In an Information Release, the IRS has announced it will return sequestered funds to corporations claiming refundable AMT credits.
Background—AMT credits and former Sec. 168(k)(4)
When a taxpayer pays alternative minimum tax (AMT), a credit, the minimum tax credit (AMT credit), is created under Code Sec. 53(b). This credit is applied against regular tax liability in later years when the regular tax (subject to certain reductions) is higher than the tentative minimum tax. (Code Sec. 53(c)) The credit can be carried forward indefinitely but cannot be carried back or used to offset future AMT liability. The AMT credit is limited.
A bonus first-year depreciation allowance applies to “qualified property” (generally, new property depreciated under MACRS with a recovery period of 20 years or less). (Code Sec. 168(k); Reg. § 1.168(k)-1(d)(1)). For tax years beginning before Jan. 1, 2018, corporations could elect under former Sec. 168(k)(4) to “swap” bonus and accelerated depreciation in exchange for an increased AMT credit limitation.
For tax years beginning after Dec. 31, 2017, the corporate AMT is repealed. (Code Sec. 55 as amended by the Tax Cuts and Jobs Act, PL 115-97)
In 2013, the Office of Management and Budget (OMB) interpreted the Balanced Budget and Emergency Deficit Control Act of 1985 (EDC, PL 99-177), as amended, to require sequestration of refund payments issued to corporations claiming refundable AMT tax credits. (IRS.gov)
IRS will return certain sequestered funds
Recently, OMB reviewed its prior EDC decision and determined that refund payments issued to corporations claiming refundable AMT credits are not subject to sequestration.
Based on the OMB’s recent decision, the IRS will return sequestered funds to corporations that were affected by that decision. According to the IRS, fewer than 1,000 corporations were affected by the OMB’s recent decision.
The IRS has a complete list of all taxpayers affected, so taxpayers don’t need to take any action. The IRS will send the funds and applicable interest during fiscal year 2020. However, any funds due a corporation will be used to offset the corporation’s current tax liabilities first.
The IRS will share additional information regarding the timing for returning these funds when it is available.
To continue your research on the AMT credit, see FTC 2d/FIN ¶ A-8801 et seq.; United States Tax Reporter ¶ 534 et seq.
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