[Federal Register Volume 59, Number 53 (Friday, March 18, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6373]
[[Page Unknown]]
[Federal Register: March 18, 1994]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[IA-4-94]
RIN 1545-AS44
Alternative Minimum Tax for Noncorporate Taxpayers
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking and public hearing.
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SUMMARY: This document contains proposed regulations relating to the
alternative minimum tax for taxpayers other than corporations. The
regulations provide guidance on the computation of alternative minimum
taxable income with respect to items that are determined by reference
to adjusted gross income. The regulations affect noncorporate taxpayers
who may be subject to the alternative minimum tax.
DATES: Written comments must be received by May 17, 1994. Outlines of
topics to be discussed at the public hearing scheduled for Monday, June
6, 1994, at 10 a.m. must be received by Monday, May 16, 1994.
ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (IA-4-94), room 5228,
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington,
DC 20044. In the alternative, submissions may be hand delivered to:
CC:DOM:CORP:T:R (IA-4-94), Internal Revenue Service, room 5228, 1111
Constitution Avenue NW., Washington, DC. The public hearing will be
held in the Auditorium, Internal Revenue Building, 1111 Constitution
Avenue NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Kelly R.
Berg of the Office of Assistant Chief Counsel (Income Tax and
Accounting) at (202) 622-4960; concerning submissions and the public
hearing, Carol Savage of the Regulations Unit, (202) 622-7190 (not
toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1) under section 55 of the Internal Revenue Code (Code).
Section 55 imposes the alternative minimum tax (AMT). These proposed
regulations are necessary to provide guidance relating to the
computation of AMT for taxpayers other than corporations.
Explanation of Provisions
Section 55 of the Code imposes an alternative minimum tax (AMT)
equal to the excess of the taxpayer's tentative minimum tax for the
taxable year over the taxpayer's regular tax for the taxable year.
Tentative minimum tax is equal to a percentage of the amount by which
the taxpayer's alternative minimum taxable income (AMTI) exceeds an
exemption amount, reduced by the taxpayer's AMT foreign tax credit.
AMTI is the taxable income of the taxpayer determined with the
adjustments provided in sections 56 and 58, and increased by the tax
preference items described in section 57. These proposed regulations
provide that, for purposes of computing the AMTI of a taxpayer other
than a corporation, all references to the taxpayer's adjusted gross
income (AGI) in determining the amount of items of income, exclusion,
or deduction must be treated as references to the taxpayer's AGI as
determined for regular tax purposes.
Section 1.55-1(a) of the proposed regulations provides that, in
general, all Internal Revenue Code provisions that apply in determining
the regular taxable income of a taxpayer also apply in determining the
AMTI of the taxpayer. This general rule is consistent with the language
of section 55 and the legislative history. The Service and Treasury in
prior years have treated the AMT as a tax system that is separate from
and parallel to the regular tax system. For example, regulations on the
adjusted current earnings (ACE) adjustment provide that, except as
otherwise provided, all Code provisions that apply in determining the
regular taxable income of a taxpayer also apply in determining ACE. In
addition, in the preamble to the final ACE regulations, the Service and
Treasury stated their belief that Congress intended ACE (and the AMT in
general) to be a separate tax system. In both the notice of proposed
rulemaking and the final ACE regulations, the Service and Treasury
solicited comments on ways in which ACE and the AMT might be simplified
without deviating from the results Congress intended. No comments
regarding the separate and parallel concept were received in response
to these solicitations.
In 1993, the Service issued Technical Advice Memorandum 9320003 and
Private Letter Ruling 9321063, both involving the application of the
section 170(b)(1) charitable contribution deduction limitation to the
computation of an individual taxpayer's AMTI. Section 170(b)(1) limits
a taxpayer's charitable deduction for the taxable year based on the
taxpayer's AGI for the year. Both of the rulings held that, consistent
with the separate and parallel concept, and absent regulations to the
contrary, taxpayers must compute a separate AMT AGI for purposes of
applying the section 170(b)(1) limitation to the charitable deduction
for AMT purposes. The separate and parallel concept on which the
rulings rely would apply to any other AGI-based item as well.
Although the 1993 Form 6251, ``Alternative Minimum Tax--
Individuals,'' reflects the position that the AMT is a separate and
parallel tax system, the forms and publications for prior years were
less clear. The Service has received comment letters asking that the
position taken in the two rulings and the 1993 forms be reconsidered.
The authors of those comment letters suggest that the added complexity
of the approach taken in the rulings and forms far outweighs the
benefits of consistency in applying the separate and parallel concept.
See Staff of the Joint Committee on Taxation, 99th Cong., General
Explanation of the Tax Reform Act of 1986 438 n.9 (Comm. Print 1987),
which contemplates that the Treasury may prescribe regulations
deviating from the separate and parallel system in cases where such
system leads to increased complexity and recordkeeping burdens.
In many cases, requiring taxpayers to recompute for AMT purposes
those items of income and expense that are limited to a percentage of
AGI results in extreme complexity. Many taxpayers will have to perform
those complex calculations only to discover that they do not have any
AMT liability for the year. In addition, taxpayers' recordkeeping
burdens are greatly increased because they are required to maintain
separate AMT carryforward schedules, regardless of whether AMT is paid
in a given taxable year. Because of the extreme complexity and
increased recordkeeping burdens imposed on a large number of
noncorporate taxpayers under a completely separate and parallel AMT
system, the proposed regulations provide that, in computing AMTI, any
reference to AGI in determining the amount of items of income,
exclusion, or deduction must be treated as referring to AGI for regular
tax purposes.
The regulations are proposed to be effective for taxable years
beginning after December 31, 1993. See, however, Notice 94-28, I.R.B.
1994-14, for rules concerning the computation of AMTI in accordance
with these proposed regulations for taxable years beginning before
January 1, 1994.
Special Analyses
It has been determined that this notice of proposed rulemaking is
not a significant regulatory action as defined in Executive Order
12866. It has also been determined that section 553(b) of the
Administrative Procedure Act (5 U.S.C. chapter 5) and the Regulatory
Flexibility Act (5 U.S.C. chapter 6) do not apply to these proposed
rules, and, therefore, a Regulatory Flexibility Analysis is not
required. Pursuant to section 7805(f) of the Internal Revenue Code,
this notice of proposed rulemaking will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on its impact on small businesses.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments that are submitted
timely (preferably a signed original and eight copies) to the IRS. All
comments will be available for public inspection and copying.
A public hearing has been scheduled for Monday, June 6, 1994, at 10
a.m. in the Auditorium, Internal Revenue Building, 1111 Constitution
Avenue NW., Washington, DC. Because of access restrictions, visitors
will not be admitted beyond the Internal Revenue Building lobby more
than 15 minutes before the hearing starts.
The rules of 26 CFR 601.601(a)(3) apply to the hearing.
Persons that wish to present oral comments at the hearing must
submit written comments by May 17, 1994 and submit an outline of the
topics to be discussed and the time to be devoted to each topic by
Monday, May 16, 1994.
A period of 10 minutes will be allotted to each person for making
comments.
An agenda showing the scheduling of the speakers will be prepared
after the deadline for receiving outlines has passed. Copies of the
agenda will be available free of charge at the hearing.
Drafting Information
The principal author of these regulations is Kelly R. Berg of the
Office of Assistant Chief Counsel (Income Tax and Accounting). However,
other personnel from the IRS and Treasury Department participated in
their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 1 is proposed to be amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 continues to read in
part:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 1.55-1 is added to read as follows:
Sec. 1.55-1 Alternative minimum tax for noncorporate taxpayers.
(a) General rule for computing alternative minimum taxable income.
Except as otherwise provided by statute or regulations, all Internal
Revenue Code provisions that apply in determining the regular taxable
income of a taxpayer also apply in determining the alternative minimum
taxable income of the taxpayer.
(b) Items based on adjusted gross income. In determining the
alternative minimum taxable income of a taxpayer other than a
corporation, all references to the taxpayer's adjusted gross income in
determining the amount of any item of income, exclusion, or deduction
must be treated as references to the taxpayer's adjusted gross income
as determined for regular tax purposes.
(c) Effective date. These regulations are effective for taxable
years beginning after December 31, 1993.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 94-6373 Filed 3-17-94; 8:45 am]
BILLING CODE 4830-01-U
