AICPA asks Congress to repeal the AMT.

• Author: Laffie, Lesli S.
• Position: Alternative minimum tax

On March 22, 2007, the House Select Revenue Measures Subcommittee held its second hearing on the individual alternative minimum tax (AMT), focusing on its effect on families. The AICPA was represented by Joseph W. Walloch, incoming chair of the AICPA Individual Income Tax Technical Resource Panel (TRP), CEO of Walloch & Associates, CPAs, in Redlands, CA, and Professor of Advanced Taxation at the University of California, Riverside. Three other CPAs also testified-David Lifson, incoming chair of the New York State Society of CPAs and member of the AICPA Tax Division's Tex Legislation & Policy Committee; Margaret Rauh, member of the AICPA Tax Division's Trust, Estate & Girl Tex TRP; and Jon Nixon, AICPA member. Art Auerbach, an AICPA Tax Division Individual Income Tax TRP member, accompanied one of his clients, who served as a witness. Across the board, the message to Congress was, "Repeal the AMT." (Te access the testimony, visit http://tax.aicpa.org/Resources/Tax+Advocacy+for+Members+IRS+Regulation+ and+Administration/AICPA+Submits+Tax+Gap+Testimony+to+House+Ways+and+ Means+Committee-+March+20+2007.htm.)

Growing Effect of the AMT The IRS National Taxpayer Advocate, Nina Olson, has reported that:

[w]hile approximately 4 million taxpayers were subject to AMT in 2006, it is projected that in 2007, absent a change in law, 23.4 million individual taxpayers- or about 26 percent of individual filers who pay income tax--are likely to be subject to the AMT. Among the categories of taxpayers projected to be hardest hit, 89 percent of married couples with adjusted gross incomes between $75,000 and $100,000 and two or more children are expected to owe AMT. Married taxpayers will be almost 15 times as likely as single taxpayers to pay AMT in 2007.

A case in point is Klaassen, 182 F3d 932 (10th Cir. 1999). David and Margaret Klaassen claimed 12 exemptions on their 1994 return, for themselves and their 10 children. Their adjusted gross income (AGI) was $83,056. The taxpayers were net wealthy, nor did they use tax shelters to reduce their income tax. They were assessed $1,085 in AMT, because the AMT calculation did not allow them to claim (1) 12 personal exemptions, (2) $3,264 in state and local taxes and (3) a portion of the otherwise-deductible medical expenses of their large family, including $2,076 in out-of-pocket medical expenses for treatment of their son's cancer. As a result of their growing family, the Klaassens claimed 13 exemptions in 1995, 14...