global Tax Inflation Reduction Act Creates New Corporate AMT: Here’s What You Should Know September 01, 2022 Attention businesses…are you up to speed on the Inflation Reduction Act’s impact on the corporate AMT? Here’s what you should know about the revamped 15% corporate AMT. Have you read our blog, Biden Signs Inflation Reduction Act: What are the Key Tax Provisions? The budget reconciliation bill, H.R. 5376, otherwise known as the Inflation Reduction Act of 2022 introduces many tax changes, including a 15% corporate minimum tax on large corporations. Does this apply to your business? Find out here. What is the corporate AMT? For non-corporate taxpayers, the Alternative Minimum Tax (AMT) is a mandatory alternative to the standard income tax. It gets triggered when taxpayers make a certain level of income and eliminates many deductions for those in higher brackets to make sure they pay at least some taxes. Corporations were also subject to the AMT until the Tax Cuts and Jobs Act (TCJA) enacted in December 2017 repealed the corporate AMT. 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). Even though the credit was repealed in 2017, corporate AMT credits were made available as “refundable credits” over several years, ending in 2021.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. Inflation Reduction Act brings back corporate AMT The Act brings back the corporate AMT for certain taxpayers for taxable years beginning after December 31, 2022. What is the rate of the new AMT? 15% Who does the AMT apply to? The AMT applies specifically to: U.S Corporations (does not include regulated investment companies, real estate investment trusts or S corporations)Corporations with an average annual Adjusted Financial Statement Income (AFSI) exceeding $1 billion for the preceding three years Will corporations be able to claim AMT credits this time around? Yes, typically corporations will be able to claim net operating losses and tax credits against the AMT, as they could before the TCJA repealed the AMT in 2017. The Joint Committee on Taxation projects $222 billion in revenue as a result of this change. Questions on your individual situation? We can help.
