DOCSLIB.ORG

OTA Paper 93: the Corporate Alternative Minimum Tax

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
OTA Paper 93: the Corporate Alternative Minimum Tax The Corporate Alternative Minimum Tax Aggregate Historical Trends by Curtis P. Carlson U.S. Department of the Treasury OTA Paper 93 June 2005 OTA Papers is an occasional series of reports on the research, models, and data sets developed to inform and improve Treasury’s tax policy analysis. The papers are works in progress and subject to revision. Views and opinions expressed are those of the authors and do not necessarily represent official Treasury positions or policy. OTA Papers are distributed in order to document OTA analytic methods and data and invite discussion and suggestions for revision and improvement. Comments are welcome and should be directed to the authors. Office of Tax Analysis Department of the Treasury Washington, DC 20220 The views expressed in this paper are those of the author and do not necessarily reflect those of the U.S. Department of the Treasury. The author wishes to thank Robert Carroll, Geraldine Gerardi and Andrew Lyon for their comments and suggestions. Comments are welcome: Curtis Carlson, Office of Tax Analysis, U.S. Department of the Treasury, 1500 Pennsylvania Ave., NW, Washington D.C. 20220. [email protected] The Corporate Alternative Minimum Tax Aggregate Historical Trends by Curtis P. Carlson U.S. Department of the Treasury OTA Paper 93 June 2005 OTA Papers is an occasional series of reports on the research, models, and data sets developed to inform and improve Treasury’s tax policy analysis. The papers are works in progress and subject to revision. Views and opinions expressed are those of the authors and do not necessarily represent official Treasury positions or policy. OTA Papers are distributed in order to document OTA analytic methods and data and invite discussion and suggestions for revision and improvement. Comments are welcome and should be directed to the authors. Office of Tax Analysis Department of the Treasury Washington, DC 20220 The views expressed in this paper are those of the author and do not necessarily reflect those of the U.S. Department of the Treasury. The author wishes to thank Robert Carroll, Geraldine Gerardi and Andrew Lyon for their comments and suggestions. Comments are welcome: Curtis Carlson, Office of Tax Analysis, U.S. Department of the Treasury, 1500 Pennsylvania Ave., NW, Washington D.C. 20220. [email protected] 1. Introduction Corporations are required to calculate their tax liability under two sets of rules – they compute their regular tax liability and their tentative alternative minimum tax (AMT) liability and pay whichever is greater. If the tentative AMT is more than the regular tax, the difference between them is AMT. The purpose of the AMT is to prevent companies from eliminating their tax liability from over use of certain corporate tax preferences. For example, the AMT rules prevent companies from using most business tax credits, such as the research and experimentation credit, the work opportunity credit and the welfare-to-work credit, to offset AMT or to reduce regular tax below tentative minimum tax. The AMT also serves to “smooth” a firm’s corporate tax liability over time because the AMT may be credited against future regular tax liability. Nevertheless, credits from prior AMT many not be used to reduce regular tax liability below the tentative minimum AMT. The original purpose of the AMT was to ensure that no taxpayer with substantial economic income could avoid significant tax liability by using exclusions, deductions and credits (JCT 1987). The AMT, however, creates economic inefficiencies, increases tax complexity and burden and is unlikely to be the best policy for achieving equity across taxpayers.1 In addition, corporate tax return data show that the tax revenue collected from the AMT has declined dramatically in the last decade. Total AMT payments reached an all time low of $1.8 billion in 2001 and slightly rebounded in 2002 to $2.5 billion. The number of firms affected by the AMT also reached new lows in the last few years. In 2001 and 2002 firms affected by the AMT accounted for 18.96 and 1 See Lyon (1997) for a detailed economic analysis of the corporate AMT. 1 25.08 percent of all corporate assets respectively.2 The figures are significantly lower than those seen in the early 1990s. The reduced effect of the AMT is likely the result of structural changes made to the AMT in the late 1990s and the Job Creation and Workers Assistance Act of 2002 (JCWAA) which temporarily reduced the effect of the AMT depreciation adjustment. 2. Brief History of the AMT Since the passage of the Tax Reform Act of 1986 the overall structure of the AMT has remained basically the same, although several important modifications to the AMT rules have been made. The most significant changes affected how depreciable assets are recovered under the AMT versus the regular tax, although the changes under the 2002 Jobs Creation and Workers Assistance Act were temporary. Recovery periods were generally shortened for AMT purposes, which has the effect of bringing the treatment of depreciable assets under the AMT somewhat more in line to the treatment under the regular tax, thereby lowering AMT liability, by reducing the difference between regular taxable income and tentative AMT income. The Omnibus Reconciliation Act of 1993 repealed one of the AMT’s two depreciation adjustments, the ACE depreciation adjustment, for property placed in service after 1993. The Taxpayer Relief Act of 1997 modified the remaining depreciation adjustments and repealed the AMT for small corporations. For property placed in service after December 31, 1998, the AMT recovery period for computing the depreciation adjustment was made the same as for regular tax purposes, although, the AMT recovery method was not conformed. Property eligible for the 200-percent declining balance method under the regular tax must continue to be recovered using 2 For similar analysis for earlier time periods see Lyon (1997) and Carlson (2001). For additional studies on corporate AMT see Gerardi, Milner and Silverstein (1993) and GAO (1995). 2 the slower 150-percent declining balance method under the AMT.3 Property placed in service on or before December 31, 1998 is generally recovered over longer periods under the AMT than for regular tax purposes in addition to being subject to the slower recovery method. For taxable years beginning after December 31, 1997, a corporation with average gross receipts of less than $7.5 million for the prior three taxable years is exempt from the AMT. The $7.5 million threshold is reduced to $5 million for the corporation’s first three-taxable year period. The Job Creation and Worker Assistance Act of 2002 (JCWAA) included 30 percent bonus depreciation, which allows a business to immediately write-off 30 percent of the original "adjusted (depreciable) basis" of most new investment in equipment, usually the fully installed cost of qualified property.4 Property must be acquired after September 10, 2001, and before September 11, 2004. The bonus depreciation is allowed for both the regular tax and the AMT. In addition, businesses are entitled to "normal" first-year MACRS depreciation. If bonus depreciation is claimed, no AMT adjustment is required on the regular MACRS deductions. In May 2003, the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA) increased bonus depreciation to 50 percent. Under the JGTRRA, 50 percent “bonus” depreciation may be claimed for property acquired after May 5, 2003, and before January 1, 2005, and placed in service generally before January 1, 2005.5 As with the JCWAA, bonus depreciation is allowed for both the regular tax and the AMT. 3 Property recovered under the 150 percent declining balance method or the straight-line method for regular tax purposes is recovered using the same method under the AMT. 4 Property eligible for this treatment includes business equipment, computer hardware and most software, but not real estate or buildings. 5 Property does not qualify for the 50 percent “bonus” depreciation if a binding written sales contract was in effect before May 6, 2003 (although the 30 percent “bonus” would be applicable). Property eligible for the 50 percent “bonus” depreciation is the same as for the 30 percent “bonus” under the JCWAA. 3 3. Historical Trends in the Corporate AMT: 1987-2002 Number of Firms Affected by the AMT Even though a firm may not have AMT liability, it can still be affected by the AMT by having its use of tax credits limited by the tentative minimum tax. Generally, a corporation cannot use its tax credits to reduce its net regular tax below its tentative minimum tax. A firm whose use of tax credits is limited in this manner does not pay AMT, but its regular tax payment is larger than it otherwise would be. The number of corporations affected by the AMT, either through limits on the use of tax credits or direct AMT payments, has declined over the past decade, reaching lows of 12,385 in 2001 and 13,172 in 2002 (Table 1).6 This is 28 percent and 30 percent respectively of the number of corporations affected by AMT in 1990 when the number of firms affected by AMT reached its height and 56 percent and 59 percent respectively of the number of corporations affected by AMT in 2000.7 Of the firms affected by AMT in 2001, 57 percent (7,095) had AMT, while the remaining 43 percent (5,289) were constrained in their use of credits by the tentative minimum tax. In 2002, 52 percent (7,060) made positive AMT payments while the remaining 46 percent (6,111) were constrained in their use of credits by the tentative minimum tax. From 1993 through 2002 at least 60 percent of firms had losses and paid no tax.
Load more

Recommended publications
  • Depreciation Recovery Periods and Methods
    Report to The Congress on Depreciation Recovery Periods and Methods Department of the Treasury July 2000 July 282000 The Honorable Bill Archer Chairman Committee on Ways and Means House of Representatives Washington, DC 205 15 Dear Mr. Chairman: Section 2022 of P.L. 105-277, the Tax and Trade Relief Extension Act of 1998 (the 1998 Act), directed the Secretary of the Treasury to conduct a comprehensive study of the recovery periods and depreciation methods under section 168 of the Internal Revenue Code and to provide recommendations for determining those periods in a more rational manner. The 1998 Act directed the Secretary to submit the results of the study and recommendations to the House Committee on Ways and Means and the Senate Finance Committee by March 3 1,200O. Pursuant to that directive, I hereby submit the “Report to the Congress on Depreciation Recovery Periods and Methods.” I am sending a similar letter to Senator William V. Roth, Jr., Chairman of the Committee on Finance, Senator Daniel P. Moynihan, and Representative Charles B. Rangel. Sincerely, Jonathan Talisman Acting Assistant Secretary Tax Policy Encl.osure L July 28,200O The Honorable William V. Roth, Jr. Chairman Committee on Finance United States Senate Washington, DC 205 10 Dear Mr. Chairman: Section 2022 of P.L. 105-277, the Tax and Trade Relief Extension Act of 1998 (the 1998 Act), directed the Secretary of the Treasury to conduct a comprehensive study of the recovery periods and depreciation methods under section 168 of the Internal Revenue Code and to provide recommendations for determining those periods in a more rational manner.
    [Show full text]
  • Sage Fixed Assets Depreciation Fundamentals 2017.1
    Sage Fixed Assets Depreciation Fundamentals 2017.1 User guide January 2017 Last updated: December 19, 2016 © 2017 The Sage Group plc or its licensors. All rights reserved. Sage, Sage logos, and Sage product and service names mentioned herein are the trademarks of The Sage Group plc or its licensors. All other trademarks are the property of their respective owners. Sage End User License Agreement (EULA): http://na.sage.com/sage-na/eula Sage Fixed Assets Depreciation Fundamentals Contents Section 1:Introduction: Features and More Features... 1-i Section 1:Preface: Historical Overview 1-i A History of Depreciation . 1-vii Section I: Fundamentals of Depreciation I-1 What Are Fixed Assets? . I-1 Who May Claim Depreciation? . I-2 What Property May Be Depreciated? . I-2 Additional Expenditures . I-4 Financial Reporting . I-4 Elements of Depreciation . I-7 Tax Reporting . I-7 Type of Property . I-10 The Date Placed in Service . I-11 Estimated Useful Life . I-12 Depreciable Basis . I-12 Basis Used for Depreciation . I-12 Trade-ins and Basis . I-14 Miscellaneous Basis Issues . I-18 Multiple Depreciation Calculations: An Overview . I-19 Section II: Amortization II-1 Amortization of Property for Financial Reporting Purposes . II-2 Computer Software . II-2 Copyrights . II-3 Covenants-Not-To-Compete . II-3 Customer Lists . II-3 Easements . II-3 Franchises . II-4 Sage Fixed Assets - Depreciation Fundamentals Contents-1 Contents Goodwill . II-4 Leasehold Improvements . II-4 Organization Costs . II-4 Patents . II-5 Research and Development Costs . II-5 Trademarks and Trade Names . II-5 Amortization of Property for Tax Reporting Purposes .
    [Show full text]
  • The Alternative Minimum Tax
    Updated December 4, 2017 Tax Reform: The Alternative Minimum Tax The U.S. federal income tax has both a personal and a Individual AMT corporate alternative minimum tax (AMT). Both the The modern individual AMT originated with the Revenue corporate and individual AMTs operate alongside the Act of 1978 (P.L. 95-600) and operated in tandem with an regular income tax. They require taxpayers to calculate existing add-on minimum tax prior to its repeal in 1982. their liability twice—once under the rules for the regular Table 2 details selected key individual AMT parameters. income tax and once under the AMT rules—and then pay the higher amount. Minimum taxes increase tax payments Table 2. Selected Individual AMT Parameters, 2017 from taxpayers who, under the rules of the regular tax system, pay too little tax relative to a standard measure of Single/ Married their income. Head of Filing Married Filing Household Jointly Separately Corporate AMT Exemption $54,300 $84,500 $42,250 The corporate AMT originated with the Tax Reform Act of 1986 (P.L. 99-514), which eliminated an “add-on” 28% bracket 187,800 187,800 93,900 minimum tax imposed on corporations previously. The threshold corporate AMT is a flat 20% tax imposed on a Source: Internal Revenue Code. corporation’s alternative minimum taxable income less an exemption amount. A corporation’s alternative minimum The individual AMT tax base is broader than the regular taxable income is the corporation’s taxable income income tax base and starts with regular taxable income and determined with certain adjustments (primarily related to adds back various deductions, including personal depreciation) and increased by the disallowance of a exemptions and the deduction for state and local taxes.
    [Show full text]
  • Treasury's Upcoming Role in Formulating Tax Policy C
    Treasury's Upcoming Role in Formulating Tax Policy C. Eugene Steuerle "Economic Perspective" column reprinted with permission. Document date: October 18, 2002 Copyright 2002 TAX ANALYSTS Released online: October 18, 2002 The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. © TAX ANALYSTS. Reprinted with permission. It is said that in every crisis is opportunity. In every political crisis, moreover, something will be done -- for good or ill -- to appear to deal with the crisis. While tax policy has generally been run out of the White House for a number of years in both Republican and Democratic administrations, that trend will be forced to reverse itself. Within the Executive Branch, only the Treasury Department is equipped to deal well with the upcoming political crisis surrounding the imposition of the alternative minimum tax on tens of millions of taxpayers. Whether it finds opportunity in this task -- one from which most politicians shy -- remains to be seen. The convoluted nature of our tax system is worthy of reform, but it is not a crisis. The strange imposition of the AMT on so many taxpayers, along with its strong bias against families with children, is a crisis. It is not an economic or even administrative crisis so much as one of politics. The economy can certainly withstand the economic repercussions of this somewhat crazy tax policy, and IRS can certainly administer the tax: At least regarding the major items involved, a computer check will find most errors.
    [Show full text]
  • 2021 Instructions for Form 6251
    Note: The draft you are looking for begins on the next page. Caution: DRAFT—NOT FOR FILING This is an early release draft of an IRS tax form, instructions, or publication, which the IRS is providing for your information. Do not file draft forms and do not rely on draft forms, instructions, and publications for filing. We do not release draft forms until we believe we have incorporated all changes (except when explicitly stated on this coversheet). However, unexpected issues occasionally arise, or legislation is passed—in this case, we will post a new draft of the form to alert users that changes were made to the previously posted draft. Thus, there are never any changes to the last posted draft of a form and the final revision of the form. Forms and instructions generally are subject to OMB approval before they can be officially released, so we post only drafts of them until they are approved. Drafts of instructions and publications usually have some changes before their final release. Early release drafts are at IRS.gov/DraftForms and remain there after the final release is posted at IRS.gov/LatestForms. All information about all forms, instructions, and pubs is at IRS.gov/Forms. Almost every form and publication has a page on IRS.gov with a friendly shortcut. For example, the Form 1040 page is at IRS.gov/Form1040; the Pub. 501 page is at IRS.gov/Pub501; the Form W-4 page is at IRS.gov/W4; and the Schedule A (Form 1040/SR) page is at IRS.gov/ScheduleA.
    [Show full text]
  • Tax Reform in the 113Th Congress: an Overview of Proposals
    Tax Reform in the 113th Congress: An Overview of Proposals Molly F. Sherlock Specialist in Public Finance March 24, 2014 Congressional Research Service 7-5700 www.crs.gov R43060 Tax Reform in the 113th Congress: An Overview of Proposals Summary Many agree that the U.S. tax system is in need of substantial reforms. The 113th Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. Identifying and enacting policies that will result in a simpler, fairer, and more efficient tax system remains a challenge. On February 26, 2014, House Ways and Means Committee Chairman Dave Camp released a comprehensive tax reform discussion draft, the Tax Reform Act of 2014. This draft proposes substantial changes to both the individual and corporate income tax systems, reducing statutory tax rates for many taxpayers, while repealing dozens of credits, deductions, and other tax preferences. The Tax Reform Act of 2014 builds on previously released discussion drafts related to international tax, financial products, and small business. Earlier in the 113th Congress, former Senate Finance Committee Chairman Max Baucus released several tax reform discussion drafts, addressing international tax, cost recovery, tax administration, and energy tax policy. Other legislation has been introduced in the 113th Congress that would fundamentally change the U.S. federal tax system. The Fair Tax Act of 2013 (H.R. 25/S. 122) would replace most current federal taxes with a 23% national retail sales tax. Other proposals would establish a flat tax, where individuals would be taxed on wages and businesses taxed on cash flows (see the Flat Tax Act (H.R.
    [Show full text]
  • Repeal the Alternative Minimum Tax
    The Contemporary Tax Journal Volume 5 Issue 2 Winter 2016 Article 11 2-12-2016 Repeal the Alternative Minimum Tax Branden Wilson San Jose State University Follow this and additional works at: https://scholarworks.sjsu.edu/sjsumstjournal Part of the Taxation-Federal Commons, Taxation-Federal Estate and Gift Commons, and the Taxation- Transnational Commons Recommended Citation Wilson, Branden (2016) "Repeal the Alternative Minimum Tax," The Contemporary Tax Journal: Vol. 5 : Iss. 2 , Article 11. Available at: https://scholarworks.sjsu.edu/sjsumstjournal/vol5/iss2/11 This Focus on Tax Policy is brought to you for free and open access by the Graduate School of Business at SJSU ScholarWorks. It has been accepted for inclusion in The Contemporary Tax Journal by an authorized editor of SJSU ScholarWorks. For more information, please contact [email protected]. Wilson: Repeal the Alternative Minimum Tax Repeal the Alternative Minimum Tax major difference between the regular income tax and the AMT is that the AMT does not By: Branden Wilson, MST Student allow some of the deductions allowed under the normal tax rules. This makes it stealthy as it creeps up to surprise a taxpayer who is What is the AMT? denied a large state tax deduction allowed under the regular tax rules and becomes a The alternative minimum tax, or AMT, can be victim to a higher tax under the AMT. described as a parallel tax system that operates on a different set of rules. The AMT is an The taxpayers most likely to get pulled into income tax. It affects individuals, the AMT are middle-to-high income earners corporations, estates and trusts.
    [Show full text]
  • 2016 Tax Brackets FACT Oct
    FISCAL 2016 Tax Brackets FACT Oct. 2015 By Kyle Pomerleau No. 486 Economist Introduction Every year, the IRS adjusts more than 40 tax provisions for inflation. This is done to prevent what is called “bracket creep.” This is the phenomenon by which people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation, instead of any increase in real income. The IRS uses the Consumer Price Index (CPI) to calculate the past year’s inflation and adjusts income thresholds, deduction amounts, and credit values accordingly. Rather than directly adjusting last year’s values for annual inflation, each provision is adjusted from a specified base year. For more information, see Methodology, below. Estimated Income Tax Brackets and Rates In 2016, the income limits for all brackets and all filers will be adjusted for inflation and will be as follows (Table 1). The top marginal income tax rate of 39.6 percent will hit taxpayers with adjusted gross income of $415,050 and higher for single filers and $466,950 and higher for married filers. Table 1. 2016 Taxable Income Brackets and Rates (Estimate) Rate Single Filers Married Joint Filers Head of Household Filers 10% $0 to $9,275 $0 to $18,550 $0 to $13,250 15% $9,275 to $37,650 $18,550 to $75,300 $13,250 to $50,400 25% $37,650 to $91,150 $75,300 to $151,900 $50,400 to $130,150 The Tax Foundation is a 501(c)(3) 28% $91,150 to $190,150 $151,900 to $231,450 $130,150 to $210,800 non-partisan, non-profit research 33% $190,150 to $413,350 $231,450 to $413,350 $210,800 to $413,350 institution founded in 1937 to 35% $413,350 to $415,050 $413,350 to $466,950 $413,350 to $441,000 educate the public on tax policy.
    [Show full text]
  • 2020 Instructions for Form 6251
    Userid: CPM Schema: Leadpct: 100% Pt. size: 9.5 Draft Ok to Print instrx AH XSL/XML Fileid: … ions/I6251/2020/A/XML/Cycle07/source (Init. & Date) _______ Page 1 of 13 14:42 - 8-Jan-2021 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Department of the Treasury 2020 Internal Revenue Service Instructions for Form 6251 Alternative Minimum Tax—Individuals Section references are to the Internal Revenue 4. The total of Form 6251, lines 2c and basis amounts may also differ for Code unless otherwise noted. through 3, is negative and line 7 would the AMT. be greater than line 10 if you didn’t take General Instructions into account lines 2c through 3. Recordkeeping You must keep records to support items Future Developments Purpose of Form reported on Form 6251 in case the IRS For the latest information about Use Form 6251 to figure the amount, if has questions about them. If the IRS developments related to Form 6251 and any, of your alternative minimum tax examines your tax return, you may be its instructions, such as legislation (AMT). The AMT is a separate tax that asked to explain the items reported. enacted after they were published, go to is imposed in addition to your regular Good records will help you explain any IRS.gov/Form6251. tax. It applies to taxpayers who have item and arrive at the correct AMT. certain types of income that receive Keep records that show how you favorable treatment, or who qualify for What's New figured income, deductions, etc., for the certain deductions, under the tax law.
    [Show full text]
  • Taxation and the Bankruptcy Code
    Chapter 4: Other Recommendations and Issues TAXATION AND THE BANKRUPTCY CODE COMMENTS PREPARED BY PROFESSOR JACK WILLIAMS RECOMMENDATIONS 4.2.1 Clarify provisions of the Bankruptcy Code on providing reasonable notice to governmental units. 4.2.2 Amend the Bankruptcy Code to prescribe that to the extent that a tax claim presently is entitled to interest, such interest shall accrue at a stated statutory rate. 4.2.3 The Commission should submit to the Advisory Committee on Bankruptcy Rules of the Judicial Conference (“Rules Committee”) a recommendation that the Federal Rules of Bankruptcy Procedure require that notices demanding the benefits of rapid examination under 11 U.S.C. § 505(b) be sent to the office specifically designated by the applicable taxing authority for such purpose, in any reasonable manner prescribed by such taxing authority. 4.2.4 Conform § 346 of the Bankruptcy Code to IRC 1398(d)(2) election; also conform local and state tax attributes that are transferred to the estate to those tax attributes that are transferred to the bankruptcy estate under IRC § 1398. 4.2.5 Amend 11 U.S.C. § 507(a)(8) and 523(a)(1) to provide for the tolling of relevant periods in the case of successive filings. Thus, in the event of successive bankruptcy filings, the time periods specified in § 507(a)(8) shall be suspended during the period in which a governmental unit was prohibited from pursuing a claim by reason of the prior case. 945 Bankruptcy: The Next Twenty Years 4.2.6 Amend 11 U.S.C. § 507(a)(8)(ii) to toll the 240-day assessment period for both pre- and post assessment offers in compromise.
    [Show full text]
  • Alternative Minimum Tax Pains! Presented By: Melinda Garvin, EA OH NO! AMT Another Miserable Tax!
    Alternative Minimum Tax Pains! Presented by: Melinda Garvin, EA OH NO! AMT Another Miserable Tax! . What really caused . Is There Anything AMT to show up? You Can Do? AMT Objectives Identify AMT adjustment and preference items. Distinguish between temporary and permanent AMT adjustments. Review Form 6251, Alternative Minimum Tax – Individuals. Determine what, if any, damage control can be done to minimize or eliminate AMT. Let’s learn about AMT using a different method…..without our eyes rolling back in our heads! AMT . Form 6251 . Part I – adjustments and preferences . Part II – calculate AMT . Part III – capital gains rates AMT . Adjustments and preferences . Preferences increase AMTI . Adjustments increase or decrease AMTI . Standard deduction and personal exemption deduction not allowed for AMT TWO ENGINES ENGINE REGULAR TAX ENGINE AMT TAX . Some items receive . Adjustments +/- and special treatment for regular tax purposes netting is allowed . Adjustments . Preferences = Bad! . Preferences receive as they always special treatment for increase AMTI regular tax Standard Deduction . Standard deduction, including add’l for elderly/blind is not allowed for AMT . Must stay consistent for reg’l and AMT . If reg’l did not itemize – no entry on 6251 If taxpayer owed AMT – might be able to lower total tax by itemizing even if less than standard deduction – if the itemized deductions are allowed for AMT Reg’l Tax and AMT Personal Exemptions . It’s Simple – they are not allowed for AMT Itemized Deductions . If itemizes – line 1 starts with line 41 from 1040 . AGI less deduction for itemized deductions . Then adds back those not allowed for AMT AMT – Itemized Deductions Item AMT Rule Adjustment on 6251 Medical expenses Medical expenses exceeding 10% of AGI Line 2 – Add back the lesser of 2.5% of AGI if are allowed.
    [Show full text]
  • An Overview of Recent Tax Reform Proposals
    An Overview of Recent Tax Reform Proposals Mark P. Keightley Specialist in Economics February 28, 2017 Congressional Research Service 7-5700 www.crs.gov R44771 An Overview of Recent Tax Reform Proposals Summary Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. In doing so, lawmakers confront challenges in identifying and enacting policies, including consideration of competing proposals and differing priorities. To assist Congress as it continues to debate the intricacies of tax reform, this report provides a review of legislative tax reform proposals introduced since the 113th Congress. Although no comprehensive tax reforms have been introduced into legislation yet in the 115th Congress, two 2016 reform proposals appear to be at the forefront of current congressional debates—the House GOP’s “A Better Way” tax reform proposal, released in June 2016, and President Trump’s campaign reform proposal, released in September 2016. As with most recent tax reform proposals, both of these plans call for lower tax rates coupled with a broader tax base. In either case, numerous technical details would need to be addressed before either plan could be formulated into legislation. Several proposals have already been introduced in the 115th Congress to replace the current income tax system. The Fair Tax Act of 2017 (H.R. 25/S. 18) would repeal the individual income tax, the corporate income tax, all payroll taxes, the self-employment tax, and the estate and gift taxes. These taxes would be effectively replaced with a 23% (tax-inclusive, meaning that the rate is a proportion of the after-tax rather than the pre-tax value) national retail sales tax.
    [Show full text]