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TIME FOR A GREAT CORPORATE AMT TREASURE HUNT?

May 30, 2003

In 1997 Congress changed the AMT rules for corporations to exempt most corporations with gross receipts under $7.5 million. Apparently not everyone got the word.

The Treasury Inspector General for Tax Administration reports that over $37 million of AMT was paid by corporations after 1997 who were no longer subject to the tax. According to the report, "...although the IRS formulated a communication strategy to educate taxpayers and tax practitioners about the exemption from the AMT for small corporations, it did not implement several of the actions in that strategy."

C corporations are exempt from AMT if their annual gross receipts for the preceding three years is no more than $7.5 million. This test is applied using the gross receipts of commonly controlled corporations; a corporation with less than $7,500,000 average gross receipts may be subject to AMT if it is controlled by owners who also own another corporation.

For new corporations, a $5,000,000 test applies for the first three years, and they are generally exempt from AMT for their first year.

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