Carrying on our tradition of providing you with Solutions Beyond the Obvious, we are pleased to bring you our “Ask the Experts” series of articles. In these articles, our Tronconi Segarra & Associates tax experts identify and explain the significant tax changes that were passed as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act which can provide additional relief for businesses and individuals facing economic hardship as the result of the coronavirus pandemic. Contact your Tronconi Segarra & Associates tax advisor for more information about any of the topics discussed in these articles.
Kathleen A. Grieco, CPA, MBA
The Tax Cuts and Jobs Act of 2017 (“TCJA”) repealed corporate Alternative Minimum Tax (“AMT”) and allowed corporations to recover their remaining AMT Credit carry-forwards over tax years 2018 through 2021. The CARES Act amends these provisions, allowing corporations to accelerate their ability to recover the AMT credit as a fully refundable credit in taxable years 2018 or 2019.
Section 53 as amended by the TCJA allowed taxpayers to utilize their remaining AMT credits (“AMTC”) carryovers before 2022. In years 2018, 2019 and 2020 taxpayers could claim a refundable credit equal to 50% of the excess of the AMTC over the amount otherwise allowable against regular tax liability. In year 2021 taxpayers could claim a refundable credit equal to 100% of the excess of the MTC for the tax year over the amount of the credit allowable for the year, meaning any remaining credit would be allowed to be taken in 2021.
New Law Under the CARES Act
Under the CARES Act, corporations may now utilize their remaining AMTC carryovers in the 2019 tax year. Corporations also have the option to elect to claim the entire refundable credit for the 2018 tax year by filing a Tentative Refund Claim on form 1139 and also submitting form 8827 no later than December 31, 2020. By filing a Tentative Refund Claim, the IRS has 90 days to review the application and refund an over-payment to the taxpayer. The taxpayer may also file an amended 2018 tax return to claim the credit.
- Taxpayers that terminated their existence in a non-section 381(a) transaction after 2018, thereby forfeiting any remaining AMTCs, may now be able to claim their AMTCs for 2018.
- Special consideration should be given to AMT credit allocation among consolidated group members.
- Special consideration is required for short tax years.
- In interaction with the new 5-year NOL carryback rule under the CARES Act, taxpayers that fully utilize the MTC for their first tax year beginning after 2017 may be due a refund since the temporary reinstatement of the NOL carryback may eliminate all or a portion of their 2018 federal income tax liability.
Please contact your Tronconi Segarra & Associates tax advisor for more information on this or any tax matter. If you do not have a Tronconi Segarra & Associates tax advisor, please call 716.633.1373 or Contact Us through our website with your question.
This article has been prepared for general guidance on matters of interest only; it does not constitute professional advice. You should not act upon the information contained in this article without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy of completeness of the information contained in this article; and, to the extent permitted by law, Tronconi Segarra & Associates LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this article or for any decision based on it.