Also known as: BEAT · base erosion tax
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A minimum tax imposed on certain large U.S. corporations. The tax applies to corporations with average annual gross receipts of at least five hundred million dollars that make base erosion payments equal to or exceeding three percent of their deductible payments. Liability is computed by increasing taxable income by the amount of base erosion payments and then applying a ten percent rate, rising to twelve point five percent after 2025.
Blackwood Technologies reports average annual gross receipts above five hundred million dollars. It makes substantial deductible payments to its foreign parent that qualify as base erosion payments exceeding three percent of total deductions. The company adds those payments back to taxable income, computes the ten percent minimum tax, and pays the excess over its regular tax liability.
Bright Path Foods maintains gross receipts above the threshold but structures payments to keep base erosion below three percent of deductions. After adding any qualifying payments back and applying the ten percent rate, its regular tax exceeds the BEAT amount, so no additional minimum tax is due.
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The BEAT applies only to U.S. corporations with average annual gross receipts of at least five hundred million dollars whose base erosion payments meet or exceed three percent of deductible payments.
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The rate begins at ten percent and increases to twelve point five percent after 2025.
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The corporation increases its taxable income by the amount of base erosion payments, applies the BEAT rate to the modified figure, and pays any excess over its regular tax liability after certain credits.
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