After-tax corporate profits declined 5.5%.

The January-March quarter drop from the fourth quarter of 1986 was the steepest decline in a year, the Commerce Department said. The big drop was attributed to the first major impact from the new tax law, which boosted business taxes by $22.5 billion at an annual rate during the first three months of the year. Without this increase, corporate profits would have risen 6.9% in the first three months. Analysts said that even after taking the new tax law into account, American corporations’ profitability has improved significantly over the past year. They noted that despite the decline from the fourth quarter, profits in the first quarter this year were up 7.6% from the same period a year ago.