| Course | ACC 455 Corporate Taxation (ACC/455) |
|---|---|
| Week | 1 |
| Paper type | Tax history and structure paper |
| Length | about 1,017 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Accounting |
| Updated | September 2026 |
Free sample paper for ACC 455 Week 1
From a 1909 Excise to a Flat 21%: How the Federal Corporate Income Tax Developed, Who Makes and Enforces It and Where a Composite Machine Shop Fits
[Student Name]
University of Phoenix
ACC/455: Corporate Taxation
Week 1 Assignment
[Instructor Name]
[Date]
The machine shop and its figures are composites written for a model paper; historical and legal facts come from the sources listed.
A composite machine shop in the upper Midwest makes precision parts for agricultural and medical equipment makers. Its founder incorporated it as a C corporation in 1978, and her two children now own it. Over nearly fifty years, the shop has paid federal corporate income tax at rates as high as 46% and as low as today's 21%, and its owners have made decisions about wages, dividends and equipment with those rates in mind. Tax history is not background to a corporation's decisions; it is part of the reason for them. This paper explains how the federal corporate income tax developed, how the system is organized and how its principles are judged, using the shop as the example.
Origins
Congress first taxed corporate income in 1909, framing the tax as an excise on the privilege of doing business in corporate form, measured by net income, to avoid the constitutional problem that had doomed the income tax of 1894. The Sixteenth Amendment, ratified in 1913, removed that problem by providing that Congress may tax incomes "from whatever source derived, without apportionment among the several States" (U.S. Const. amend. XVI, 1913). An individual income tax followed the same year, and the corporate tax became a permanent part of the federal system.
Major Changes
Rates rose sharply during the world wars and remained high afterward. When the machine shop was incorporated, corporations faced graduated rates with a top rate of 46%. The Tax Reform Act of 1986 lowered the top corporate rate to 34%, broadened the base by removing preferences and reorganized the law into the Internal Revenue Code of 1986, which remains the governing statute as amended. Legislation in 1993 raised the top rate to 35%, where it stayed for twenty-five years.
The largest recent change came with the Tax Cuts and Jobs Act, Pub. L. No. 115-97, enacted in December 2017, which replaced the graduated schedule with a flat 21% rate beginning in 2018 and repealed the corporate alternative minimum tax at that time. Auerbach (2018) reviewed early evidence on the rate cut and cautioned that its effects on investment and wages would take years to measure reliably. For the machine shop, the change cut its federal rate from 34% to 21% on its typical income of about $1.5 million.
Who Makes, Interprets and Enforces the Law
Congress writes the tax law. Revenue bills begin in the House of Representatives, where the Ways and Means Committee has jurisdiction, and the Senate Finance Committee considers them before passage. The Treasury Department issues regulations interpreting the Code, and the Internal Revenue Service, a bureau of the Treasury, administers the law, processes returns, conducts examinations and issues rulings and guidance. The machine shop files Form 1120 each year following the IRS instructions (Internal Revenue Service, 2025).
The courts resolve disputes. A corporation that disagrees with an IRS deficiency can petition the U.S. Tax Court without paying first, or it can pay the tax first and then sue for a refund, either in its local federal trial court or in the Court of Federal Claims in Washington. Appeals go to the circuit courts and, rarely, to the Supreme Court.
Sources of Tax Law in Order of Authority
A tax professional researching a question consults sources in order of authority. The Internal Revenue Code is primary. Treasury regulations come next and generally carry the force of law. Revenue rulings and revenue procedures state the IRS's position on particular facts and bind the IRS but not the courts. Court decisions interpret the Code and regulations, with Supreme Court decisions binding on all and circuit decisions binding within their circuits. IRS publications and form instructions are useful explanations but are not authority; a taxpayer who relies on a publication that misstates the law is not protected.
Double Taxation and the Owners' Decisions
A C corporation is a separate taxpayer. When the machine shop earns $100 of taxable income, it pays $21 of federal tax. If it distributes the remaining $79 as a dividend, the owners pay tax on the dividend at the qualified dividend rate, 15% for them, or about $11.85, leaving about $67.15. Combined, the $100 of profit bears about $33 of federal tax. That second layer of tax encourages the owners to keep profits in the business, pay themselves reasonable salaries, which the corporation deducts, and invest in equipment. The accumulated earnings tax exists to limit the first strategy when profits are kept beyond the business's reasonable needs.
Judging a Tax
Economists have long judged taxes by equity, efficiency and simplicity. Slemrod (1990) argued that practical tax design must weigh these goals against the costs of administration and compliance, since a tax that is ideal in theory may be impossible to enforce. The corporate tax raises questions on each count. Its burden may fall partly on shareholders, partly on workers through lower wages and partly on customers, so its equity is debated. It affects decisions about entity choice, debt and dividends, which bears on efficiency. And its rules, from depreciation to international provisions, make it complex. For the machine shop, the most noticeable cost is compliance: an outside accountant spends several days each year on the return.
Why This Background Matters
Every later topic in corporate taxation, from computing taxable income to distributions and tax research, rests on the structure described here. Knowing which sources carry authority prevents errors in research, and knowing the history explains why the Code contains provisions that seem to conflict.
Conclusion
The machine shop's tax history mirrors the history of the corporate income tax: an excise measured by income in 1909, a constitutional amendment in 1913, high graduated rates for most of the century, reform in 1986 and a flat 21% rate since 2018. Congress writes the law, Treasury and the IRS interpret and administer it and the courts resolve disputes. Double taxation shapes the owners' choices, and debates about equity, efficiency and simplicity will shape the rules they face next.
References
Auerbach, A. J. (2018). Measuring the effects of corporate tax cuts. Journal of Economic Perspectives, 32(4), 97-120. https://doi.org/10.1257/jep.32.4.97
Internal Revenue Service. (2025). Instructions for Form 1120: U.S. corporation income tax return. https://www.irs.gov/instructions/i1120
Slemrod, J. (1990). Optimal taxation and optimal tax systems. Journal of Economic Perspectives, 4(1), 157-178. https://doi.org/10.1257/jep.4.1.157
Tax Cuts and Jobs Act, Pub. L. No. 115-97, 131 Stat. 2054 (2017).
U.S. Const. amend. XVI (1913).
What the ACC 455 Week 1 instructions ask
In ACC 455 Week 1, the assignment usually centers on the history and structure of federal taxation, with corporations in the foreground. Prompts commonly cover the origins of the income tax, major legislation, the roles of Congress, the Treasury and the courts, the primary sources of tax law and the criteria used to evaluate a tax system, such as equity, efficiency, certainty and convenience. Some versions ask students to compare the taxation of C corporations with pass-through entities or to explain double taxation. The paper is usually a short essay in APA style supported by legal and scholarly sources, and it is strengthened when the history is tied to its effect on real taxpayers.
How this ACC 455 Week 1 example is built
A machine shop that has been a C corporation since 1978 has lived through most of modern corporate tax history, including the high graduated rates of the 1980s, the 1986 reform and the 2017 cut, so its story makes the history concrete. The paper moves in order: origins, major changes, the institutions that write, interpret and enforce the law, the hierarchy of authority a tax professional consults and the standards used to judge tax policy. Each section returns to the shop, for example how the 2017 rate cut and the tax on dividends shape whether the owners keep profits in the business. The closing section explains why this background matters for the rest of the course.
ACC 455 Week 1 grading rubric: where the points go
Instructors commonly award credit for accurate history, a correct description of the institutions and sources of tax law and thoughtful discussion of tax policy criteria. Dates and legislation should be correct and cited. The hierarchy of authority should place the Internal Revenue Code first, followed by Treasury regulations and then administrative and judicial sources. Explaining double taxation of C corporations and its effect on decisions shows understanding beyond recall. Linking the history to a taxpayer, real or described, earns more than a timeline alone. A logical structure, a professional tone and APA-formatted legal and scholarly references secure the remaining marks.
ACC 455 Week 1 help: mistakes to avoid
ACC 455 Week 1 papers often become a list of dates. Choose the few events that changed how corporations are taxed and explain what each changed. Another weak point is treating IRS publications as law; they are helpful guidance but do not carry the authority of the Code or regulations. Place sources in order. Students also describe double taxation without an example. Show a dollar of corporate profit taxed at 21% and then again as a dividend. Discuss at least two tax policy criteria and apply them to a real rule. Keep claims about recent legislation modest and cite the statute. Finally, connect the history to the decisions a corporate taxpayer makes today.
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ACC 455 Week 1 questions, answered
What does ACC/455 Week 1 usually cover?
It usually covers the history and structure of federal taxation, including the origins of the corporate income tax, major legislation, the sources of tax law and the criteria used to evaluate tax policy.
Where can I find a free ACC 455 Week 1 sample paper?
This page offers a machine shop example tracing corporate tax history and structure, with margin notes, and it is free to read. If your prompt differs, send it along; the first draft we write from it is free.
When did the federal corporate income tax begin?
Congress enacted a corporate excise tax measured by income in 1909, and the Sixteenth Amendment, ratified in 1913, allowed an income tax without apportionment among the states.
What is the current federal corporate tax rate?
Since 2018, C corporations have paid a flat federal rate of 21% on taxable income, replacing the earlier graduated rates that reached 35%.
What is double taxation of corporations?
C corporation profits are taxed at the corporate level, and the same profits are taxed again to shareholders when distributed as dividends.
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