Refundable AMT Credit
Current status and outlook
Posted January 13, 2008
Technical corrections pass; further liberalization possible.
Use this page to keep on top of developments concerning the refundable AMT credit, a provision that makes it easier for some people to claim AMT credit that's more than three years old.
The issue
People who continue holding stock after the end of the year in which they exercise incentive stock options may pay alternative minimum tax. In certain circumstances they receive a credit for some or all of this amount in a later year. Yet some people are unable to claim credit for the full amount paid. If you have unused AMT credit that's more than three years old, you may be able to claim a refundable credit beginning in 2007. (We have a guide providing full details on the refundable AMT credit.)
Who's affected
This provision may affect anyone who has paid AMT as a result of exercising an incentive stock option and failed to claim the full amount paid as AMT credit — especially, but not exclusively, those whose stock option strategy turned out poorly because of the collapse in technology stocks that began early in 2000. Because of a phase-out provision, however, people with higher levels of income will not be able to use this credit unless a change described below is adopted.
Recent events
A technical correction to the refundable AMT credit adopted near the end of 2007 changes the way the credit will be calculated in years after 2007, making it easier for people with larger amounts of unused credit to recover the full amount over a period of five tax years. A proposal for further liberalization of the refundable AMT credit, summarized below, appeared in some versions of the tax legislation Congress was considering near the end of 2007, but was not in the version finally enacted.
Current status
The technical correction is now law, but other liberalizations have not been adopted.
What's next
Efforts to liberalize this provision further will continue. It is difficult to assess the prospects for success, but inclusion of a more generous provision in the legislation that was being considered late in 2007 is a hopeful sign. A liberalized version may include the following provisions:
- Credit recovery over two years rather than five
- Elimination of the phase-out for higher-income taxpayers
- Protection from or recovery of interest and penalties related to the original AMT payment
Related
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