What is the formula to determine ENPI for an S corporation's penalty tax?

The correct choice highlights that the formula to determine the Excess Net Passive Income (ENPI) for an S corporation's penalty tax is derived from the calculation of net passive income multiplied by a specific percentage. This approach is rooted in the tax regulations that impose a penalty on S corporations when they have excessive passive investment income.

For S corporations, if the entity has passive investment income exceeding a certain threshold, it may trigger an additional tax that is calculated based on the ENPI. ENPI is specifically focused on passive income sources like rents, royalties, and interest, and its purpose is to monitor and regulate the passive income received by S corporations since they are typically pass-through entities with different tax treatment compared to traditional corporations.

The other choices do not accurately represent the calculation of ENPI in this context. Net income minus expenses or total income minus deductions do not specifically account for the nature of passive income or the particular penalties associated with it. Taxable income minus adjusted expenses also does not reflect the specific focus on passive investment income that the ENPI calculation requires. Thus, understanding ENPI as net passive income multiplied by a defined percentage is essential in correctly applying tax regulations to S corporations with substantial passive income streams.