TEI Alerts Congress to Unintended Consequences of Retaining Corporate AMT in Tax Reform under H.R. 1, the Tax Cuts and Jobs Act.

• Position: Tax Executives Institute, alternative minimum tax

On behalf of Tax Executives Institute, Inc. ("TEI" or the "Institute"), I am writing to add the Institutes voice to the growing chorus of taxpayers concerned about the Senate tax reform bill's retention of the corporate alternative minimum tax. TEI is the preeminent association of in-house tax professionals worldwide, with more than 7,000 members representing a cross-section of the business community, and is dedicated to the development of sound tax policy, uniform and equitable enforcement of tax laws, and minimization of administrative and compliance costs to the benefit of both government and taxpayers.

Under current law, an alternative minimum tax ("AMT") is imposed on a corporation to the extent the corporation's tentative minimum tax exceeds its regular tax. This tentative minimum tax is computed at the rate of 20% on the corporation's alternative minimum taxable income ("AMTI") in excess of an exemption amount. AMTI is the taxpayer's regular taxable income increased by certain preference items and adjusted by determining the tax treatment of certain items in a manner that negates the deferral of income resulting from the regular tax treatment of those items. Thus, the corporate AMT places a significant administrative burden on corporations by requiring them to maintain at least three sets of books--to calculate income for financial accounting, regular corporate income tax, and corporate AMT purposes.

Recognizing the requirement that taxpayers compute their income for purposes of both the regular income tax and the AMT as "one of the most far-reaching complexities of the Code," (1) the Committee on Ways and Means included a provision in the House tax reform bill that would repeal the individual and corporate AMT. (2) The Committee on Finance included a similar provision in the tax reform bill it reported on November 16, but the version passed by the Senate on December 2 did not. The Senate bill would retain the corporate AMT without making any change to current law.

Retaining the corporate AMT under the Tax Cuts and Jobs Act would only add to the administrative burden, complexity, and cost that corporate taxpayers endure under current law. Under the Senate bill, beginning in 2019, the regular corporate income tax rate and the corporate AMT rate each would be 20%. As a result, the number of corporations that would be subject to the corporate AMT would be vastly increased from the number of corporations currently subject thereto.

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