Taxpayers filed 138.4 million individual income tax returns for Tax Year 2006, an increase of 3.0 percent from the 134.4 million returns filed for Tax Year 2005. The adjusted gross income less deficit reported on these returns totaled $8.0 trillion, an 8.2-percent increase from the previous year. Several income items increased appreciably during 2006, including taxable interest, ordinary dividends, and net capital gain (less loss), which increased 37.1 percent, 19.7 percent, and 16.7 percent, respectively. Taxable income also increased 8.6 percent since 2005, to $5.6 trillion. Statutory income tax rates remained constant for 2006, for the third straight year, following 3 consecutive years of decreases. Total income tax rose 9.5 percent to $1.0 trillion. This was the third year in a row of revenue increases. For the fourth straight year, the alternative minimum tax showed a substantial increase in amount, increasing $4.1 billion, or 23.8 percent, to $21.6 billion. However, the number of returns with AMT liability decreased by 1.0 percent. This is the first year since 2001 that the number of returns did not increase.
For Tax Year 2006, there were approximately 22.1 million individual income tax returns that reported nonfarm sole proprietorship activity, a 2.8-percent increase from 2005. Profits for these returns grew to $278.0 billion in 2006, a 3.0-percent increase from 2005. In constant dollars, total nonfarm sole proprietorship profits decreased for the first time since Tax Year 2001, by 0.4 percent, after increasing 5.5 percent in 2005. The professional, scientific, and technical services sector, representing 24.1 percent of total sole proprietorship profits, at $67.0 billion, had the largest profits of any sector, increasing 9.8 percent from 2005. Reporting the second largest profits of any sector was the health care and social assistance sector, with 16.0 percent of total profits, at $44.5 billion. Receipts and deductions increased 4.5 percent and 5.0 percent for all sole proprietorships, respectively. The construction sector reported the largest percentage of total business receipts and deductions among all industrial sectors, with 18.5 percent and 19.9 percent, respectively. This sector reported a 6.5-percent increase in receipts and a 6.3-percent increase in deductions. Although not among the larger of the industrial sectors, the financial and insurance sector reported the largest percentage increase in both receipts and deductions, with a 13.8-percent increase in business receipts and an 18.9-percent increase in deductions.
The number of partnerships increased 6.6 percent, from 2,763,625 for Tax Year 2005 to 2,947,116 for Tax Year 2006. The number of partners increased 3.2 percent, from 16,211,908 for 2005 to 16,727,803 for 2006. Total partnership net income (loss) increased by 22.1 percent, from $546.2 billion for 2005 to $666.7 billion for 2006. Partnerships classified in the finance and insurance sector accounted for $83.9 billion of the $120.5-billion increase for all partnerships. Total receipts increased 12.5 percent, down substantially from the 23.1-percent increase reported for 2005. Total receipts increased from $4.6 trillion for 2005 to $5.1 trillion for 2006. The finance and insurance sector alone reported 45.1 percent of the increase, followed by the manufacturing sector, which reported 13.0 percent. The largest component increases were the following: $291.2 billion for business receipts and $97.7 billion for net long-term capital gains. Total assets increased from $13.7 trillion for 2005 to $17.1 trillion for 2006. Total income (loss) minus total deductions available for allocation increased $201.8 billion to $1,250.6 billion. The finance and insurance sector accounted for $177.2 billion of this increase. For the first time in history, partners classified as corporations surpassed partners classified as individuals as the top income (loss) recipients. Partners classified as corporations received $362.5 billion of the total income (loss) allocated, while partners classified as individuals received only $330.5 billion. For the fourth consecutive year, individuals who were limited partners were the largest group of income (loss) recipients, receiving $254.5 billion of the total allocated income (loss) for all partnerships.
The total value of nonloan transactions between large foreign-owned domestic corporations and related foreign parties reached $1 trillion for the first time in 2004, an increase of more than 100 percent from 2002. Sales and purchases of stock in trade represented the bulk of the total value of nonloan transactions, 86 percent, which is consistent with prior years. The total amounts received, excluding loan balances, rose 163 percent between 2002 and 2004, from $167 million to $439 billion, respectively. The large U.S. companies represented in this study continued to send out more in property, services, and money than they received through transactions with related foreign parties. This net outflow came to $224 billion in 2004 compared to $176 billion in 2002. There was a modest 5-percent increase in the number of large foreign parent corporations since 2002, rising from 737 to 774. The number of related persons increased from 14,515 to 16,565 between 2002 and 2004.
The total amount of tax-exempt bonds issued by State and local governments declined 9.8 percent between Calendar Years 2005 and 2006, from $474.8 billion in 2005 to $428.3 in 2006. For Calendar Year 2006, Governmental bonds accounted for $319.4 billion, or 74.6 percent, of the total issuance amount. Long-term Governmental bonds totaled $272.2 billion—$180.2 billion of proceeds were used to finance new projects, while the remaining $92.0 billion of proceeds refunded prior Governmental bond issues. Governmental bond proceeds were used to finance essential Government operations, facilities, and services that are for general public use. Tax-exempt private activity bonds accounted for $108.9 billion, or 25.4 percent, of the total issuance amount for 2006. Long-term private activity bonds totaled $108.6 billion—$63.3 billion of proceeds were used to finance new projects, while the remaining $45.3 billion of proceeds refunded prior tax-exempt private activity bond issues. These tax-exempt private activity bond proceeds financed qualified private facilities, such as residential rental facilities, single family housing, and airports, as well as the facilities of Internal Revenue Code section 501(c)(3) organization, such as hospitals and private universities.
Nonprofit charitable organizations exempt from income tax under Internal Revenue Code (IRC) section 501(c)(3) filed more than 286,000 information returns for Tax Year 2005, an increase of 4 percent from 2004. These organizations held more than $2.2 trillion in assets, an increase of 9 percent from the previous year. They reported nearly $1.3 trillion in revenue, 68 percent of which came from program services. Labor and agricultural organizations exempt under IRC section 501(c)(5) filed 19,837 Forms 990 and 990-EZ for 2005. Assets reported by these organizations totaled $29.7 billion. Of the $20.7 billion in revenue reported by labor and agricultural organizations, the majority, $13.5 billion, came from membership dues and assessments. Information returns for Tax Year 2005 were filed with the Internal Revenue Service in Calendar Years 2006 and 2007.
In 2004, there were an estimated 2.7 million adults with gross assets of $1.5 million or more, the Federal estate filing threshold for decedents from that year. In total, these top wealth holders owned nearly $11.1 trillion in assets. After accounting for debts and mortgages of $850.1 billion, these individuals had a combined net worth of more than $10.2 trillion. Although top wealth holders made up only about 1.2 percent of the total U.S. adult population, they held 20.3 percent of the total U.S. net worth in 2004. Most wealthy individuals of both genders were married, although a significantly higher proportion of wealthy females were widowed compared to widowed wealthy males. While the median net worth of male and female top wealth holders was similar, men had a significantly higher average net worth, reflecting the impact of a relatively small number of extremely wealthy men. In 2004, California had the largest number of individuals with net worth of $1.5 million or more, while Connecticut had the highest per capita population of these very wealthy residents. States with a high concentration of residents with net worth of $1.5 million or more were distributed relatively evenly across the major regions of the United States. The value of stock held by very wealthy individuals increased substantially between 1998 and 2001, before falling between 2001 and 2004. In contrast, the value of real estate held by individuals with net worth of $1.5 million or more increased steadily between 1998 and 2004.