Repeal of AMT depreciation.

• Position: Alternative minimum tax

On November 13, 1995, Tax Executives Institute submitted the following comments to Kenneth J Kies, Chief of Staff of the Congressional Joint Committee on Taxation, concerning proposals to reform the corporate alternative minimum tax provisions of the Internal Revenue Code. The Institute's submission, which took the form of a letter from TEI President Jack R. Skinner, supplement comments made during TEI's November 2 liaison meeting with the Joint Committee staff The submission was prepared under the aegis of the Institute's Federal Tax Committee, whose chair is Bruce H. Barnett of Cargill, Incorporated.

During our recent liaison meeting, we discussed briefly some of the Institute's concerns about proposals to reform the corporate alternative minimum tax (AMT) provisions contained in the different versions of the Revenue Reconciliation Act of 1995. Specifically, section 12161 of the Senate bill would, for purposes of computing depreciation deductions on assets placed in service after December 31, 1995, conform the depreciation method employed for AMT purposes with that used for regular tax purposes. Under section 19002(f) of the House Bill, the corporate AMT tax rate would be reduced to zero for tax years beginning after December 31, 1994. Hence, under the House proposal the requirement to compute depreciation adjustments would be obviated for taxpayers not subject to the environmental tax under section 59A of the Internal Revenue Code.

You asked us to elaborate on our concerns about the administrability of the provisions -- especially those in the Senate version of the bill.

Corporate AMT Should Be Repealed Completely

In our view, the AMT provisions of the Code stand as an admission of the tax law's failure. The AMT takes away with one hand the tax treatment given by the other hand, and in the process, it unduly burdens taxpayers. Thus, while clearly preferable to the Senate bill, even the House version of the revenue reconciliation bill perpetuates the calculation of alternative minimum taxable income for purposes of computing the environmental tax under Code Section 59A. As we did at the meeting, TEI reaffirms its belief that the best course is to repeal the corporate alternative minimum tax and all of its vestiges. Regrettably, neither bill adopts this course.

Administrability Concerns Heightened by Senate Version

An all-too-common misperception is that taxpayers have all their fixed assets recorded on a computer somewhere and it is a...