Question

Corporate AMT What are the differences/similarities to the individual AMT?

Answer 1

The corporate alternative minimum tax (“AMT”) is perhaps best understood as a separate and distinct method of taxation that runs parallel to the “regular” corporate income tax. Every corporation must calculate its tax burden under both the regular corporate income tax and the AMT, and pay the higher of the two. Just as with the individual AMT, the corporate AMT is intended to make sure that a corporation pays at least some minimum amount of tax by limiting or eliminating certain deductions, credits, and other tax preference items. As a result of these adjustments and limitations under this parallel system, a corporation determines its alternative minimum taxable income (“AMTI”), which is the first step in determining whether AMT is applicable for a given year.

The individual alternative minimum tax (AMT) operates alongside the regular income tax. It requires some taxpayers to calculate their liability twice—once under the rules for the regular income tax and once under the AMT rules—and then pay the higher amount. Originally intended to prevent perceived abuses by a handful of the very rich, the AMT affected roughly 5 million filers in 2017. The Tax Cuts and Jobs Act dramatically reduced the reach of the AMT, albeit temporarily, so that the tax will hit only 200,000 filers in 2018.