The Tax Cuts and Jobs Act repeals the corporate Alternative Minimum Tax.

Prior Law

Through December 31, 2017

Alternative Minimum Tax is a second tax computation that does not allow certain deductions and/or modifies other deductions for purposes of the computation. One example is depreciation, which has different lives for assets (typically longer) and different methods of depreciation (typically a slower method). It is basically a flat tax, and limits the benefit of certain tax strategies. For any given year, corporations pay the higher of their regular tax computation or the AMT computation. AMT paid in prior years is available as a credit in certain situations.

New Law

Effective for tax years beginning after December 31, 2017

The corporate Alternative Minimum Tax is repealed. Companies that have an Alternative Minimum Tax Credit for AMT paid in prior years will be allowed to use the credit, subject to limits, in full before 2022. The credit is refundable during the period from 2018 to 2021.

Commentary

Corporations that have been subject to AMT and have a credit carryforward will be able to use the credit to offset taxes in the next few years. All corporations should be able to use various tax benefits in full to offset taxable income without the limits imposed by the AMT.

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Matt Eckelberg
I joined Hawkins Ash CPAs in 1997. I began as an intern and have advanced to partner. I have thorough experience in audit and tax and provide these services to commercial entities, individuals, and profit-sharing 401(k) plans. I am a former member of the firm’s tax committee.

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