IRS Clarifies Sequestration of Alternative Minimum Tax Credits for Corporations

On January 14, 2019, the IRS published new guidance regarding sequestration of alternative minimum tax credits. According to the statement, for taxable years beginning after December 31, 2017, refund payments, credit elect, and refund-offset transactions due to refundable minimum tax credits under section 53(e) won’t be subject to sequestration.

For corporations with alternative minimum tax credit carryforwards, this notification clarifies that the full amount of alternative minimum tax credit carryforwards may be utilized.  

Background

Previous guidance from the IRS had indicated that prior year’s minimum tax credits were subject to sequestration. In accordance with the requirements of the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985, as amended, refund payments issued to, and credit elect and refund-offset transactions for, corporations claiming refundable, prior-year minimum tax liability, are subject to sequestration.

This means that refund payments, credit elect, and refund-offset transactions processed on or after October 1, 2018, and on or before September 30, 2019, will be reduced to a 6.2% sequestration rate by the fiscal year 2019—regardless of when the IRS received the original or amended tax return. The sequestration reduction rate will be applied unless or until a law is enacted that cancels or otherwise affects the sequester, at which time the sequestration reduction rate is subject to change.

Prior guidance from the IRS indicated that prior year’s minimum tax credits were subject to sequestration.

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For more information about how the IRS’s new guidance could affect you or your corporation, please contact a Moss Adams professional.