ABSTRACT
The economic income concept is relevant to numerous corporate tax issues, yet it is not clearly defined. It does not equate to taxable income or financial accounting retained earnings. The concept is required for earnings and profits, accumulated earnings and personal holding company penalty taxes, alternative minimum tax, and adjusted current earnings adjustment. However, it is defined differently under each provision. This complexity is inefficient. This article offers suggestions to improve tax law as it relates to economic income. A uniformly defined measure of economic income, earnings and profits, would be the starting point for all related tax measures, with appropriate adjustments that are consistent with the intent of tax measures. The resulting computation should be codified and provide comprehensive guidance for analysis in one source. Thus, earnings and profits becomes the platform for other provisions that require an economic income proxy, with necessary adjustments to meet specific policy objectives.
