Targeted jobs credit reduces AMT wage deduction.

• Author: Lasch, Eric S.
• Position: Alternative minimum tax - Brief Article

Letter Ruling (TAM) 9722005 held that the targeted jobs credit (the predecessor of the current work opportunity credit) reduced a taxpayer's wage deduction for alternative minimum tax (AMT) purposes by the targeted jobs credit claimed for such wages for regular tax purposes.

Sec. 51 provided a targeted jobs credit equal to a percentage of certain qualifying wages paid or incurred to individuals in certain targeted groups. However, Sec. 280C(a) disallows a deduction for the portion of wages paid or incurred for the tax year equal to any credit determined under Sec. 51 for that year. Under Sec. 38(c), the targeted jobs credit (included in the general business credit) may only be used to reduce a taxpayer's regular tax; it cannot be used to reduce the taxpayer's AMT.

The taxpayer did not reduce its wage deduction in computing alternative minimum taxable income (AMTI) for tax years ending in 1990-1992, since the Code treats the AMT system as separate from, although parallel to, the regular tax system. The taxpayer contended that, since Sec. 38(c) prohibits a taxpayer from reducing its AMT by any targeted jobs credit, this credit effectively did not exist for AMT purposes. The taxpayer asserted that Congress enacted Sec. 280C to prevent taxpayers from receiving both a credit and a deduction for the same expenditure. Since the credit could not be used for AMT...