Lawmakers Likely to Consider One-Year 'Patch' for AMT

Congress may soon consider another one-year “patch” of the alternative minimum tax to keep nearly 20 million taxpayers from becoming liable under the secondary tax system. While House Ways and Means Committee chairman Charles Rangel, D-N.Y., has said he wants to address AMT relief in the context of major tax legislation planned for this fall, reports yesterday indicated that he may consult with Senate Finance Committee chairman Max Baucus, D-Mont., on a temporary patch that would be introduced separately from that forthcoming bill. Baucus has been pushing a one-year relief measure similar to those enacted in recent years — which temporarily raised AMT exemption levels but did not address the growing spread of the tax in a permanent way. The AMT, which applies to interest earned on private-activity bonds and some governmental and 501(c)(3) bonds, is not indexed to inflation, so more taxpayers become subject to it each year. Beyond temporary relief, Rangel said that he will introduce a bill to repeal the AMT, with other tax cuts targeted toward lower and middle-income families, as early as next week, the National Journal reported yesterday. “As to the provisions that are going to expire, I don’t think I have a damn choice. We’ve got to protect the taxpayers,” he said at a briefing with reporters. Even temporary relief that maintains the status quo is a thorny proposal in the Democratic Congress, which requires that all new measures be offset by revenue-raisers. The cost of AMT relief in 2007 will be more than $50 billion, federal tax experts have estimated.“The challenge on AMT will be the pay-for,” Rep. Artur Davis, D-Ala., said at the briefing. “If the House is going to take on the heavy lifting on this issue, I want to see some action by the Senate.” In a letter sent to Treasury Secretary Henry Paulson Tuesday, the tax-writing committees’ ranking Republicans requested a detailed report on the effect of a delay in AMT relief on taxpayers. Republicans Sen. Charles Grassley of Iowa and Rep. Jim McCrery of Louisiana said they were worried about over- and underpayments of taxes, filing errors, and wasted tax dollars from revised IRS forms and guidance if a patch is not enacted soon. “Specifically, we are concerned Congress may enact AMT relief so late in the year that it will raise substantial administrative challenges for the IRS,” Grassley and McCrery said in the letter. “In 2006, an AMT 'patch’ was passed much earlier in the year that provided taxpayers with AMT relief and the IRS with sufficient time to update computer programs and tax forms.”