How does the CARES Act Impact the Corporate AMT?April 30, 2020
The CARES Act provides relief for corporate taxpayers in regard to the AMT, or alternative minimum tax. We share the details here.
As our blog, How the CARES Act Will Help You and Your Business, mentions the Coronavirus Aid Relief and Economic Security, or CARES Act introduces accelerated credits for prior year corporate alternative minimum tax (AMT) liabilities. Here’s what you need to know.
What is the AMT?
The Alternative Minimum Tax is a mandatory alternative to the standard income tax. For corporations, the intent was to make sure that a corporation paid at least some amount of tax by limiting certain deductions, credits and tax preference items. Certain “small” corporations were exempt from the AMT. For those corporations that paid AMT tax, a minimum tax credit was created. This credit could be used against regular tax (but limited by any AMT).
The Tax Cuts and Jobs Act (TCJA) enacted in December 2017 repealed the corporate AMT.
How has the CARES Act impacted the Corporate AMT?
Although the corporate AMT was repealed, corporate AMT credits were made available as “refundable credits” over several years, ending in 2021. Corporations were able to treat a portion of their prior year AMT credit carryover as refundable. The credit carryover was available to offset regular tax and was refundable for 50% of the uncredited balance for tax years 2018-2020 and 100% refundable in 2021.
A CARES Act provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
Corporate taxpayers are able to claim the refund in full in either 2018 or 2019. If you’re looking to accelerate an AMT credit refund for 2018, you can use a quick refund procedure (Form 1139) to claim the credits.