[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