Business Income Tax Chapter 1

tax

A payment to support the cost of government. A tax is nonpenal but compulsory and is not directly related to any specific benefit provided by the government.

taxpayer

Any person or organization required by law to pay tax to a governmental authority.

jurisdiction

The right of a government to levy tax on a specific person or organization.

incidence

The ultimate economic burden represented by a tax

tax base

An item, occurrence, transaction, or activity with respect to which a tax is levied. Tax bases are usually expressed in monetary terms.

flat rate

A single percentage that applies to the entire tax base.

graduated rate

Multiple percentages that apply to specified brackets of the tax base.

bracket

The portion of a tax base subject to a given percentage rate in a graduated rate structure.

event or transaction based

A tax imposed on the occurrence of a certain event or transaction.

activity-based tax

A tax imposed on the results of an ongoing activity in which persons or organizations engage.

income tax

A tax imposed on the periodic increases in wealth resulting from a person’s economic activities.

earmarked tax

A tax that generates revenues for a designated project or program rather than for the government’s general fund.

ad valorem tax

A tax based on the value of property.

realty

Land and whatever is erected or growing on the land or permanently affixed to it.

real property taxes

A tax levied on the ownership of realty and based on the property’s assessed market value

tax assessor

An elected or appointed government official responsible for deriving the value of realty located within a taxing jurisdiction.

abatement

A property tax exemption granted by a government for a limited period of time

personalty

Any asset that is not realty.

sales tax

A general tax levied on the retail sale of goods and services.

use tax

A tax levied on the ownership, possession, or consumption of goods if the owner did not pay the jurisdiction’s sales tax when the goods were purchased.

excise tax

A tax levied on the retail sale of specific goods or services. An excise tax may be in addition to or instead of a general sales tax.

employment tax

A tax based on wages, salaries, and self-employment income. Federal employment taxes are earmarked to fund Social Security and Medicare.

unemployment taxes

A tax levied by both the federal and the state governments on compensation paid by employers to their employees. Unemployment taxes are earmarked to fund the national unemployment insurance program.

transfer tax

A tax levied on the transfer of wealth by gift or at death and based on the market value of the transferred assets.

value-added tax (VAT)

A tax levied on firms engaged in any phase of the production or manufacture of goods and based on the incremental value added by the firm to the goods.

tax law

The body of legal authority consisting of statutory laws, administrative pronouncements, and judicial decisions.

Internal Revenue Code of 1986

The compilation of statutory tax laws written and enacted by the Congress of the United States.

House Ways and Means Committee

The committee of the U.S. House of Representatives responsible for originating and drafting tax legislation.

Senate Finance Committee

The committee of the U.S. Senate responsible for drafting tax legislation.

Conference Committee

A committee composed of House and Senate members formed for the purpose of reconciling differences in the House and Senate versions of new tax legislation.

section

Numerically labeled subdivision of the Internal Revenue Code. Each section contains an operational, definitional, or procedural rule relating to one of the federal taxes.

treasury regulation

The official interpretation of a statutory tax rule written and published by the U.S. Treasury.

Internal Revenue Service

The subdivision of the U.S. Treasury Department responsible for the enforcement of the federal tax laws and the collection of federal taxes.

revenue ruling

An IRS pronouncement explaining how the IRS applies the tax law to a particular set of facts.

revenue procedure

An IRS pronouncement advising taxpayers how to comply with IRS procedural or administrative matter

Internal Revenue Bulletin (I.R.B.)

The IRS’s weekly publication containing revenue rulings and revenue procedures

Cumulative Bulletin (C.B.)

Semiannual compilation of weekly Internal Revenue Bulletins