Reform or Repeal the Alternative Minimum Tax (AMT)

Background

The AMT is an alternative tax system, originally designed to ensure that all taxpayers paid some tax. The AMT applies a different set of rates to an income base that does not recognize certain exemptions and exclusions. If the AMT is greater than the tax owed under the normal tax system, then you pay the AMT amount. When originally enacted, the AMT was not indexed for inflation and now affects a greater percentage of taxpayers every year.

In addition to being extremely complex, the AMT increases the cost of capital, discourages investment, and stifles economic growth. The AMT negates many of the capital formation incentives provided under the regular tax system, particularly accelerated depreciation, which frees up capital that can be deployed into new plant and equipment and other productive uses.

Congress has dealt with the AMT with a series of short term "patches," often resulting in uncertainty for taxpayers. The most recent patch was a two year fix enacted as part of the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Temporary Relief Act)," which was enacted in December 2010. The Temporary Relief Act also extended for two years firms' ability to use their AMT credits in lieu of claiming bonus depreciation.

The AMT is extremely complex and burdensome for both individuals and businesses. Even businesses not subject to the tax must go through the computations to determine if they are liable. Additionally, while recent legislation offered modest increases to the exemption amounts for individuals, more and more middle-income individuals are vulnerable to the AMT.

Chamber Position

Reforming the AMT would spur capital investment in business and help to spur job creation. The U.S. Chamber supports measures to simplify and reduce the scope of the corporate and individual AMT, while working towards full repeal of both.