Subpart F inclusions derived from the sale by a CFC of the stock of a lower-tier foreign corporation treated as a dividend), Section 965 inclusion, GILTI, and foreign dividend gross-up.

Subpart F Inclusions

[Page 2, Schedule C, Line 16(a through c)]

Generally, U.S. shareholders can claim a 100% deduction on the repatriated earnings and profits of a CFC. The Subpart F provisions of the Code, however, require that some types of foreign income be included in the income of the U.S. shareholders even if not distributed. The types of income involved are passive investment income, income from sources thought especially easy to shift between tax jurisdictions, or income from sources contrary to public policy. A CFC is a foreign corporation in which U.S. shareholders directly, indirectly, or constructively own, by vote or value, more than 50% of the corporation’s stock. A U.S shareholder was defined as a U.S. person who owned 10% or more of the foreign corporation’s total combined voting stock. Earnings and profits of a CFC may also be taxed by the GILTI provisions; see “GILTI Income.”

Subpart F inclusions consisted of:

(1) Subpart F income, defined below (2) any previously excluded Subpart F income that had

been invested in qualified assets in less developed countries and was either withdrawn from those countries or repatriated to the U.S. shareholders and therefore became taxable (3) any increase in controlled foreign corporation earnings

due to investment in U.S. property and (4) factoring income, or income that arose from the sale or

transfer of a receivable. Subpart F income, defined in Code Section 952, included:

(1) income from issuing (or reinsuring) an insurance or

annuity contract that would otherwise be taxed under Subchapter L of the IR code if that income had been from a domestic insurance company (2) “foreign base company income,” which included sev eral types of income derived from passive investments or from transactions outside the CFC’s country of incorporation; income from participation in international boycotts not sanctioned by the United States; illegal bribes, kickbacks, or other payments to a government official and (3) income derived from any foreign country during any

period for which a foreign tax credit would be denied for taxes paid to those countries, as described in Code Section 901(j) (i.e., a government not recognized by the United States, with which the United States had severed or did not conduct diplomatic relations, or a government that provided support for international terrorism). GILTI Income

[Page 2, Schedule C, Line 17]

GILTI income is generally earnings and profits of CFCs (excluding Subpart F income, foreign oil and gas income, related party dividends, and income effectively connected to the United States) in excess of a deduction for 10% of intangible assets minus interest costs. The maximum tax rate on this income is 10.5%, for tax years beginning before January 1, 2025, achieved by a 50% deduction (the GILTI deduction), included in the Section 250 deduction (see “Statutory Special Deductions”). For tax years beginning after January 1, 2025, the deduction falls to 37.5%, yielding a rate of 13.125%.

Section 965(a) Inclusion

[Page 2, Schedule C, Line 15]

Section 965, as amended by P.L. 115-97, generally requires a U.S. entity who owns 10% or more of the voting power of a specified foreign corporation (SFC) to include in gross income its pro rata share of such corporation’s untaxed accumulated post-1986 E&P as of November 2, 2017, or December 31, 2017 (whichever is greater). A SFC is either

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a CFC or a foreign corporation, other than a passive foreign investment company (PFIC), that has at least one domestic corporate U.S. shareholder.

Foreign Dividend Gross-Up

[Page 2, Schedule C, Line 18(a)]

This item is dividend income resulting from foreign taxes deemed paid by a U.S. corporation on the earnings and profits of its related foreign corporations, including its controlled foreign corporations; see “Foreign Deemed Income.” The U.S. corporation’s share of the foreign taxes depended on the ratio of the dividends and includable income it received to the total earnings and profits of the related foreign corporation. The foreign taxes were treated as deemed paid by the U.S. corporation. The foreign taxes deemed paid were included in income as an increase to foreign dividends, called a dividend gross-up. Foreign dividend gross-up from the taxes deemed paid on Section 965 inclusion are reduced by a percentage generally corresponding to the Section 965 deduction.

Foreign Tax Credit

[Page 3, Schedule J, Line 5a]

Code Section 901 allowed a credit against U.S. income tax for income taxes paid to foreign countries or U.S. possessions. The credit could be claimed by domestic corporations, except S corporations, and by foreign corporations engaged in trade or business in the United States for foreign taxes paid on income effectively connected with the U.S. business. The U.S. income tax that could be reduced by the credit excluded the recapture taxes and the personal holding company tax. The credit was not allowed for S corporations because their income was primarily taxed through their shareholders; any creditable foreign taxes were also passed through to their shareholders. Regulated investment companies could elect under Code Section 853 to allow their shareholders to claim any credit for the foreign taxes paid. However, if the election was not made, the regulated investment company could claim the tax credit.

The foreign tax credit was subject to a limitation that prevented the corporations from using foreign tax credits to reduce U.S. tax liability on U.S.-sourced income. The credit was limited to a percentage of total U.S. income tax equal to the ratio of taxable income from foreign sources to worldwide taxable income. This limitation was computed separately for foreign taxes paid or accrued with respect to six income categories, which are: (1) Passive Income; (2) General Category Income; (3) Section 901 (j) Income (Sanction Country Income); (4) Income Re-sourced by Treaty; (5) Section 951A income (Global Intangible Low-Taxed Income); and (6) Foreign Branch Income. Foreign taxes exceeding the limitation for any 1 year could be carried back 1 year and forward 10 years.

A corporation that claimed (or passed through) the foreign tax credit could not also claim a business deduction for

the same foreign taxes paid. The credit could be reduced for taxes paid on foreign income from operations involving participation or cooperation with an international boycott. The foreign tax credit was not allowed for taxes paid to certain foreign countries whose governments were not recognized by the United States, with which the United States severed or did not conduct diplomatic relations, or which supported international terrorism.

General Business Credit Δ

[Page 3, Schedule J, Line 5c]

The general business credit is computed on Form 3800, General Business Credit. The credit consisted of a combination of several individual credits of which the following are edited by the IRS Statistics of Income Division (SOI): Form 3468, Investment Credit; From 7207, Advanced Manufacturing Production; Form 6765, Credit for Increasing Research Activities; Form 8586, Low-Income Housing Credit; Form 8826, Disabled Access Credit; Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit; Form 8845, Indian Employment Credit; Form 8820, Orphan Drug Credit; Form 8874, New Markets Credit; Form 8881, Credit for Small Employer Pension Plan Startup Costs and Auto-Enrollment; Form 8882, Credit for Employer-Provided Child Care Facilities and Services; Form 8864, Biodiesel and Renewable Diesel Fuels Credit; Form 8896, Low Sulfur Diesel Fuel Production Credit; Form 8910, Alternative Motor Vehicle Credit; Form 8911, Alternative Fuel Vehicle Refueling Property Credit; Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit; Form 5884A, Employee Retention Credit for Employers Affected by Qualified Disasters; Form 8834, Qualified Electric Vehicle Credit; Form 3468, Investment Credit; Form 5884, Work Opportunity Credit; Form 6478, Biofuel Producer Credit; Form 8586, Part II, Low-Income Housing Credit; Form 8835, Renewable Electricity, Refined Coal, and Indian Coal Production Credit; Form 8846, Credit for Employer Social Security and Medicare Taxes Paid on Certain Employee Tips; Form 8941, Credit for Small Employer Health Insurance Premiums; Form 8844, Empowerment Zone Employment Credit; and Form 8994, Employer Credit for Paid Family and Medical Leave. If a corporation claimed more than one of these credits, reported a carryforward, had credits from a passive activity, or had the Trans-Alaska pipeline liability fund credit, Form 3800 was to be filed with the income tax return.

The following general business credit forms are not edited: Form 8900, Qualified Railroad Track Maintenance Credit; Form 8906, Distilled Spirits Credit; Form 8907, Nonconventional Source Fuel Credit; Form 8908, Energy Efficient Home Credit; Form 8909, Energy Efficient Appliance Credit; Form 8923, Mine Rescue Team Training Credit; Form 8931, Agricultural Chemicals Security Credit; Form 8932, Credit for Employer Differential Wage Payments; Form 8933, Carbon Oxide Sequestration Credit; and Form 5884-B, New Hire Retention Credit. However, the

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current-year amount is displayed on the appropriate line of Form 3800 and included in the “credit allowed for the current year” (line 38).

The purpose of the general business credit was to provide a uniform limitation on the amount that could be used to reduce tax liability and to establish uniform rules for carrybacks and carryforwards. Each of the credits is computed separately. Total credits became the general business credit for the purpose of applying the maximum tax liability rules and the carryback and carryforward rules.

Except for the investment credits, S corporations computed these credits at the corporate level; the credits were then passed through to the shareholders. For the investment credits, the S corporation reported the basis in the qualifying property to each shareholder. The shareholders themselves computed the credits. However, S corporations that were previously C corporations could use business credit carryforwards from their C corporation status to reduce tax on their net recognized built-in gains.

According to Code Section 38(c), the general business credit shall not exceed the excess of the taxpayer’s net income tax over the greater of (1) the tentative minimum tax, or (2) 25% of so much of the taxpayer’s net regular tax liability as exceeds $25,000.

The general business credit that could be claimed by personal service corporations and closely held corporations was subject to an additional limitation if the component credits were generated in a passive activity. Passive activities generally included trade or business activities in which the corporation did not materially participate for the tax year and, with exceptions, rental activities regardless of the corporation’s participation.

When the credit exceeded the limitation in any year, the excess became an unused business credit that could be carried back 1 year and forward 20 years. (For tax years beginning before December 31, 1997, the carryback period was 3 years, and the carryforward period was 15 years.)

Qualified small businesses may elect to claim a certain amount of the research credit as a payroll tax credit. The Tax Cuts and Jobs Act repealed the Alternative Minimum Tax for tax years beginning after December 31, 2017; therefore, corporations will enter zero in Part II, Line 14.

Global Intangible Low Tax Income

[Page 2, Schedule C, Line 17(a)]

See “Foreign Deemed Income.”

Gross Rents

[Page 1, Line 6]

These were the gross amounts received for the use or occupancy of property by corporations whose principal activities did not involve operating rental properties. Expenses related to rental property, such as depreciation, repairs,

interest paid, and taxes paid, were not deducted directly from the rental income, but were reported as business deductions.

When rents were a significant portion of a corporation’s operating income, they were included in the statistics for business receipts rather than in rents. These corporations included some manufacturers and public utility companies, as well as businesses whose principal operating income was expected to be rents, such as hotels, motels, and other lodging places. For real estate operators, rental income was included in business receipts if the expense schedule indicated that the owner operated the building rather than leased it. No rent was reported for regulated investment companies. S corporations reported income from rents on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc. and are not included in the statistics for this item.

Gross Royalties

[Page 1, Line 7]

Royalties were gross payments received, generally on an agreed percentage basis, for the use of property rights before taking deductions for depletion, taxes, etc. Included were amounts received from such properties as copyrights, patents, and trademarks, as well as from natural resources such as timber, mineral mines, and oil wells. Expenses relating to royalties, depletion, or taxes were not deducted directly from this income, but were reported among the various business deductions from total gross income. No royalties were included in the statistics for regulated investment companies and real estate investment trusts. S corporations reported this item on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc. These statistics are presented as “Royalty Income” under “Portfolio Income (less deficit) Distributed to Shareholders” in Table 7.

Excluded from the statistics were certain royalties received under a lease agreement on timber, coal deposits, and domestic iron ore deposits, all of which were allowed special tax treatment. Under elective provisions of Code Section 631, the net gain or loss on such royalties was included in the computation of net gain or loss on sales or exchanges of certain business property under Code Section 1231. If the overall result of this computation was a net gain, then it was treated as a long-term capital gain. If the overall result was a net loss, then it was fully deductible in the current year as an ordinary noncapital loss. See also the discussions of “Net Capital Gains” and “Net Gain (or Loss), Noncapital Assets.”

Income Subject to Tax

[Page 1, Line 30]

This was generally the amount of income subject to tax at the corporate level. For most corporations, income subject to tax consisted of net income minus the “Statutory Special Deductions” and “Foreign Deemed Deductions” described in this section. However, there were certain exceptions. S corporations were usually not taxable at the corporate level and

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so did not have income subject to tax. Some, however, had a limited tax liability on capital gains and so were included in the statistics for this item. Likewise, regulated investment companies and real estate investment trusts generally passed their net income on to be taxed at the shareholder level; however, any taxable amounts not distributed were included in income subject to tax.

Because insurance companies were permitted to use reserve accounting for tax purposes, insurance income subject to tax was based on changes in reserve accounts. Under IRC Section 501(c)15(A), insurance companies with small gross receipts are exempt from taxation if certain percentages of gross receipts consist of premiums. Consolidated returns that contain life insurance subsidiaries were not allowed to offset all the life insurance subsidiary’s gains by losses from nonlife companies, so it was possible for such a consolidated return to show no net income but still have a positive amount of income subject to tax.

Income Tax

[Page 3, Schedule J, Line 2]

Income tax was the amount of a corporation’s total tax liability calculated at the regular corporate tax rates in Code Section 11 (or substitutes for Section 11).

The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) replaced the graduated corporate tax structure with a flat 21% corporate tax rate effective for tax years beginning after December 31, 2017.

Most income of S corporations was taxed only at the shareholder level. However, for S corporations that had once been C corporations, the corporate income tax was imposed on certain long-term capital gains, recognized built-in gains, and excess net passive income. The taxes paid on capital gains or recognized built-in gains by S corporations were included in the corporate statistics as “Income Tax.”

The taxes paid on excess net passive income were excluded from “Income Tax” but were included in “Total Income Tax.”

A small number of corporations without net income had an income tax liability. These were corporations reporting all or part of their income under special life insurance rules, including consolidated returns filing a life insurance subsidiary.

See also “Total Income Tax Before Credits” and “Total Income Tax After Credits.”

Intangible Assets and Accumulated Amortization

[Page 6, Schedule L, Line 13a(c)]

Intangible assets represented the total gross value of goodwill, contracts, formulas, licenses, patents, registered trademarks, franchises, covenants not to compete, and similar assets that were amortizable for tax purposes. Thus, specific

intangible asset items were included in this category only if amortization (or depreciation) had been taken against them.

The amounts shown as accumulated amortization represent the portion of these intangible assets that were written off in the current year as well as in prior years. In general, intangible assets were the gross amounts before adjustments for amounts of accumulated amortization. Some corporations, however, reported only the net amount of intangible assets after adjusting for amortization charges.

Interest

[Page 1, Line 5]

Taxable interest, a component of total receipts, included interest on U.S. government obligations, loans, notes, mortgages, nonexempt private activity bonds, corporate bonds, bank deposits, and tax refunds. The statistics also included dividends from savings and loans and mutual savings banks, federal funds sold, finance charges, and sinking funds. The interest received was reduced by the amortizable bond premium under Code Section 171.

Interest received from tax-exempt state or municipal bonds and ESOP loans was not included in this item. Corporations were not allowed to offset any interest expense against interest income. However, if the corporation reported only a net amount, this figure was used in the statistics. See also “Interest Paid.”

Interest received by S corporations was passed through to shareholders and reported on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc., and it is not included in the statistics for this item. These statistics are presented as “Interest Income” under “Portfolio Income (less deficit) Distributed to Shareholders” in Table 7.

Interest Paid

[Page 1, Line 18]

These amounts consisted of interest paid by corporations on all business indebtedness. For banking and savings institutions, the statistics also included interest paid on deposits and withdrawable shares. For mutual savings banks, building and loan associations, and cooperative banks, interest paid included amounts paid or credited to the accounts of depositors as dividends, interest, or earnings under Code Section 591. Interest identified as part of the cost of goods sold or capitalized under Section 263A was excluded from cost of goods sold and included in the statistics as interest paid.

The Tax Cuts and Jobs Act of 2017 (P.L. 115-97) generally limits the deductions for business interest incurred by certain large businesses to any business interest income plus 30% of the business’s adjusted taxable income. Interest that exceeds the limit may be carried forward indefinitely.

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Inventories

[Page 6, Schedule L, Line 3(d)]

These were the corporations’ end of year inventories as reported on their balance sheets. Inventories included such items as finished goods, partially finished goods (work in progress), new materials and supplies acquired for sale, merchandise on hand or in transit, and growing crops reported as assets by agricultural concerns. Inventories reported on balance sheets were book accounts and would not necessarily have corresponded to those reported for tax purposes in cost of goods sold.

Inventories reported on the returns of companies in financial industries were transferred during statistical processing to other balance sheet accounts (unless reported on a consolidated return with nonfinancial subsidiaries). For security brokers and dealers, commodity brokers and dealers, and holding and other investment companies (except bank holding companies), inventories were included in “Other Investments.” For the rest of the “Finance and Insurance” and “Management of Holding Companies” sectors, inventories were included in “Other Current Assets.” Inventories shown in the statistics for the “Finance and Insurance” and “Management of Holding Companies” sectors were those reported by consolidated financial companies with diversified nonfinancial subsidiaries.

See also “Cost of Goods Sold.”

Inventory, Beginning of Year

[Form 1125-A, Line 1]

These are closing inventories from the end of the previous year.

See also “Inventory, End of Year.”

Inventory, End of Year

[Form 1125-A, Line 7]

These were ending inventories as calculated for tax purposes. Inventories included the portion of raw materials and merchandise purchased for resale and not sold during the year. Statistical adjustments made to the current-year components of cost of goods sold were not carried over into the capitalized inventory accounts, which were shown as reported by taxpayers (except for necessary corrections).

See “Cost of Goods Sold.”

Land

[Page 6, Schedule L, Line 12(d)]

Land, which was reported as a separate capital asset on the balance sheet, may be understated in this report because it could not always be identified. Some corporations may have included land as part of depreciable or depletable assets or included it in other investments. Whenever corporations included and identified land as part of depreciable assets, the amount was reclassified as land, but land improvements remained as depreciable assets.

Loans from Shareholders

[Page 6, Schedule L, Line 19(d)]

This balance sheet liability item was regarded as long term in duration and included loans to the company from holders of the company’s stock.

Loans to Shareholders

[Page 6, Schedule L, Line 7(d)]

This balance sheet asset item was regarded as long term in duration and included loans to persons who held stock in the corporation.

Losses Incurred

[Form 1120-PC, Schedule A, Line 26]

See “Cost of Goods Sold.”

Mortgage and Real Estate Loans

[Page 6, Schedule L, Line 8(d)]

In general, mortgage and real estate loans were the total amount a corporation loaned on a long-term basis, accepting mortgages, deeds of trust, land contracts, or other liens on real estate as security. Because the return form did not provide a separate place for reporting any reserve for uncollectable mortgage and real estate loan accounts, such reserves may have been included in the allowance for bad debts, shown in this report as an adjustment to notes and accounts receivable. If a corporation reported an uncollectable mortgage and real estate loan reserve on a separate schedule, that amount was moved during statistical processing to allowance for bad debts.

Mortgages, Notes, and Bonds Payable

[Page 6, Schedule L, Lines 17(d) and 20(d)]

Mortgages, notes, and bonds payable were separated on the balance sheet according to the length of time to maturity of the obligations. The length of time to maturity was based on the date of the balance sheet rather than on the date of issue of the obligations. Accordingly, long-term obligations maturing within the coming year were reportable with shortterm obligations as having a maturity of less than 1 year. Deposits and withdrawable shares may have been reported in mortgages, notes, and bonds payable by banks and savings institutions. When identified, such amounts were transferred to “Other Current Liabilities.”

Net Capital Gains

[Schedule D, Lines 16 and 17]

In the tables in this report, capital gains net of capital losses were divided into two data items: “Net Short-Term Capital Gain Reduced by Net Long-Term Capital Loss” and “Net Long-Term Capital Gain Reduced by Net Short-Term Capital Loss.” A gain or loss from the sale or exchange of capital assets was short-term if the assets had been held for

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1 year or less and long-term if they had been held for longer than 1 year. The distinction between short-term and long-term assets was maintained in the Code and in the reporting forms even though it did not affect tax liability.

For corporations, capital losses were generally deductible only from capital gains, so only net gains were included in the statistics. Excess net losses could be carried back as shortterm losses to be applied against the net capital gains of the 3 preceding years; any losses remaining after carryback were carried over the 5 succeeding years. There was no limit on the number of years a regulated investment company could carry forward a net capital loss. If the unused capital loss carryover was not eliminated within the prescribed span of years, then it could not be taken. Regardless of origin, all carrybacks and carryovers were treated as short-term capital losses for carryback and carryover purposes.

In general, capital assets for tax purposes meant property regarded or treated as an investment, such as stocks and bonds. Code Section 1221(a) defined the capital assets as all property held by a corporation except:

(1) stock in trade or other property included in inventory

or held mainly for sale to customers (2) notes and accounts receivable acquired in the ordinary

course of business (3) depreciable or real property used in the trade or business (4) copyrights; literary, musical, or artistic compositions;

or similar properties not acquired by purchase (5) publications of the United States Government not ac quired by purchase (6) certain commodities derivative financial instruments

held by a dealer (7) certain hedging transactions entered into in the normal

course of trade or business and (8) supplies regularly used in the trade or business.

was treated as zero. Any long-term capital gain that exceeded the net underlying long-term capital gain was treated as ordinary income. Gains from constructive ownership transactions that were marked to market were excluded from this provision to be treated as ordinary income.

Although depreciable and real property used in the trade or business was not defined as a capital asset, the gain on such property held for more than 1 year could be treated as long-term capital gain. See “Net Gain (or Loss), Noncapital Assets.”

The capital gains of S corporations were passed through to their shareholders and not included in the corporations’ ordinary income (loss) from trade or business activities but were reported on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc. These statistics are presented as “Net Short-Term Capital Gain (less loss)” and “Net Long-Term Capital Gain (less loss)” under “Portfolio Income (less deficit) Distributed to Shareholders” in Form 1120-S-specific tables.

Net Gain (or Loss), Noncapital Assets

[Page 1, Line 9]

This item includes all losses from the sale or exchange of noncapital assets, but only those gains that were not treated as long-term capital gains. Noncapital assets included property used in a trade or business plus certain other transactions given special treatment by statute. After December 16, 1999, non-capital assets were expanded to also include certain financial assets such as:

(1) certain commodities derivative financial instruments

held, acquired, or entered into by commodities derivatives dealers (2) any hedging transaction clearly identified as a hedging

transaction before the close of the day on which it was acquired, originated, or entered into and (3) supplies regularly used or consumed in the ordinary

course of a trade or business. A commodities derivative financial instrument is a commodities contract or other financial instrument with respect to commodities, for which the value or settlement price is calculated or determined by reference to a specified index as defined in Code Section 1221(b). A commodities derivative dealer is an entity that regularly offers to enter into, assume, offset, assign, or terminate positions in commodities derivative financial instruments with customers in the ordinary course of a trade or business. A hedging transaction is any transaction entered into in the normal course of a trade or business primarily to manage one of the following: (1) risk of price changes or currency fluctuations involving ordinary property held (or to be held), or (2) risk of interest rate or price changes, or currency fluctuations, involving borrowed funds or ordinary obligations incurred (or to be incurred).

Gains from constructive ownership transactions entered into after July 11, 1999, that involved any equity interest in passthrough entities such as partnerships, S corporations, trusts, regulated investment companies, and real estate investment trusts that would otherwise be treated as capital gains could be treated instead as ordinary income. Constructive ownership transactions included gains from notional principal contracts with the right to receive substantially all the investment yield of an equity interest and the obligation to reimburse substantially all of any decline in value of the interest; a forward or futures contract to acquire an equity interest; and the holding of a call option and writing of a put option at substantially the same strike price and maturity date. A net underlying long-term capital gain had to be established by computing a net capital gain as though the asset were acquired at its fair market value when the transaction was opened and sold at its fair market value when the transaction was closed. If not established, then the net underlying long-term capital gain

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

Rules governing the computation of a net gain or loss from noncapital assets were provided under Code Section 1231. Transactions treated under these special provisions included:

(1) the sale or exchange of real or depreciable property

used in a trade or business (2) the cutting or disposal of timber treated as a sale or

exchange under Code Sections 631(a) and (b) (3) the disposal of coal or iron ore treated as a sale under

Code Section 631(c) (4) the sale or exchange of livestock (excluding poultry)

used in a trade or business for draft, breeding, dairy, or sporting purposes, if held for at least 12 months (24 months for horses and cattle) (5) the sale or exchange of unharvested crops sold with

the land and (6) the involuntary conversion of property or capital assets

due to partial or total destruction, theft, seizure, requisition, or condemnation. Long-term gains from Section 1231 transactions were treated as long-term capital gains for tax purposes and were included in “Net Capital Gains” in these statistics. Losses under Section 1231 were treated as ordinary losses, i.e., fully deductible from ordinary income. Amounts treated as long-term gains were reduced by several provisions designed to recapture (as ordinary income) previous benefits. These provisions included Sections 1245 and 1250, recapturing some depreciation taken previously; Section 1252, recapturing conservation and land clearing expenses upon the sale of some farmland; Section 1254, recapturing certain depletion, intangible drilling, and mine development expenses; and Section 1255, recapturing some crop-sharing payments if a farm is sold within 20 years of receiving the payments.

Statutory provisions allow that recognition of a gain or loss may be postponed under certain circumstances. The postponement of gain recognition accounts for some differences in tax versus book income. This difference is not presented in these statistics.

Gains and losses resulting from involuntary conversions, due mostly to casualty and theft, received special treatment. Such losses were to be included in the computation of net gain or loss, noncapital assets. However, some corporations reported them in other deductions, in which case the losses were included in the statistics for other deductions. No attempt was made to recompute the net gain or loss from noncapital assets or the carryover of losses subject to recapture rules for such returns.

Although this item was a part of corporate-level income for S corporations, the portion of gain treated as long-term capital gain under Section 1231 was not a part of the corporations’ ordinary income (loss) from trade or business activities, but rather was reported on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc.

Net Income (or Deficit)

[Page 1, Line 28]

This was net profit or loss from taxable sources of income reduced by allowable deductions. It differed from “Total Receipts Less Total Deductions” because it included “Foreign Deemed Income” and excluded “Interest on Government Obligations: State and Local.” Net income generally differed from “Income Subject to Tax” by the “Statutory Special Deductions” and “Foreign Deemed Deductions” allowed corporations. More information can be found under all these headings in this section.

Net income included income from the trade or business activities of S corporations, including ordinary gain from the sale of business property. Although the income was taxable to the shareholders, it was used for the statistics as a measure of corporate business activity for these companies. For tax purposes, net income for S corporations excluded passive income, which was passed through to the shareholders and then reported on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Credits, Deductions, etc. Statistics on these items are presented in Form 1120-S-specific tables as “Net income (less deficit) from a trade or business.” Although certain long-term capital gains were taxable to S corporations before the gains were passed through to the shareholders, these gains were excluded from net income.

The statistics for net income (or deficit) also included the “effectively connected income” of foreign corporations operating in the United States. Generally, income was considered effectively connected if the foreign corporation conducted a trade or business in the United States and the income was attributable to that business.

Under IRC Section 831(b), certain small property and casualty insurance companies could elect to compute income tax on their taxable investment income only, deducting only expenses related to that income. Therefore, the statistics for net income included only net investment income for those companies.

Net Long-Term Capital Gain Reduced by Net Short-Term Capital Loss

See “Net Capital Gains.”

Net Operating Loss Deduction

See “Statutory Special Deductions.”

Net Short-Term Capital Gain Reduced by Net Long-Term Capital Loss

See “Net Capital Gains.”

Net Worth

Net worth represented the shareholders’ equity in the corporation (total assets minus the claims of creditors). In the

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statistics, net worth comprised the net sum of the following items:

(1) capital stock (2) additional paid-in capital (3) retained earnings, appropriated (4) retained earnings, unappropriated (5) adjustments to shareholders’ equity (6) less the cost of treasury stock.

Notes and Accounts Receivable

[Page 6, Schedule L, Line 2a(c)]

In general, notes and accounts receivable were the gross amounts arising from business sales or services to customers on credit during the ordinary course of trade or business. These current assets would normally be converted to cash within 1-year. This category included commercial paper, charge accounts, current intercompany receivables, property improvement loans, and trade acceptances. Current nontrade receivables were generally included in other current assets.

Certain savings and loan associations reported loans and mortgages as notes and accounts receivable. When identified, such mortgage loans were included in the statistics for mortgage and real estate loans, rather than notes and accounts receivable.

The gross amount of the receivables and the corresponding adjustment account, allowance for bad debts, were reported on the balance sheets of most corporation income tax forms. For an explanation of the adjustment account, see “Allowance for Bad Debts.” However, some corporations reported only the net amount of the accounts receivable.

Number of Returns

This was a count of the returns filed by active corporations on one of the Form 1120-series returns. It included ordinary for-profit C corporations filing Form 1120, S corporations electing to be taxed through their shareholders filing Form 1120-S, foreign corporations with U.S.-source income filing Form 1120-F, life insurance companies filing Form 1120-L, property and casualty insurance companies filing Form 1120-PC, Real Estate Investment Trusts filing Form 1120-REIT, and Regulated Investment Companies filing Form 1120-RIC. It did not include nonprofit corporations, exempt farmers’ cooperatives, and many other incorporated organizations that did not file corporation income tax returns. It also did not include the returns of inactive corporations, defined as those reporting no item of income or deductions.

See Section 3, Description of the Sample and Limitations of the Data.

Consolidated groups could file a single return covering many corporations, so the number of returns was not a count of the number of active corporations.

See “Consolidated Returns.”

Other Assets

[Page 6, Schedule L, Line 14(d)]

In general, other assets comprised noncurrent assets, which were not allocable to a specific account on the balance sheet, and certain assets not identified as current or noncurrent. Both tangible and intangible assets were included in this category. Also included were any assets, such as deposits on contracts, interest discounts, and guaranty deposits, when they were reported as noncurrent assets.

Other assets of life insurance companies included the market value of real estate and that portion of stock and bond holdings exceeding book value. For statistical purposes, negative balance sheet asset accounts have been moved to, and included in, the computation of other assets. This procedure was adopted to address the increased usage of negative items being reported on corporate balance sheets. This process may cause other assets to become negative in certain situations. When identified on the tax return, assets held for investment were not included in other assets.

Other Costs

[Form 1125-A, Line 5]

See “Cost of Goods Sold.”

Other Current Assets

[Page 6, Schedule L, Line 6(d)]

Other current assets included assets not allocable to a specific current account listed on the balance sheet of the tax form and assets reported as short-term but without identification of a specific current account.

Marketable securities, prepaid expenses (unless reported as long-term), nontrade receivables, coupons and dividends receivable, and similar items were included in this asset account. Deposits were included here for banks and deposit institutions. Also included were amounts that exceeded the amount billed for contract work in progress and reported as current by construction corporations.

When reported by certain nonconsolidated financial companies, inventories were included in the statistics for other current assets, rather than for inventories. Those nonconsolidated financial companies included banks, credit agencies, insurance companies, insurance agents, brokers, real estate operators, lessors, and condominium management and cooperative housing associations. Inventories were included in other current assets if reported by bank holding companies, whether consolidated or nonconsolidated. However, if consolidated with nonfinancial subsidiaries, then inventories were not moved to other current assets to the extent they were attributable to the nonfinance subsidiaries.

Some property and casualty insurance companies included investments in government obligations and tax-exempt securities with other current assets on the income tax return, Form 1120-PC. When identified, the amounts were included

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

in the statistics for investments in government obligations and tax-exempt securities and excluded from other current assets.

Other Current Liabilities

[Page 6, Schedule L, Line 18(d)]

Other current liabilities included certain amounts due and payable within the coming year. The account consisted of accrued expenses, as well as current payables not arising from the purchase of goods and services. Examples of other current liabilities were taxes accrued or payable, accrued employee accounts such as for payrolls and contributions to benefit plans, dividends payable, overdrafts, accrued interest or rent, and deposits and withdrawable shares of banking and savings institutions, if not reported as long-term by the corporation. For construction corporations, amounts for uncompleted contracts or jobs in progress were included in this item, if reported as current.

Other Deductions

[Page 1, Line 26]

Other deductions included (1) business expenses which were not allocable to a specific deduction item on the tax return, or which were not included elsewhere on the tax return, and (2) certain amounts which were given special treatment during statistical processing. It also included adjustments reported as deductions.

The first category included such items as administrative, general, and selling expenses; commissions (unless reported as cost of goods or salaries and wages); delivery, freight, and shipping expenses; sales discounts; travel and entertainment expenses; utility expenses not reported as part of the cost of goods sold; and similar items. The Tax Cuts and Jobs Act of 2017 (P.L.115-97) disallowed deductions for entertainment expenses, membership dues, and related facility expenses incurred after December 31, 2017, unless the expenses were outlined under specific exceptions in IR Code Section 274(e). For example, a taxpayer can continue to deduct 50% of the cost of business meals if the taxpayer (or an employee of the taxpayer) is present and the food or beverages are not considered extravagant. The Taxpayer Certainty and Disaster Relief Act of 2020 expanded this deduction to 100% of the cost of food or beverages from restaurants if the costs occurred after December 31, 2020, and before 2023.

The second category included intangible drilling costs, direct pensions (paid by a company to an individual but not to pension plans), employee welfare (but not payments to welfare or benefit plans), employee moving expenses, partnership net losses, and patronage dividends paid. Also included were itemized business deductions and other deductions unique to life and property and casualty insurance companies.

Losses from involuntary conversions which were reported as ordinary losses on Form 4797, Sales of Business Property were included in the statistics for Net Gain (or Loss), Noncapital Assets. However, some taxpayers reported

such amounts as deduction items; if so, then they were included in the statistics for “Other Deductions.” Also included were net foreign currency losses, registration fees, insurance costs, accounting and legal service costs, management and investment advisory fees, transfer agency, shareholder servicing, and custodian fees and expenses, and costs for reports to shareholders for regulated investment companies, life insurance increases in reserves, and policyholder dividends paid by insurance companies on participating policies (after certain adjustments).

Other Inclusions from CFCs under Subpart F

[Page 2, Schedule C, Line 16(a)]

See “Foreign Deemed Income.”

Other Investments

[Page 6, Schedule L, Line 9(d)]

This category generally included long-term nongovernment investments and certain investments for which no distinction could be made as to their current or long-term nature. Examples of nongovernment investments included stocks, bonds, loans to subsidiaries, treasury stock reported as assets, and other types of financial securities.

Real estate not reported as a fixed asset could also be included. In certain instances, land and buildings owned by real estate operators (except lessors of real property other than buildings) were reported as other investments. Certain insurance carriers also included their real estate holdings (other than their home and branch office buildings) in this asset category.

When inventories were reported by companies in certain financial industries, the amounts were included in the statistics for other investments and excluded from inventories. For security brokers and dealers; commodity brokers, dealers, and exchanges; and holding and other investment companies (except bank holding companies), inventories were included in other investments unless the return was consolidated and included nonfinance subsidiaries. Inventories attributable to the nonfinance subsidiaries were not moved to other investments.

The statistics may be somewhat overstated by amounts that should have been reported for treasury stock. When treasury stock held for resale or for future distribution was reported as an asset, rather than as an offset to capital stock, the treasury stock was included in the statistics for other investments.

Some property and casualty insurance companies included investments in government obligations and taxexempt securities in other investments on Form 1120-PC, U.S. Property and Casualty Insurance Company Income Tax Return. When identified, these amounts were transferred to the appropriate accounts.

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Other Liabilities

[Page 6, Schedule L, Line 21(d)]

Other liabilities were obligations which were not allocable to a specific account on the balance sheet, and which were either noncurrent accounts, in general not due within 1 year, or accounts which could not be identified as either current or long-term. The excess of reserves for amortization, depreciation, and depletion over the respective asset accounts was included in this balance sheet account.

Examples of other liabilities were deferred or unearned income not reported as part of a current account, provisions for future or deferred taxes based on the effects of either accelerated depreciation or possible income tax adjustments, and principal amounts of employee and similar funds. Accounts and notes payable, borrowed securities, commissions, intercompany accounts, loans, overdrafts, and unearned income were also included. For statistical purposes, negative balance sheet liability accounts have been moved to, and included in, the computation of other liabilities. This procedure was adopted to address the increased usage of negative items being reported on corporate balance sheets. This process may cause other liabilities to become negative in certain situations.

Other Receipts

[Page 1, Line 10]

Other receipts included amounts not reported elsewhere on the return form. These included income from minor operations; cash discounts; income from claims, license rights, judgments, and joint ventures; net amount earned under operating agreements; profit from commissaries; profit on the purchase of a corporation’s own bonds; recoveries of losses and bad debts previously claimed for tax purposes; refunds for the cancellation of contracts; auto lease inclusion income; and income from sales of scrap, salvage, or waste.

Unidentified and certain dividends received were also regarded as “other receipts.” For example, those from Federal Reserve and Federal Home Loan Banks and the following special classes of corporations: corporations deriving a large percentage of their gross income from sources within a U.S. possession, when they did not provide detailed attachments; tax-exempt charitable, educational, religious, scientific, and literary organizations; and mutual and cooperative societies including farmers’ cooperatives. Also included were any adjustment items reported by corporations and listed in other income, payments with respect to security loans and foreign currency gains for regulated investment companies, and life insurance decreases in reserves. Per the Families First Coronavirus Response Act, eligible corporations were allowed to take a credit against their payroll taxes for the cost of qualified COVID-19-related emergency paid sick leave and family leave taken. The amount of this credit was also included in other income. See also “Business Receipts.”

Overpayment or Amount Owed

[Page 1, Line 36]

All corporations with more than minimal tax liability were required to have settled their liability by the time their returns were due for their accounting year, within specified tolerances. They were required to estimate their liability at the beginning of their tax year and make payments on this estimated tax liability at least quarterly. If estimated tax payments were less than final tax liability for the year, within the allowed tolerances, the corporation was assessed a penalty. The corporation could count as tax payments (calculated on the Schedule J) its “Credit for Tax Paid on Undistributed Capital Gains,” “Credit for Federal Tax on Fuels,” and “Refundable Credits.”

A property and casualty insurance company could also claim a credit for taxes paid by a reciprocal and for certain other payments and credits it could have been required to make. A corporation that requested an extension of time to file its tax return was required to pay any final estimated tax liability not already covered (see “Tax Deposited with Form 7004”). When the corporation finally filed its return for the year, it would seldom have paid exactly the final liability; most corporations would have had either an overpayment or an amount owed.

Estimated tax payments were required of any corporation expecting to owe a tax liability of $500 or more for the year. The payments had to be made quarterly, on the fifteenth day of the fourth, sixth, ninth, and twelfth months of the company’s accounting year. If the total payments for the year were greater than the liability shown on the return, the overpayment could be either refunded or applied to the next year’s estimated tax liability. If a corporation realized before it filed its return that it had overpaid, and the overpayment was at least $500 and at least 10% of tax liability for the year, it could apply for an immediate refund of the excess payment. The application had to be made within 2½ months of the close of its taxable year.

If a corporation had $500 or more of tax liability on the due date of its return and had not made quarterly estimated tax payments of at least 25% of the liability shown on its return or 25% of the tax it paid in the previous year, it was liable for a penalty for underpayment of estimated tax. This penalty, which was calculated at the current interest rate prescribed by the IRS, became a part of the amount owed when the corporation filed its return. However, the penalty did not apply if there was a legitimate reason for the underpayment.

Foreign insurance companies with effectively connected income (as filed on Form 1042-S) may have reported U.S. income tax paid or withheld at source, which would be considered in their tax liability computation. These amounts are included in “Overpayment or Amount Owed.” The components of the tax payment schedule are shown in Table 11.

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

Overpayments Less Refunds

[Page 3, Line 16]

These were the net estimated tax payments, after deducting any amount previously refunded, remaining to be credited when the corporation’s tax return was filed. See “Overpayment or Amount Owed.”

Pension, Profit-Sharing, Etc., Plans

[Page 1, Line 23]

This deduction was the current year’s deductible contributions to qualified pension, profit sharing, or other funded deferred compensation plans. Contributions made by employers to these plans were deductible under Code Section 404 subject to limits on contributions for owners, officers, and highly paid employees. For defined benefit plans, contributions were also limited based on actuarial computations of the amount necessary to fund the promised benefits.

The statistics included amounts from “Cost of Goods Sold” and “Other Deductions” identified as pensions (unless clearly direct pensions), annuity plans, 401(k) plans, profitsharing plans, retirement plans, and stock bonus plans. Any amounts identified as part of cost of goods sold or capitalized under Section 263A were excluded from cost of goods sold and included in these statistics. The combined amount for companies other than mining companies that reported an amount for a combination of welfare/retirement plans was included in the statistics for contributions to pension and profit-sharing plans. This item was not reported for regulated investment companies and real estate investment trusts.

Portfolio Income (Less Deficit)

Portfolio income (less deficit) is interest, dividends, annuities, and royalties, as well as gain or loss from the disposition of income-producing or investment property that is not derived in the ordinary course of trade or business.

Purchases

[Form 1125-A, Line 2]

This is the total of items purchased during the year for resale or to become a part of goods manufactured or prepared for sale.

See “Cost of Goods Sold.”

Recapture of Investment Credit

[Page 3, Schedule J, Line 9a]

The investment credit (Form 3468) was subject to recapture (Form 4255) if the property was sold or converted to other uses, including but not limited to:

(1) The investment credit property was disposed of before

the end of 5 full years after the property was placed in service (recapture period), including leased property.

(a) gasoline used on farms for farming purposes (Code

Section 6420) (b) gasoline used for nonhighway purposes or by local

transit systems (Code Section 6421) and (c) fuel not used for taxable purposes (Code Section 6427),

such as on the sale of fuel when tax was imposed under

(2) The use of the property was changed before the end

of the recapture period so that it no longer qualifies as investment credit property. (3) The business use of the property decreased before the

end of the recapture period so that it no longer qualifies (in whole or in part) as investment credit property. (4) In the case of a project under the Phase II gasification

program or Phase II qualifying advanced coal project program, failure at any time during the applicable recovery to attain and maintain the separation and sequestration requirements.

Inflation Reduction Act (IRA) Alternative Minimum Tax (AMT)

[Page 3, Schedule J, Line 9g [ME]]

For tax years beginning after December 31, 2022, the IRA imposes a corporate alternative minimum tax. For corporations that file a short tax year that begins in 2023 and ends in 2023, reports any corporate alternative minimum tax (CAMT) imposed under section 55 by IRA in the margin of line 9g. Section 55 imposes a new 15% minimum tax CAMT based on the adjusted financial statement income (AFSI) of a corporation. This generally applies to large corporations with average AFSI exceeding $1 billion.

Refundable Credits Δ

[Page 3, Schedule J, Line 20]

This term includes amounts from several refundable credits, including:

(1) Credit for Tax Paid on Undistributed Capital Gains

[Page 3, Schedule J, Part II, Line 20a]

RICs and REITs were required to pay tax on amounts of undistributed net long-term capital gain less net shortterm capital loss at the regular corporate tax rate of 21%. Stockholder corporations, for their part, were required to include in the computation of their long-term capital gains any such gains designated by the parent as undistributed dividends. The stockholder corporations were then deemed to have paid the tax on the undistributed long-term capital gain dividends and were allowed a credit for the tax they were deemed to have paid.

(2) Credit for Federal Tax Paid on Fuels

[Page 3, Schedule J, Line 20b]

IR Code Section 34 allowed a credit in full or in stated amounts for excise taxes on:

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Section 4041(a) or (e), and the purchaser used such fuel other than for the use for which it sold or resold such fuel. This credit was also used to claim the credit for purchase of qualified diesel-powered highway vehicles. The Inflation Reduction Act of 2022 (IRA), under Section 40b, allows sustainable aviation fuel credit for sales or uses after 2022. IRA reinstated the alternative fuel credit for fuel sold or used effective January 1, 2022. Additionally, under IRA, renewable diesel and treatment of kerosene for fuel, sold or used after December 31, 2022, no longer includes fuel derived from biomass that meets the requirements of the Department of Defense specification for military jet fuel or an American Society of Testing Materials specification for aviation turbine fuel. Kerosene is also no longer greater as diesel fuel for the purposes of the renewable diesel mixture credit.

(3) Other Refundable Credits

[Page 3, Schedule J, Line 20d]

This amount is from any other refundable credit the corporation is claiming, including the credit for tax on ozone-depleting chemicals, and credits claimed under Section 960(b).

Rents Paid

[Page 1, Line 16]

This deduction consisted of rents paid for the use of land, buildings, or structures; rents paid for leased roads; and work equipment for railroad companies. Also included in rents paid was the leasing of vehicles. Auto lease inclusion income, required by law to offset this deduction for businesses that lease luxury automobiles, was reported in other receipts. Some corporations reported taxes paid and other specific expenses with rents paid. When identified, those items were included in the statistics for the respective deductions and excluded from rents paid.

Rent identified as part of the cost of goods sold, or capitalized under Section 263A, was excluded from cost of goods sold and included in the statistics as rent paid on business property.

Repairs

[Page 1, Line 14]

Repairs reported as an ordinary and necessary business expense were the costs of maintenance and incidental repairs that did not add to the value or appreciably prolong the life of the property. Expenditures for permanent improvements, which increased the basis of the property, were required to be capitalized and depreciated rather than deducted currently. Regulated investment companies did not report repairs.

Research Activities Credit

[Form 6765]

The research activities tax credit is a credit for qualified research expenses and basic research payments to universities

and other qualified organizations. The research credit is a credit taken upon expenses paid or incurred for qualified research as defined by Section 174 of the IRC. The methods to calculate the credit are the Regular Credit and Alternative Simplified Credit.

Section D—Qualified Small Business Payroll Tax Election and Payroll Tax Credit was added to reflect that a qualified small business may elect to claim a certain amount of its research credit as a payroll tax credit. Qualified small businesses may elect to apply up to $250,000 of the credit against the employer portion of Social Security taxes.

Research is limited to research undertaken to discover information that is technological in nature and useful in the development of a new or improved business component. The research had to be conducted within the United States and could not involve the social sciences, arts, or humanities. Research funded by another person, a grant, or a government agency was also ineligible for the credit. For qualified clinical testing expenses relating to drugs for certain rare diseases, taxpayers can elect to claim the credit using Form 8820, Orphan Drug Credit.

For a discussion of the income tax limitations and carryback and carryforward provisions of the credit, see “General Business Credit.”

Retained Earnings, Appropriated

[Page 6, Schedule L, Line 24(d)]

Earnings set aside for specific purposes and not available for distribution to shareholders were included under this heading. Included were guaranty funds (for certain finance companies), reserves for plant expansion, bond retirements, contingencies for extraordinary losses, and general loss reserves. Also included was the total amount of all reserves not defined as valuation reserves or reserves included in other liabilities. Specifically excluded were the reserves for bad debts, depreciation, depletion, and amortization, which are shown separately in this report. Unrealized appreciation was included in retained earnings, unappropriated. Unrealized profits were included in other liabilities. Unearned income, if not current, was also included in other liabilities. Any amount of retained earnings not identified as either appropriated or unappropriated was considered unappropriated for the purpose of these statistics.

Retained Earnings, Unappropriated

[Page 6, Schedule L, Line 25(d)]

Retained earnings, unappropriated, consisted of the retained earnings and profits of the corporation less any reserves (these reserves were shown in the statistics as Retained Earnings, Appropriated). Dividends and distributions to shareholders were paid from this account. These accumulated earnings included income from normal and discontinued operations, extraordinary gains or losses, and prior period adjustments. Also included were undistributed or undivided

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earnings (income or profits) and earned surplus. For railroads, unappropriated retained earnings included additions to property and funded debt retired through income and surplus. The statistics presented here are net amounts after reduction for negative amounts reported and include adjustments to shareholders equity reported by the taxpayer.

Adjustments reported by the taxpayers primarily consisted of unrealized gains and losses from securities held “available for sale.” Also included were adjustments, guarantees of employee stock ownership plan debt, and compensation related to employee stock award plans.

Form 1120-S did not differentiate between appropriated and unappropriated retained earnings. For statistical tables in this report that include Forms 1120-S, retained earnings unappropriated includes the total 1120-S amount of retained earnings, which could include appropriated and unappropriated amounts.

Returns of Active Corporations

These returns were the basis for all financial statistics presented in the report. They comprised the majority of returns filed and were defined for the statistics as returns of corporations reporting any income or deduction items, including tax-exempt interest. Although corporations in existence during any portion of the taxable year were required to file a return whether they had income and deductions (Code Section 6012(a)(2)) or not, inactive corporate returns were excluded from the statistics. See Section 3, Description of the Sample and Limitations of the Data.

Returns with Net Income See “Net Income (or Deficit).”

S Corporation Returns

Form 1120-S, U.S. Income Tax Return for an S Corporation was filed by corporations electing to be taxed through their shareholders under IRC Section 1362. These companies reported corporate income and deductions from their conduct of a trade or business but generally allocated any income or loss to their shareholders to be taxed only at the individual level. Portfolio income (loss), net rental real estate income (loss), net income (loss) from other rental activities, and other income (loss) were not included in net income (loss) from ordinary trade or business but were allocated to shareholders to be reported on their returns.

Only corporate-level S corporation trade or business income and deductions are included in the items comprising “Total Receipts” and “Total Deductions.” Data on rental and investment income allocated to shareholders is presented in Tables 7, 8, and 9.

Subchapter S of the IRC provided a set of restrictive criteria which a company had to meet to qualify as an S corporation. For tax years beginning after 2004, S corporations had to meet the following criteria:

(1) banks or similar financial institutions using the reserve

method of accounting for bad debts under Section 585 (2) life insurance companies (3) corporations electing to take the U.S. possessions tax

credit (4) IC-DISCs or former DISCs and (5) affiliated group members eligible for inclusion on a

consolidated return. The Small Business Job Protection Act of 1996 provided significant reform for S corporations. This legislation contained 17 provisions relating to S corporations. For more information on the impact of this legislation on S corporations, see Wittman, Susan, “S Corporation Returns, 1997,” Statistics of Income Bulletin, Spring 2000, Volume 19, Number 4.

Some S corporations were subject to certain special taxes at the corporate level. See “Excess Net Passive Income Tax” and “Income Tax” in this section.

Salaries and Wages

[Page 1, Line 13]

Salaries and wages included the amount paid for the tax year less any amounts paid for the work opportunity credit, empowerment zone employment credit, Indian employment credit, or welfare-to-work credit. Also included were expenses, such as bonuses, directors’ fees, wages, payroll, and salaries listed in the other deductions schedule. Excluded were items deductible elsewhere on the return, such as contributions to a 401(k) plan, amounts contributed under a salary reduction agreement, or amounts included in the cost of goods sold. Also excluded was compensation of officers since it was listed as a separate deduction item on the return. This amount, along with compensation of officers, was reduced by the amount of any CARES Act employee retention credit the corporation claimed on its employment tax return.

Size of Business Receipts

Returns for nonfinance industries were classified by size of gross receipts from sales and operations. Returns of industries within the “Finance and Insurance” and “Management Holding Companies” sectors were classified by size of

(1) no more than 100 shareholders (2) only individuals as shareholders (with an exception for

estates and trusts, including charitable remainder trusts) (3) no nonresident alien shareholders and (4) only one class of stock.

For tax years beginning after 1997, certain tax-exempt organizations can be S corporation shareholders. These are qualified pension, profit-sharing, and stock bonus plans; charitable organizations; and Code Section 501(c)(3) organizations.

Corporations ineligible to be treated as S corporations were:

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total receipts (the sum of business receipts and investment income). See also “Business Receipts” and “Total Receipts.”

Statutory Special Deductions

[Page 1, Line 29c]

Statutory special deductions in the tables were the sum of the deductions for net operating loss carryovers from prior years and the special deductions for dividends and other corporate attributes allowed by the Code. These deductions were in addition to ordinary and necessary business deductions and were shown in the statistics as deductions from net income. In general, net income less statutory special deductions equaled income subject to tax. Some components of statutory special deductions are shown separately in Table 11.

Net operating loss (NOL) deduction:

This deduction consists of net operating losses carried forward or back from previous or future years and applied to reduce taxable income in the current year. For tax years beginning after December 31, 2020, net operating losses carried forward from prior tax years that began after December 31, 2017, were limited to 80% of taxable income excluding Section 199a deductions, Section 250 deductions, and net operating loss deductions. Additionally, certain farming losses and insurance company losses (excluding life insurance companies) that were incurred in tax years beginning after December 31, 2020, could be carried back up to two years. Insurance company losses (excluding life insurance companies) were not subject to the 80% taxable income limitation.

Dividends received deduction: This deduction was based on the type of stock owned and the extent of ownership. Generally, dividends from other domestic members of a company’s affiliated group were deducted 100%, those from other domestic companies owned 20% or more were allowed a 65% deduction, and those owned less than 20% were allowed a 50% deduction. These percentages were reduced if the stock was debt financed or if it was preferred stock of public utilities that were allowed a deduction for dividends paid. In the case of life insurance companies, the dividend received deduction (other than the 100% deduction) was further reduced by the share of the company’s investment income attributed to policyholders, which is set at 70%.

A deduction for dividends received from a foreign corporation was allowed if the foreign corporation had been engaged in a trade or business within the United States for at least 3 years and if at least 50% of its gross income was effectively connected U.S. trade or business income. The deduction was allowed only for dividends attributable to income earned in the United States, and only if the U.S. corporation owned at least 10% of the stock of the foreign corporation. Dividends from specified 10%-owned foreign corporations were 100% deductible.

The total dividends received deduction was further limited to a percentage of the net income less certain 100%

deductions for dividends. The percentage allowed depended on the percentage of ownership of the corporations for the applicable dividends and did not apply for corporations with a net operating loss. The various categories of stock ownership and the percentages that were deductible are shown on Form 1120, Schedule C (reproduced in Section 5). See also “Dividends Received from Domestic Corporations” and “Dividends Received from Foreign Corporations” in this section.

Deduction for dividends paid (Forms 1120-RIC and 1120-REIT): RICs and REITs were required to distribute virtually all (90% for both return types) of their taxable income to their shareholders in the form of dividends to qualify for their special status. Their taxable income was reduced by the dividends they paid (which were taxable to the recipients), and they generally paid no corporate tax. This special deduction represented those required distributions.

Deduction for dividends paid on certain public utility stock: This special deduction was for dividends paid on preferred stock issued by regulated telephone, electric, gas, or water companies before October 1, 1942, or was issued to replace such stock. Companies could deduct 40% of the smaller of such dividends or taxable income computed without this deduction. This item is included in “Statutory Special Deductions, Total,” but is not shown separately in Table 11.

Section 857(b)(2)(E) deduction (Form 1120-REIT): This deduction was equivalent to the tax imposed on REITs that failed to meet the restrictions imposed on their sources of income. Generally, at least 75% of their income had to come from real estate investments and at least 95% from investment sources of all kinds. A tax of 100% was imposed on the net income attributable to the greater of the amounts by which the trust failed to meet the 75%- or 95%-income test, and a deduction was allowed to prevent the same income from being taxed under the income tax. This item is included in “Statutory Special Deductions, Total,” but is not shown separately in Table 11.

Tax Deposited with Form 7004

[Page 3, Schedule J, Line 17]

This is the amount of the corporation’s estimated tax liability deposited with the filing of Form 7004, Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns as reported on the corporation’s income tax return for the year. The automatic extension of time to file a corporate tax return was generally 6 months, except for C corporation returns with accounting periods ending June 30, which are eligible for a 7-month extension. The corporation is required to pay any remaining tax liability with the request for an extension. See “Overpayment or Amount Owed.”

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

Tax-Exempt Interest

[Page 4, Form 1120, Schedule K, Line 9; Page 6, Schedule M-1, Line 7; Page 2, Form 8916-A, Part II, Line 1, column (c); or Page 4, Form 1120-S, Schedule K, Line 16a]

The interest received from certain government obligations was not subject to U.S. income tax. These tax-exempt obligations included those issued by states, municipalities, and other local governments, the District of Columbia, and U.S. possessions, including Puerto Rico.

For statistical presentation, this interest was included in total receipts. However, it was not included in net income (less deficit) or income subject to tax.

Tax-Exempt Securities

[Page 6, Schedule L, Line 5(d)]

This balance sheet asset item comprised (1) state and local government obligations, the interest on which was excludable from gross income under Section 103(a), and (2) stock in a mutual fund or other regulated investment company that distributed exempt-interest dividends during the tax year of the corporation. Examples included bond anticipation notes, project notes, Public Housing Authority bonds, and state and local revenue bonds.

Tax from Section I and Tax from Section II

[Form 1120-F, Page 1, Lines 1 and 2]

Foreign corporations with income effectively connected to a trade or business conducted in the U.S. were taxable at U.S. corporation income tax rates on that income, but they could also have been taxable on income not “effectively connected” with a U.S. trade or business (generally, portfolio investment and certain transportation income) just as nonresident foreign corporations were.

On Form 1120-F, the tax on income not effectively connected with a U.S. trade or business was called “Tax from Section I” and the tax on effectively connected income was called “Tax from Section II.” Only the “Tax from Section II” is included as a component of “Income Tax” and “Total Income Tax” in the general tables in this report. It is also shown as a separate item in Table 11.

“Tax from Section II” included income tax calculated at the U.S. corporate tax rates on effectively connected income, recapture taxes, and the base erosion minimum tax.

It was reduced by the foreign tax credit, nonconventional source fuel credit, qualified electric vehicle credit, general business credit, and credit for prior-year minimum tax.

Tax Refund

[Page 1, Line 37b]

See “Overpayment or Amount Owed.”

Tax Year

Tax year (income year) in this publication refers to the year covering accounting periods ending July 2022 through June 2023. The corporation returns included a span of over 23 months between the first-included accounting period, which began on August 1, 2021, and closed on July 31, 2022, and the end of the last–included accounting period, which began on July 1, 2022, and closed on June 30, 2023. Therefore, this report shows income received or expenses incurred during any or all the months in the 23-month span. This span, in effect, defines the tax year in such a way that the non-calendar year ended accounting periods are centered by the calendar year ended accounting period. The calendar year made up 94% of the number of returns for TY 2022. (See “Introduction” in Section I.)

Taxable Income

[Page 1, Line 30]

This line item from Form 1120 is called “Income Subject to Tax” in this report.

Taxes Paid

[Page 1, Line 17]

Taxes paid included the amounts reported as an ordinary and necessary business deduction as well as identifiable amounts reported in the cost of goods sold schedules or capitalized under Section 263A. Included among the deductible taxes were ordinary state and local taxes paid or accrued during the year; Social Security and payroll taxes; unemployment insurance taxes; excise taxes; import and tariff duties; and business, license, and privilege taxes. Income and profit taxes paid to foreign countries or U.S. possessions were also deductible unless claimed as a credit against income tax. However, S corporations excluded any foreign taxes from the deduction for taxes paid, instead allocating them to their shareholders (who might either deduct them or take a foreign tax credit for them). Regulated investment companies also had to exclude those foreign taxes from the deduction for taxes when they elected under Code Section 853 to allow their shareholders to claim a foreign tax credit (or a deduction) for the foreign taxes paid. See also “Foreign Tax Credit.”

Taxes not deductible generally included federal income and excess profits taxes; gift taxes; taxes assessed against local benefits; taxes not imposed on the corporation; and certain other taxes, including state or local taxes that were paid or incurred in connection with an acquisition or disposition of property. Taxes related to the acquisition of property were to be treated as part of the cost of the property, while taxes related to the disposition of property were to be treated as a reduction in the amount realized from the disposition.

Some corporations included sales, excise, and related taxes, which were part of the sales price of their products, as receipts. When this occurred, an equal and offsetting amount

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2022 Corporate Tax Returns Complete Report Explanation of Terms

was usually included in the cost of goods sold or as part of the separate deduction for taxes paid. When included in the cost of goods sold, these taxes were included in the statistics for taxes paid when they could be identified.

Total Assets and Total Liabilities

[Page 6, Schedule L, Lines 15(d) and 28(d)]

Total assets and total liabilities were those reported in the end of year balance sheet in the corporations’ books of account. Total assets were net amounts after reduction by accumulated depreciation, accumulated amortization, accumulated depletion, and the reserve for bad debts. If these reserve accounts were reported as liabilities, they were treated as reductions from the asset accounts to which they related, and then total assets and liabilities were adjusted accordingly.

When used in this report, the term total liabilities included both the claims of creditors and shareholders’ equity (see also “Net Worth”). In addition, total liabilities were net amounts after reduction by the cost of treasury stock. See also “Balance Sheets” in this section.

Total Deductions

As presented in this publication, total deductions comprised (1) the cost of goods sold, (2) the ordinary and necessary business deductions from gross income, and (3) net loss from sales of noncapital assets. Components of total deductions were shown in the income statement segment of various tables throughout this report. See also “Total Receipts.”

Total Income Tax After Credits

[Page 3, Schedule J]

Income tax after credits in the statistics equals “Total Income Tax Before Credits” less the sum of:

(1) Foreign Tax Credit (2) Qualified Electric Vehicle Credit (3) General Business Credit (4) Prior Year Minimum Tax Credit (5) Credit for Holders of Tax Credit Bonds and (6) American Samoa Economic Development Credit.

Many of these items are discussed under their own headings and may or may not be shown separately.

Total Income Tax Before Credits Δ

Total income tax before credits was the sum of the following taxes, which may or may not be shown separately:

(1) Income tax (2) Personal holding company tax (3) Base Erosion Minimum Tax (4) Recapture and other taxes (5) Interest/tax due under Section 453A(c) and/or Section

453(l)

(6) Excess net passive income tax (Form 1120-S) (7) Undistributed net capital gains tax of regulated invest ment companies (Form 1120-RIC) (8) Tax on net income from foreclosure property (Form

1120-REIT) (9) Tax on net income from prohibited transactions (Form

1120-REIT) (10) Branch profits tax of foreign corporations (Form

1120-F) (11) Reciprocal tax (Form 1120-PC) (12) Code Section 856 tax (including 856(c)(7) and 856(g)

(5)) (Form 1120-REIT) (13) Code Section 857 tax (including 857(b)(5) and 857(b)

(7)(A)) (Form 1120-REIT) (14) Adjustment to Total Tax (15) Inflation Reduction Act Alternative Minimum Tax and (16) Tax imposed under sections 851(d)(2) and 851(i)

(Form 1120-RIC). Current year payment of Section 965 tax liability from prior years

The installment payment of any Section 965 tax liability incurred for TYs 2017, 2018 or 2019 was added from Form 965-B, Part II, Rows 1 and 2, column (k).

Other tax and interest amounts were either included in or subtracted from the total income tax. Amounts included were tax and interest on a nonqualified withdrawal from a capital construction fund (Section 7518), interest due on deferred gain (Section 1260(b)), interest on deferred tax attributable to installment sales of certain timeshares and residential lots (Section 453(l)(3)), certain nondealer installment obligations (Section 453A(c)), interest due under the look-back method, and deferred tax due upon the termination of a Section 1294 election for shareholders in qualified electing funds. Amounts subtracted were deferred tax on the corporation’s share of the undistributed earnings of a qualified electing fund, recapture of new markets credit, recapture of employer-provided childcare facilities and services credit, and deferred LIFO recapture tax (Code Section 1363(d)). These amounts were included in the statistics as adjustments to total income tax, which is not shown separately.

Total Income Tax (S Corporations)

Total income tax for S corporations was the sum of the following taxes:

(1) income tax (2) income tax adjustments (3) excess net passive income tax (4) recapture taxes and (5) adjustments to total tax.

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

Total Net Income (Less Deficit) (S Corporations)

Since the Tax Reform Act of 1986, total net income (less deficit) is defined as the sum of:

(1) ordinary income (loss) (2) ordinary dividends (3) interest income (4) royalty income (5) net income (loss) from rental real estate activities (6) net income (loss) from other rental activities (7) total net long-term capital gain (loss) and

(8) net short-term capital gain (loss).

Prior to 1987, S corporation net income (less deficit) included most of the components of total net income (less deficit) above. The sum of the above components is a comprehensive measure of S corporation profits and losses that enables comparisons to be made with years prior to 1987.

Total Receipts

Total receipts equal the sum of the following items, each discussed under its own heading:

(1) business receipts

(2) interest

(3) interest on government obligations: state and local

(4) rents;

(5) royalties

(6) net capital gains (excluding long-term gains from regulated investment companies)

(7) net gain, noncapital assets

(8) dividends received from domestic corporations

(9) dividends received from foreign corporations (excluding certain taxable income from related foreign corporations only constructively received) and

(10) other receipts.

Total receipts for S corporations equal the sum of the following items, each discussed under its own heading:

(1) business receipts

(2) interest on government obligations: state and local

(3) net gain, noncapital assets and

(4) other receipts.

S corporations reported receipts for interest, rents, royalties, net capital gains, and dividends on Schedule K-1 (Form 1120-S), Shareholder’s Share of Income, Deductions, Credits, etc. These are not included in the statistics for this item.

Total Receipts Less Total Deductions

This item differed from net income (less deficit) for tax purposes in that it included tax-exempt interest and excluded foreign deemed income.

U.S. Government Obligations

[Page 6, Schedule L, Line 4(d)]

This balance sheet asset item comprised U.S. obligations, including those of instrumentalities of the federal government. State and local government obligations, the interest on which was excluded from gross income under Section 103(a), were included in “Tax-Exempt Securities.”

Some property and casualty insurance companies included investments in government obligations within other investments on the income tax return, Form 1120-PC. When identified, the amounts were included in the statistics for investments in government obligations and excluded from other investments.

U.S. Tax Paid or Withheld at Source

[Form 1120-F, Page 1, Line 5i]

Foreign corporations with income related to a U.S. business activity (i.e., effectively connected income) often had U.S. income tax withheld at the source for portfolio or transportation income not effectively connected to their U.S. operations. Also withheld was certain effectively connected income, such as gains from the disposition of U.S. real property reported on Form 8288-A or income allocable to foreign partners reported on Form 8805. This withholding is shown in Table 11.

U.S. taxes paid or withheld by resident foreign corporations on income effectively connected to a U.S. trade or business are included in the statistics for “Overpayment or Amount Owed.” Taxes withheld at the source on effectively connected income for foreign insurance companies are also included in “Overpayment or Amount Owed.”

Withholding

[Page 3, Schedule J, Line 18]

Includes amounts of U.S. federal income tax withheld from income.

Zero Assets

See “Balance Sheets.”

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2022 Corporate Tax Returns Complete Report Explanation of Terms

APPENDIX A

Industry Codes by Sector, Major Industry, and Minor Industry

11 Agriculture, Forestry, Fishing and Hunting 111 111005 Agricultural Production

113 113005 Forestry and Logging 114 114005 Support Activities and Fishing, Hunting, and Trapping

21 210 Mining 211115 Oil and Gas Extraction 212110 Coal Mining 212200 Metal Ore Mining 212315 Nonmetallic Mineral Mining and Quarrying 213110 Support Activities for Mining

22 221 Utilities 221100 Electric Power Generation, Transmission, and Distribution

221210 Natural Gas Distribution 221300 Water, Sewage, and Other Systems 221500 Combination Gas and Electric

23 Construction 236 236115

236 236115 Construction of Buildings

237 Heavy and Civil Engineering Construction and Land Subdivision 237105 Heavy and Civil Engineering Construction

Heavy and Civil Engineering Construction

237210 238

238210

Land Subdivision Specialty Trade Contractors

238210 Electrical Contractors

238220 Plumbing, Heating, and Air-Conditioning Contractors 238905 Other Specialty Trade Contractors

31 311 311115

Manufacturing

Food Manufacturing

311115 Animal Food Manufacturing and Grain and Oilseed Milling

311300 Sugar and Confectionery Product 311400 Fruit and Vegetable Preserving and Specialty Food Manufacturing 311500 Dairy Product 311615 Meat and Seafood Processing 311800 Bakeries and Tortilla Manufacturing

311900 312

312110

Other Food Beverage and Tobacco Product Manufacturing

312110 Soft Drink and Ice

312120 Breweries 312135 Wineries and Distilleries

312200 313

313000

Tobacco Manufacturing Textile Mills and Textile Product Mills

Textile Mills

314000 315

315100

Textile Product Mills Apparel Manufacturing

315100 Apparel Knitting Mills

315215 Cut and Sew Apparel Contractors and Manufacturers 315990 Apparel Accessories and Other Apparel 316 316115 Leather and Allied Product Manufacturing 321 321115 Wood Product Manufacturing

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

APPENDIX A—CONTINUED

Industry Codes by Sector, Major Industry, and Minor Industry

322 Paper Manufacturing 322100 Pulp, Paper, and Paperboard Mills 322200 Converted Paper Product 323 323100 Printing and Related Support Activities 324 Petroleum and Coal Products Manufacturing 324110 Petroleum Refineries (including integrated) 324125 Asphalt Paving, Roofing, Other Petroleum and Coal Products 325 Chemical Manufacturing 325100 Basic Chemical 325200 Resin, Synthetic Rubber, and Artificial and Synthetic Fibers and

Filaments 325410 Pharmaceutical and Medicine 325500 Paint, Coating, and Adhesive 325600 Soap, Cleaning Compound, and Toilet Preparation 325905 Other Chemical Product and Preparation 326 Plastics and Rubber Products Manufacturing 326100 Plastics Product 326200 Rubber Product 327 Nonmetallic Mineral Product Manufacturing 327105 Clay, Refractory and Other Nonmetallic Mineral Product 327210 Glass and Glass Product 327305 Cement, Concrete, Lime, and Gypsum Product 331 Primary Metal Manufacturing 331115 Iron, Steel Mills, and Steel Product 331315 Nonferrous Metal Production and Processing 331500 Foundries 332 Fabricated Metal Product Manufacturing 332110 Forging and Stamping 332215 Cutlery, Hardware, Spring and Wire: Machine Shops, Screw, Nut, and

Bolt 332300 Architectural and Structural Metals 332400 Boiler, Tank, and Shipping Container 332810 Coating, Engraving, Heat Treating, and Allied Activities 332900 Other Fabricated Metal Product 333 Machinery Manufacturing 333100 Agriculture, Construction, and Mining Machinery 333200 Industrial Machinery 333310 Commercial and Service Industry Machinery 333410 Ventilation, Heating, Air-Conditioning, and Commercial Refrigeration

Equipment 333510 Metalworking Machinery 333610 Engine, Turbine, and Power Transmission Equipment 333900 Other General Purpose Machinery 334 Computer and Electronic Product Manufacturing 334110 Computer and Peripheral Equipment 334200 Communications Equipment 334315 Audio and Video Equipment Manufacturing and Reproducing

Magnetic and Optical Media 334410 Semiconductor and Other Electronic Component 334500 Navigational, Measuring, Electromedical, and Control Instruments

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2022 Corporate Tax Returns Complete Report Explanation of Terms

APPENDIX A—CONTINUED

Industry Codes by Sector, Major Industry, and Minor Industry

335 Electrical Equipment, Appliance, and Component Manufacturing 335105 Electrical Lighting Equipment and Household Appliance

335105 Electrical Lighting Equipment and Household Appliance

335310 Electrical Equipment

335900 336

336105 Motor Vehicles and Parts

336410 Aerospace Product and Parts 336610 Ship and Boat Building 336995 Other Transportation Equipment and Railroad Rolling Stock 337 337000 Furniture and Related Product Manufacturing 339 Miscellaneous Manufacturing 339110 Medical Equipment and Supplies

336105

Other Electrical Equipment and Component Transportation Equipment Manufacturing

339110 Medical Equipment and Supplies

339900 Other Miscellaneous Manufacturing

42 423 423100

Wholesale Trade

Merchant Wholesalers, Durable Goods

423300 423400 423500 423600 423700 423800

423905 424

424100 Paper and Paper Product

424210 Drugs and Druggists' Sundries 424300 Apparel, Piece Goods, and Notions 424400 Grocery and Related Product 424500 Farm Product Raw Material 424600 Chemical and Allied Products 424700 Petroleum and Petroleum Products 424800 Beer, Wine, and Distilled Alcoholic Beverage 424915 Miscellaneous Nondurable Goods 425 425115 Wholesale Electronic Markets and Agents and Brokers

424100

Motor Vehicle and Motor Vehicle Parts and Supplies Lumber and Other Construction Materials Professional and Commercial Equipment and Supplies Metal and Mineral (except Petroleum) Electrical and Electronic Goods Hardware, Plumbing, Heating Equipment and Supplies Machinery, Equipment, and Supplies Furniture, Sports, Toys, Recycle, Jewelry, and Other Durable Goods Merchant Wholesalers, Nondurable Goods

44 441 441115

Retail Trade

Motor Vehicle Dealers and Parts Dealers

441115 New and Used Car Dealers

441215 Other Motor Vehicle and Parts Dealers

442 442115 Furniture and Home Furnishings Stores 443 443115 Electronics and Appliance Stores 444 Building Material and Garden Equipment and Supplies Dealers 444115 Homes Centers; Paint and Wallpaper Stores

444115 Homes Centers; Paint and Wallpaper Stores

444130 Hardware Stores 444190 Other Building Material Dealers

444200 445

445115

445115 Food and Beverage Stores

445310 Beer, Wine, and Liquor Stores

Lawn and Garden Equipment and Supplies Stores Food, Beverage, and Liquor Stores

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

APPENDIX A—CONTINUED

Industry Codes by Sector, Major Industry, and Minor Industry

446 446115 Health and Personal Care Stores 447 447100 Gasoline Stations 448 448115 Clothing and Clothing Accessories Stores 451 451115 Sporting Goods, Hobby, Book, and Music Stores 452 452115 General Merchandise Stores 453 453115 Miscellaneous Store Retailers 454 454115 Nonstore Retailers

48 481 481000

Transportation and Warehousing

Air, Rail, and Water Transportation

481000 Air Transportation

482110 Rail Transportation 483000 Water Transportation 484 484115 Truck Transportation 485 485115 Transit and Ground Passenger Transportation 486 486000 Pipeline Transportation 487 487005 Other Transportation and Support Activities 493 493100 Warehousing and Storage

51 511 511110

Information

Publishing Industries (except Internet)

511110 Newspaper Publishers

511120 Periodical Publishers 511130 Book Publishers 511145 Database Directory and Other Publishers

511210 512

512100 Motion Picture and Video Industries (except video rental)

512200 Sound Recording Industries 515 515105 Broadcasting (except Internet) 517 517000 Telecommunications (paging, cellular, cable, satellite,

512100

Software Publishers Motion Picture and Sound Recording Industries

& internet service providers) 518 518210 Data Processing, Hosting, and Related Services 519 519100 Other Information Services (incl. news syndicates, libraries,

internet pub. & broadcasting)

52 Finance and Insurance 521 Depository Credit Intermediation 522110 Commercial Banking

522110 Commercial Banking

522125 Savings Institutions, Credit Unions, and Other Depository Credit

Intermediation

522 Nondepository Credit Intermediation 522215

522215 Credit Card Issuing and Other Consumer Credit

522292 Real Estate Credit (including mortgage bankers and originators) 522295 International, Secondary Financing, and Other Nondepository Credit

Intermediation 522300 Activities Related to Credit Intermediation (loan brokers,

check clearing, etc.)

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2022 Corporate Tax Returns Complete Report Explanation of Terms

APPENDIX A—CONTINUED

Industry Codes by Sector, Major Industry, and Minor Industry

523 Securities, Commodity Contracts, Other Financial Investments,

and Related Activities 523110 Investment Banking and Securities Dealing 523120 Securities Brokerage 523135 Commodity Contracts Dealing and Brokerage 523905 Securities, Commodity Exchanges, and Other Financial Investment

Activities 524 Insurance Carriers and Related Activities 524140 Life Insurance (Form 1120L)

524140 Life Insurance (Form 1120L)

524150 Property and Casualty Insurance (Form 1120-PC) 524210 Insurance Agencies and Brokerages 524290 Other Insurance Related Activities (including third-party administrator

of Insurance, etc.) 525 Funds, Trusts, and Other Financial Vehicles 525910 Open-End Investment Funds (Form 1120-RIC)

525910 Open-End Investment Funds (Form 1120-RIC)

525995 Other Financial Vehicles (including mortgage real estate investment trust (REITs))

53 531 531115

Real Estate and Rental and Leasing

Real Estate

531115 Lessors of Buildings (including Equity REITs)

531135 Lessors of Miniwarehouses, Self-Storage Units, and

Lessors of Miniwarehouses, Self-Storage Units, and

531210

Other Real Estate (including Equity REITs) Offices of Real Estate Agents and Brokers

531315 532

532100 Automotive Equipment Rental and Leasing

532215 Other Consumer Goods and General Rental Centers 532400 Commercial and Industrial Machinery and Equipment Rental and

532100

Other Real Estate Activities Rental and Leasing Services

Leasing 533 533110 Lessors of Nonfinancial Intangible Assets (Except Copyrighted Works)

54 541 Professional, Scientific, and Technical Services 541115 Legal Services 541215 Accounting, Tax Preparation, Bookkeeping, and Payroll Services 541315 Architectural, Engineering, and Related Services 541400 Specialized Design Services 541515 Computer Systems Design and Related Services 541600 Management, Scientific, and Technical Consulting Services 541700 Scientific Research and Development Services 541800 Advertising and Related Services 541915 Other Professional, Scientific, and Technical Services 55 551 Management of Companies (Holding Companies) 551111 Offices of Bank Holding Companies 551112 Offices of Other Holding Companies

56 Administrative and Support and Waste Management and Remediation

Services 561 Administrative and Support Services 561300 Employment Services 561500 Travel Arrangement and Reservation Services 561905 Other Administrative and Support Services 562 562000 Waste Management and Remediation Services

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Explanation of Terms 2022 Corporate Tax Returns Complete Report

APPENDIX A—CONTINUED

Industry Codes by Sector, Major Industry, and Minor Industry

61 611 611000 Educational Services

62 621 621115

Health Care and Social Assistance

Offices of Health Practitioners and Outpatient Care Centers

621115 Offices of Physicians

621210 Offices of Dentists 621315 Offices of Other Health Practitioners 621415 Outpatient Care Centers 625 621515 Miscellaneous Health Care and Social Assistance 626 622005 Hospitals, Nursing, and Residential Care Facilities

71 Arts, Entertainment, and Recreation 711 711105 Other Arts, Entertainment, and Recreation

713 713105 Amusement, Gambling, and Recreation Industries

72 Accommodation and Food Services 721 721115 Accommodation

722 722115 Food Services and Drinking Places

81 811 811115

Other Services

Repair and Maintenance

811115 Automotive Repair and Maintenance

811215 Other Repair and Maintenance 812 812115 Personal and Laundry Services 813 813000 Religious, Grantmaking, Civic, Professional, and Similar Organizations

43