[Federal Register Volume 59, Number 226 (Friday, November 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28980]


[[Page Unknown]]

[Federal Register: November 25, 1994]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 8569]
RIN 1545-AS44

 

Alternative Minimum Taxable Income

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
alternative minimum tax (AMT). The regulations provide guidance on the 
computation of alternative minimum taxable income (AMTI) with respect 
to items that are determined by reference to adjusted gross income 
(AGI). The regulations affect taxpayers who are subject to the 
alternative minimum tax.

DATES: These regulations are effective November 25, 1994.
    These regulations are applicable to taxable years beginning after 
December 31, 1993.

FOR FURTHER INFORMATION CONTACT: Forest Boone of the Office of 
Assistant Chief Counsel (Income Tax and Accounting) at (202) 622-4960 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    On March 18, 1994, a notice of proposed rulemaking (IA-4-94) was 
published in the Federal Register (59 FR 12880) which contained 
proposed amendments to the Income Tax Regulations (26 CFR part 1) under 
section 55 of the Internal Revenue Code (Code). A detailed explanation 
of the proposed regulations is contained in the preamble to those 
regulations. The proposed regulations provide that, in general, all 
Code provisions that apply in determining the regular taxable income of 
a taxpayer also apply in determining the AMTI of the taxpayer. However, 
the proposed regulations provide that, for purposes of computing the 
AMTI of a noncorporate taxpayer, all references to the taxpayer's AGI 
in determining the amount of any item of income, exclusion, or 
deduction must be treated as references to the taxpayer's AGI as 
determined for regular tax purposes.
    The IRS received written comments on the proposed regulations and 
on June 6, 1994, held a public hearing on those regulations. After 
consideration of the comments received and the statements made at the 
public hearing, the proposed regulations are revised and adopted as 
final regulations by this Treasury decision.

Discussion

    In the Tax Reform Act of 1986, Congress expanded the application of 
the alternative minimum tax (AMT) for individual taxpayers. Although 
Congress generally intended that the AMT be treated as a tax system 
separate from and parallel to the regular tax system, in certain 
limited instances deviations from the separate and parallel concept may 
be necessary to reduce complexity and ease administrative burden. See 
Staff of the Joint Committee on Taxation, 100th Cong., General 
Explanation of the Tax Reform Act of 1986 438 n.9 (Comm. Print 1987).
    Some commentators suggested that there should be even greater 
conformity between the AMT and regular tax systems than that provided 
in the proposed regulations. These commentators urged that, in 
computing AMTI, all references to taxable income or a component thereof 
(such as AGI, modified AGI, earned income, or taxable business income) 
should be treated as references to regular taxable income or a 
component thereof for purposes of determining any item of income, 
exclusion, or deduction.
    Other commentators stated that any regulatory attempt at conformity 
was inappropriate. According to these commentators, the separate and 
parallel system should be adhered to in full.
    Finally, there were some commentators who suggested that taxpayers 
be allowed to make a binding election to make computations based either 
on regular tax AGI or AMT AGI.
    If, in computing AMTI, all items of income, exclusion, or deduction 
that are determined by references to defined measures of income were 
based on such defined measures as determined for regular tax purposes, 
the system envisioned by Congress would be substantively changed. 
Accordingly, the final regulations have not been expanded to provide 
that all references to taxable income, or a component thereof, be 
treated as references to regular taxable income, or a component 
thereof, in computing AMTI. The final regulations clarify, however, 
that for purposes of computing the AMTI of a noncorporate taxpayer, all 
references to the taxpayer's modified AGI in determining the amount of 
any item of income, exclusion, or deduction must be treated as 
references to the taxpayer's modified AGI as determined for regular tax 
purposes.
    The final regulations also do not adopt the suggestion that an 
election be permitted to use either regular tax AGI or AMT AGI in 
computing AMTI. Such an election would add administrative complexity to 
the AMT and would be contrary to the goal of simplicity sought by these 
regulations.
    The proposed regulations were intended to reduce complexity without 
deviating from the separate and parallel concept to such an extent that 
the purpose of the AMT provisions would be subverted. The Treasury and 
the IRS believe that the general intent of Congress to apply the AMT on 
a separate and parallel basis is not undermined where this concept is 
not followed in limited, specific instances for the purpose of reducing 
some of the complexity and recordkeeping burdens of the AMT. 
Accordingly, the final regulations adopt the provisions of the proposed 
regulations in full.
    The IRS will continue to consider other possible areas of the AMT 
where the separate and parallel concept should, on a limited basis, be 
modified in order to reduce complexity. The IRS may, in the future, 
address other possible areas through regulations or other published 
guidance.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It also has 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 regulations, and, therefore, a Regulatory Flexibility Analysis is 
not required. Pursuant to section 7805(f) of the Internal Revenue Code, 
the notice of proposed rulemaking preceding these regulations was 
submitted to the Small Business Administration for comment on its 
impact on small businesses.

Drafting Information

    The principal author of these regulations is Forest Boone 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.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.55-1 is added to read as follows:


Sec. 1.55-1   Alternative minimum taxable income.

    (a) General rule for computing alternative minimum taxable income. 
Except as otherwise provided by statute, regulations, or other 
published guidance issued by the Commissioner, 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 or modified 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 or modified adjusted gross income in determining 
the amount of items of income, exclusion, or deduction must be treated 
as references to the taxpayer's adjusted gross income or modified 
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.
    Approved: October 14, 1994.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 94-28980 Filed 11-23-94; 8:45 am]
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