CARES Act - Modification of Credit for Prior Year Minimum Tax Liability of Corporations

The TCJA repealed the Alternative Minimum Tax (AMT) for corporations effective for tax years beginning after December 31, 2017.  In addition, IRC Section 53(e) was amended to provide a mechanism for refunding taxpayers’ existing AMT credit carryforwards.  AMT credits that were not utilized to reduce Federal income tax in tax years beginning after December 31, 2017 were to be refunded in an amount equal to 50 percent of the taxpayer’s remaining AMT credits in tax years 2018, 2019 and 2020, with the balance refunded in the 2021 tax year.

The new CARES, Act signed March 27, 2020, amends IRC Section 53(e) to remove the gradual refunding of taxpayers’ AMT credits over four tax years (2018-2021) and to provide for a full refundable credit for the taxpayer’s tax year beginning in 2019.  Alternatively, taxpayers may make an election to take the entire refundable credit in 2018.

Taxpayers wishing to claim the refundable credit for the 2018 tax year may file a Form 1139, Corporation Application for Tentative Refund, prior to December 31, 2020.  The Form 1139 must report 1) the amount of the refundable credit claimed under IRC Section 53(e), 2) the amount of the refundable credit claimed or refunded on a previously filed return, and, 3) the amount of remaining credit to be refunded.

The Act states that within 90 days of filing the Form 1139, the Treasury will review the application, determine the amount of the overpayment and apply the appropriate credit or refund.

When planning for any tax refunds or any related elections, taxpayers must consider many other implications of such filings, and this situation is no different.

Please contact your Schneider Downs tax advisor if you have any questions.

Please visit our Coronavirus resource page at schneiderdowns.com/our-thoughts-on/category/Coronavirus for related content.

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Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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