What tax rate applies to C corporations on their income?

The tax treatment of C corporations is characterized by a flat tax rate applied to corporate income, which is currently set at 21%. This means that C corporations are subject to taxes on their profits at this rate, distinct from pass-through entities such as partnerships or S corporations, where the earnings are taxed at the individual partners' rates.

In addition to the corporate tax, C corporation shareholders face a second layer of taxation when dividends are distributed. Once the corporation pays its corporate taxes, any profits that are distributed as dividends to shareholders are then taxed again at the individual level. Depending on the individual's tax bracket, this can be as high as 37% for qualified dividends.

This structure results in a double taxation scenario, which is a fundamental aspect to understand regarding C corporation taxation. Thus, the statement correctly identifies both the corporate rate of 21% and acknowledges the tax implications for shareholders receiving dividends, further highlighting the nuances of the tax system applicable to C corporations.