Letter to Congress regarding the 2007 Reform of the Alternative Minimum Tax

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REPORT

The Honorable Max S. Baucus
Chairman
Senate Committee on Finance
219 Dirksen Senate Office Building
Washington D.C. 20510

The Honorable Charles E. Grassley
Ranking Member
Senate Committee on Finance
219 Dirksen Senate Office Building
Washington D.C. 20510

The Honorable Charles B. Rangel
Chairman
House Committee on Ways and Means
1102 Longworth House Office Building
Washington D.C. 20515

The Honorable Jim McCrery
Ranking Member
House Committee on Ways and Means
1102 Longworth House Office Building
Washington D.C. 20515

RE: 2007 Reform of Alternative Minimum Tax

Dear Chairman Baucus, Chairman Rengel, Senator Grassley and Representative McCrery:

The Personal Income Tax Committee of the Association of the Bar of the City of New York[1] would like to respectfully offer comments on the important subject of 2007 Reform of the Alternative Minimum Tax. In particular, the areas of main concern addressed by this letter are support of a continues increased AMT exemption amount in 2007 and support of a short term 2007 AMT Estimated Tax Relief provision of safe harbor from IRS interest and penalties (which is particularly relevant for those taxpayers whose estimated tax payments for 2007 have not taken into account an extension of the 2006 increased AMT exemption).

A short term 2007 AMT increased exemption is consistent with the short term AMT relief enacted by Congress between 2003 and 2006. In so doing, Congress has held down the number of AMT taxpayers to less than there would have been under prior law. This patch expired at the end of 2006 and Congress has not yet enacted a patch for 2007. Without the proposed 2007 AMT short term reform, the number of Americans affected by the AMT for 2007 will increase from approximately four million to more than 23 million. The Joint Committee on Taxation projects that most of the 23 million taxpayers affected would earn between $50,000 and $200,000, that is middle income families.[2] The problem with the AMT goes beyond just those paying the tax.

The AMT affects a lot of other taxpayers, as well. The AMT forces many taxpayers to have to calculate their tax liability twice, first under the regular tax system, and then again under the AMT. The IRS estimates that the average taxpayer takes about 30 hours filling out a Form 1040.[3] The AMT increases that burden.

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