Corporate Alternative Minimum Tax (AMT), vols. 1-2.

Corporate Alternative Minimum Tax (AMT), Volumes I and II, CCH Tax Transactions Library, by Byrle M. Abbin, Stephen R. Corrick, Marc D. Levy, and Robert W. Hriszko.

The Tax Reform Act of 1986 replaced the corporate "addon" minimum tax with the Alternative Minimum Tax, a complex and often misunderstood tax based upon a parallel tax system.

The AMT was introduced to ensure that all corporations with economic profits paid some measure of corporate income taxes. In reality, the repeal of the investment tax credit had substantially achieved this objective. The AMT was driven more by perception than reality.

As a practical matter, the AMT has added enormous complexity to an already confusing tax structure and has become a substantial, unintended source of revenue for the Federal Government. The AMT represents bad economic and tax policy--it discourages capital formation, particularly in recessionary times when it is most needed. The AMT works against companies that seek to become more efficient and competitive by plowing profits back into corporate capital. The tax hampers the ability of Corporate America to carry out long-range planning activities, adding needless complexity and uncertainty.

With the ascendance of the separate AMT tax system, it behooves corporate taxpayers to better understand not only the mechanics but also the economic challenge to affected taxpayers on making business decisions, especially those that involve long term investment. Fortunately, a two-volume analysis by four Arthur Andersen partners makes both of these challenges easier to cope with. The volumes, which are part of the CCH Tax Transactions Library, go far beyond a black letter analysis. To be sure, the technical rules are thoroughly discussed. The strength of this work lies in numerous practical examples spread throughout, as well as major exhibits that are second nature to accountants. For those involved in international business, there are two detailed case studies showing a computerized print-out and analysis of the complexities of the AMT foreign tax credit limitation, including separate basket calculations. Examples of filled-out Forms 4626 for a domestic corporation over a two-year period, including use of the AMT credit carryover, complete the application aids for the user.

Thus, the authors combine a discussion of the theoretical with practical applications, and thereby enable the user to comprehend how the myriad rules operate in specific fact patterns. The format follows a standard used for the entire CCH library, providing a key issue overview followed by a detailed analysis that is very amply supported by footnotes. There is also a helpful index for treating an item or area of interest. As part of the transactional focus, specific industry application and nuances of the corporate AMT are addressed, as well as alternative investment strategies to mitigate the AMT "hit" such as leasing. Frequent updates reflecting decisional, regulatory and ruling developments, as well as statutory changes, are effected through the CCH capabilities as well as the authors' efforts. In addition, the authors' delve into uncharted areas to render conclusions and suggested approaches for the taxpayer to consider, such as consolidated return group allocations and the AMT basis of group members.

Unique in these volumes is a separate chapter on financial accounting considerations for the AMT. Two chapters cover the economic effect of the AMT related to different industries and type of asset acquisition and comparing capital allowance schemes to other countries and how well the AMT has operated from a tax policy point of view in efficiency and fairness, and what should be considered to improve the pervasive and unexpected AMT impact.

For the corporate tax managers these volumes are a must for a working understanding of the corporate AMT. Few questions that come to mind are unaddressed. I strongly recommend this work as an excellent addition to your corporate tax libraries.

(Editor's Note: John P.Z. Kent is Vice President-Taxes for GTE Corporation in Stamford, Connecticut. He is a member of the Westchester-Fairfield Chapter.)