Alternative Minimum Tax (AMT)

 

Originally designed to ensure that all taxpayers pay at least a minimum amount of taxes, the alternative minimum tax (AMT) unfairly penalizes businesses that invest heavily in plants, machinery, equipment, and other assets.

 

The AMT significantly increases the cost of capital and discourages investment in productivity-enhancing assets by negating many of the capital formation incentives provided under the “regular” tax system—most notably, accelerated depreciation. To make matters worse, many capital-intensive businesses have been perpetually trapped in the AMT system, unable to use their suspended AMT credits.

 

The AMT is extremely complex and burdensome. Even businesses not subject to the tax must go through the computations to determine whether they are liable for it. While the Taxpayer Relief Act of 1997 (P.L. 105-34) exempted “small business corporations” from the AMT, larger corporations and many individuals may not be exempt. Additionally, while recent legislation offered modest increases to the exemption amounts for individuals, more and more middle-income individuals are vulnerable to the AMT.

 

 

Reforming the AMT would spur capital investment in the business community, thereby creating jobs. The U.S. Chamber supports measures to simplify and reduce the scope of the corporate and individual AMT, while ultimately working for full repeal of both.