Corporate Alternative Minimum Tax Research Articles

The Corporate Alternative Minimum Tax: A Congressional Folly

The Corporate Alternative Minimum Tax: A Congressional Folly

Initial Company Responses to the Enactment of the Corporate Alternative Minimum Tax

Initial Company Responses to the Enactment of the Corporate Alternative Minimum Tax

A Critical Analysis of the Corporate Alternative Minimum Tax

ABSTRACT The corporate alternative minimum tax, enacted as part of the 2022 Inflation Reduction Act, intends to impose a minimum level of taxation on profitable large corporations using financial statement income as a tax base. Although both alternative tax bases and the usage of financial statement income in taxes have a long history in the United States, the tax represents a substantial change in the current corporate tax law. Although the corporate alternative minimum tax is predicted to raise billions of dollars from a small subset of the largest corporations, its design raises concerns about long-term efficacy. In this article, we summarize the development of the corporate alternative minimum tax in light of its historical predecessors and compare its design against accepted standards of good tax policy, ultimately identifying multiple inadequacies in its construction and implementation. We conclude by making policy recommendations. JEL Classifications: H21; H25; K34.

Made in America: International Tax Reform 2.0 – Part 3

This is Part 3 of the author’s article, “Made in America: International Tax Reform 2.0”. It first considers the Inflation Reduction Act of 2022, followed by an exploration of the new Corporate Alternative Minimum Tax based on information available as of 5 February 2023, the date this article was written. It then deals with the Excise Tax on Repurchases of Corporate Stock.

Corporate Minimum Tax Options

Canada faces a quandary. Should it adopt a corporate minimum tax under the pillar two agreement that is consistent other agreeing countries, or should it adopt a US-style corporate alternative minimum tax that is more harmonized with the minimum tax of the United States, its largest trading partner? There is no easy answer to this question. The pillar two corporate minimum tax is complex and distortionary, even though it puts a floor on tax-rate competition at 15 percent; but a made-in-Canada corporate minimum tax could reduce distortions while raising more revenue by being applied to a wider group of companies. The authors of this paper argue that Canada should take its time to see whether the US corporate alternative minimum tax qualifies as a minimum tax, giving Canada better options for a corporate tax than pillar two's global tax.

ОБОСНОВАНИЕ ПРИОРИТЕТОВЭКОНОМИЧЕСКОЙПОЛИТИКИНАОСНОВЕСТРУКТУРНОГОАНАЛИЗАВАЛОВОГОРЕГИОНАЛЬНОГОПРОДУКТА(НАПРИМЕРЕПЕРМСКОГОКРАЯ)

The structural analysis of gross regional product (GRP) of Perm Krai has been conducted. The GRP has been calculated using income and expenditure approaches to determine the influence of each of its components on the growth rate of generalized indicator. The significant statistical discrepancy of GRP values, calculated with different methods, has been revealed. The GRP calculated using the expenditures approach is characterized by the greater range of fluctuation than the gross added value and the GRP calculated using the income approach. The reason of the discrepancy has been determined. It is the incomplete disclosure of interregional relations at the regional level. The authors have highlighted the challenges that arose when calculating the values, including the resulting simplification of the methods of calculation of macroeconomic indicators at regional level that are quite substantial to regions, including Perm Krai. Based on the sensitivity analysis and the results of the correlation analysis the authors have identified factors that have the significant effect on the rate of economic growth in the region. Correlation analysis has shown the high dependence of the GRP on consumer spending both in Perm Krai and in Russia. Empirical analysis has allowed to substantiate the main directions of regional economic policy and to identify the instruments of public administration. The use of these instruments together with the methods affecting the salary range, stimulating consumer demand, investment and government spending will allow the government of Perm Krai to influence economic growth in the region. Keywords economic growth, regional economy, gross regional product, gross added value, sensitivity analysis, correlation analysis, economic policy.

The impact of depreciation savings on investment: Evidence from the corporate Alternative Minimum Tax

Over the past decade, the United States has offered investment incentives in the form of larger depreciation savings, namely, bonus depreciation. The neoclassical investment model implies that investment responds to changes in depreciation savings, but there have been few direct attempts to investigate this implication. This paper examines investment patterns surrounding the 1999 shortening of the Alternative Minimum Tax (AMT) depreciation recovery periods, finding strong evidence that firms subject to the AMT increase investment in response to the AMT reform. The empirical results show that firms subject to the AMT increase their investment, measured as the ratio of capital expenditures to capital stock, by around 0.0418 to 0.0622, compared to firms subject to the regular tax. Given their average annual investment rate of approximately 0.27 during this period, the results imply a relative increase in investment of 15%--23%. By contrast, I find that the 2002 introduction of bonus depreciation, available both for firms subject to the regular tax and for firms subject to the AMT, affects both groups of firms similarly. The estimation uses an empirical specification developed from the Summers (1981) tax-adjusted q model, and the results imply that the responsiveness of investment to the tax term is somewhat larger than previously estimated.

Expanding the R&D Tax Credit to Drive Innovation, Competitiveness and Prosperity

The U.S. economy faces a new and formidable competitiveness challenge. Not only has the emergence of a global economy led to the creation of robust new economic competitors, but within the last decade many nations, including most of Southeast Asia and Europe, have made innovation-led economic development a centerpiece of their national economic strategies. Their aggressive use of research and development (RD it must also spur demand by companies to locate more of their innovation-based production in the United States. If the United States is to remain the world's preeminent location for technological innovation (and the high paying jobs that result), Congress will need to significantly expand the Research and Experimentation Tax Credit. To do that Congress should: - Make the R&D tax credit permanent, - Double the rate of the regular credit from 20 percent to 40 percent, - Expand the Alternative Simplified Credit, - Create a flat credit for Collaborative R&D, - Allow firms to expense in the first year expenditures on research equipment, and - Exempt the credit from the corporate Alternative Minimum Tax.

Cracking the Code: Making Sense of the Corporate Alternative Minimum Tax

[© Brookings Institution] The corporate alternative minimum tax (AMT) was hailed in the Tax Reform Act of 1986 as instrumental to ensuring that tax loopholes would not permit corporations to avoid paying their fair share of tax liability. In 1995, less than ten years later, repeal of the AMT was pledged as part of the Republican Party's Contract with America and passed by the House of Representatives. Opponents of the AMT object that it penalizes new investment by firms and prevents the use of legitimate deductions. Its defenders tout the ability of the AMT to address public perceptions of unfairness in the tax system.

Cracking the Code: Making Sense of the Corporate Alternative Minimum Tax By Andrew B.Lyon. Washington, DC: Brookings Institution Press, 1997. Pp. xi, 156. $16.95 paper, $38.95 cloth.

Cracking the Code: Making Sense of the Corporate Alternative Minimum Tax By Andrew B.Lyon. Washington, DC: Brookings Institution Press, 1997. Pp. xi, 156. $16.95 paper, $38.95 cloth.

Cracking the Code: Making Sense of the Corporate Alternative Minimum Tax. By ANDREW B. LYON.

Previous article No AccessBOOK REVIEWCracking the Code: Making Sense of the Corporate Alternative Minimum Tax. By ANDREW B. LYON.George A. PleskoGeorge A. Plesko Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by National Tax Journal Volume 51, Number 1March 1998 Published for: The National Tax Association Article DOIhttps://doi.org/10.1086/NTJ41789320 Views: 2Total views on this site © 1998 National Tax Association. All rights reserved.PDF download Crossref reports no articles citing this article.

The effect of the corporate alternative minimum tax on investment in oil and gas exploration and development

This paper investigates the assertion that the U.S. corporate alternative minimum tax system diminishes exploration and development investment by U.S. corporations operating in the extractive petroleum industry. The analysis is based on an after-tax investment model in which number of wells drilled and exploration risk are endogenous variables. The model is solved using 1) the values of the relevant tax parameters specified by the tax code and 2) empirical estimates of the non-tax parameters and exogenous variables. The analysis shows that the alternative minimum tax has reduced by 9% the optimal number of exploration wells as compared to the optimal number of exploration wells prior to the introduction of the alternative minimum tax. The analysis also shows that the alternative minimum tax has 1) reduced the optimal level of exploration risk and 2) increased the importance of well-designed incentive compensation agreements for firms operating in the extractive petroleum industry.

AMTexpert: An Expert Decision Support System for the Corporate Alternative Minimum Tax

AbstractAMTexpert is a prototype of an expert decision support system (EDSS) for the corporate alternative minimum tax (AMD. The corporate AMT was introduced as part of the Tax Reform Act of 1986 in order to force US corporations to pay more tax. The complicated and interrelated nature of the AMT system has made compliance and planning even more difficult for corporate taxpayers. Given the complexities of the corporate AMT, significant benefits may accrue from the development of an EDSS. In effect, an EDSS combines the judgmental benefits of an expert system (ES) with the computational benefits of a decision support system (DSS). AMTexpert is menu driven with six interdependent phases. The heart of the system is a ‘scoreboard’ used to compare and evaluate alternative tax positions. Context‐sensitive advice and explanations are provided to guide the user. The system was validated and evaluated by two groups of outside experts. AMTexpert demonstrates that an EDSS may be developed from existing tax and systems software.

The economic effects of taxing capital income

Should we tax income from capital? is the capital income tax structure efficient? the efficiency cost of the corporate tax tax neutrality and capital cost recovery - depreciation, inflation, and investment subsidies capital gains taxes the corporate alternative minimum tax and the passive loss restriction tax treatment of retirement savings - pensions, IRAs, and other tax-deferred savings a potpourri of capital income tax issues capital income taxation in an international economy economic analysis of capital income taxation and tax policy. Appendices: history of capital income taxation in the United States methods of calculation and data sources.

The effect of the alternative minimum tax on corporate tax burdens

The Tax Reform Act of 1986 revised the corporate alternative minimum tax ( AMT) and explicitly linked corporate taxation to financial accounting “Book Income”. Congress added the book income adjustment (although temporarily) to eliminate highly publicized instances in which corporations with substantial book income paid no tax. The intent of this study is to assess the incidence of the AMT and the industry groups expected to pay additional taxes under the new law. Our results indicate that while corporate taxes paid increased after implementation of the law, the incidence of the new law did not necessarily fall on those firms expected to pay the new tax. Firms with increased tax burdens did not necessarily incur lower tax burdens prior to the implementation of the new AMT, nor were they the most profitable. Consequently, the potential negative impact of this new law may have overshadowed its expected revenue generation and corrective benefits.

Earnings Management and the Corporate Alternative Minimum Tax

This study tests whether firms affected by the U.S. corporate alternative minimum tax (AMT) enacted as part of the Tax Reform Act of 1986 (TRA 86) managed their 1986 and 1987 earnings to reduce their tax liabilities. One provision of TRA 86 required the inclusion of a variant of financial accounting income (AMT book) in the AMT income tax base for 1987 through 1989. The AMT created an incentive to shift income to 1986 from 1987 to avoid the 20% tax rate on alternative minimum taxable income (AMTI) and an effective marginal rate of 10% on AMT book exposure. On the

Discussion of Earnings Management and the Corporate Alternative Minimum Tax

This paper presents an empirical study of possible earnings management in response to a tax on reported income (book income) introduced in the Tax Reform Act of 1986. Starting in 1987, book income became part of the corporate alternative minimum tax (AMT) base which applied to corporations that did not pay a minimum level of regular tax. The authors' objectives are to identify firms exposed and not exposed to the AMT, and to determine whether firms exposed to the AMT managed their accruals to reduce the cost of the AMT. Boynton, Dobbins, and Plesko adapt the Jones [1991] approach to estimate a discretionary accrual proxy (DAP) for 649 Compustat manufacturing and transportation firms, applying firm-specific data to a model based on pooled-industry data for the years 1981-85. They then access a proprietary IRS tax return file and remove the DAP estimate from the book income amount reported on the tax return. The AMT is recalculated for each firm based on the resulting book income amount to estimate the pre-AMT position, i.e., the position before discretionary accruals. A final sample of 414 firms is partitioned according to whether the firms face the AMT based on the pre-AMT book income and based on the reported book income. The 414 firms are further partitioned on the presence or absence of AMT-mitigating characteristics, such as net operating loss carryforwards and foreign tax credits. The paper reports results consistent with the first hypothesis that firms used discretionary accruals to reduce income in 1987, the first year

Incentive Effects of the Corporate Alternative Minimum Tax

Previous articleNext article FreeIncentive Effects of the Corporate Alternative Minimum TaxB. Douglas BernheimB. Douglas Bernheim Search for more articles by this author PDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by Tax Policy and the Economy Volume 31989 Sponsored by the National Bureau of Economic Research (NBER) Article DOIhttps://doi.org/10.1086/tpe.3.20061784 Views: 38 Citations: 7Citations are reported from Crossref Copyright 1989 The National Bureau of Economic Research and The Massachusetts Institute of TechnologyPDF download Crossref reports the following articles citing this article:Claudia Dahle, Michaela Üffing Cross-Border Group-Taxation and Loss-Offset in the EU - An Analysis for CCCTB (Common Consolidated Corporate Tax Base) and Etas (European Tax Allocation System), SSRN Electronic Journal (Jan 2009).https://doi.org/10.2139/ssrn.2128991Rainer Niemann, Caren Sureth Steuern und Risikobereitschaft in Modellen irreversibler Investitionen, Journal für Betriebswirtschaft 58, no.33 (Aug 2008): 121–140.https://doi.org/10.1007/s11301-008-0037-3Claudia Dahle, Caren Sureth Income-Related Minimum Taxation Concepts and Their Impact on Corporate Investment Decisions, SSRN Electronic Journal (Jan 2008).https://doi.org/10.2139/ssrn.2128096Rainer Niemann Wirkungen der Abschnittsbesteuerung auf internationale Investitions- und Repatriierungsentscheidungen, Schmalenbachs Zeitschrift für betriebswirtschaftliche Forschung 58, no.77 (Jul 2016): 928–957.https://doi.org/10.1007/BF03371687Caren Sureth, Ralf Maiterth Wealth Tax as Alternative Minimum Tax - The Impact of a Wealth Tax on Business Structure and Strategy, SSRN Electronic Journal (Jan 2005).https://doi.org/10.2139/ssrn.700297Caren Sureth, Armin Voß Willingness to Invest and Time Indifference under Uncertainty and Taxes, SSRN Electronic Journal (Jan 2005).https://doi.org/10.2139/ssrn.905760Rainer Niemann The Effects of Periodic Taxation on International Investment and Repatriation Decisions, SSRN Electronic Journal (Jan 2005).https://doi.org/10.2139/ssrn.905764

International Tax Policy's Harm To Manufacturing and National Interests

Two tax regulations that permit U.S. multinational enterprises (MNEs) to use foreign contract manufacturers and to disregard their wholly owned foreign subsidiaries have created significant tax incentives for MNEs to move manufacturing outside the United States. These tax incentives have contributed to the loss of five million manufacturing jobs and the closure of more than 91,000 plants since 1997. The job losses exacerbated racial and economic inequality and stressed our political system. But the losses arising from offshore manufacturing extend to other areas as well. Offshore manufacturing increases U.S. exposure to supply chain disruptions, threatens national security, and decreases research and development efforts to improve production techniques. Also, as automated manufacturing increases, the use of offshore manufacturing hinders the ability of the U.S. to compete in that sector. The U.S. implementation of a corporate alternative minimum tax in 2023 and the current Organization for Economic Co-operation (OECD) initiative, Pillar Two, which seeks to impose a global corporate minimum tax, may reduce the incentive to offshore in some instances. But the incentives created by the two tax regulations for U.S. MNEs to offshore clearly remain and should be eliminated given the harms they have inflicted and are likely to inflict in the future. This Article proposes two amendments to the regulations to reduce further the tax incentives for offshoring. First, MNEs should not be allowed to use foreign contract manufacturers to qualify for the manufacturing exception in Subpart F of the Internal Revenue Code. Second, MNEs should not be permitted to disregard their wholly owned foreign entities. Under the Chevron doctrine, both proposals would clearly be valid. The Supreme Court’s nascent major question doctrine (MQD), however, creates significant uncertainty about the circumstances in which Chevron deference should apply. This Article concludes that even if the MQD applies to eliminate Chevron deference, the so-called “weak form” of the MQD should validate the proposed regulations.