1 (November 25, 2005)

handle is hein.crs/crsmthabdfq0001 and id is 1 raw text is: 
                                                              Order Code RS221 00
                                                        Updated November 25, 2005



 CRS Report for Congress

              Received through the CRS Web



 The Alternative Minimum Tax for Individuals:

     Legislative Initiatives and Their Revenue
                               Effects

                            Gregg Esenwein
                      Specialist in Public Finance
                   Government and Finance Division

Summary


     The alternative minimum tax (AMT) for individuals was originally enacted to
 ensure that all taxpayers, especially high-income taxpayers, paid at least a minimum
 amount of federal taxes. However, the AMT is not indexed for inflation, and this factor,
 combined with the recent reductions in the regular income tax, has greatly expanded the
 potential impact of the AMT.

     Temporary provisions intended to mitigate the effects of the AMT expire at the end
 of 2005. If this occurs, then the number of taxpayers subject to the AMT will increase
 from 3 million in 2004 to 21 million in 2006. The Congressional Budget Office
 estimates that extending and indexing the 2006 AMT parameters would reduce federal
 revenue by $191 billion over the next five years.

     The conference agreement on the 2006 budget resolution, H.Con.Res. 95, contained
 $106 billion in tax relief over the next five years, approximately $70 billion of which
 would be protected through the reconciliation process. Under reconciliation, $11 billion
 of tax relief is allocated for 2006. On November 16, 2005, the Senate Finance
 Committee approved a tax cut reconciliation plan - the Tax Relief Act of 2005 (S.
 2020) - that would, among other things, extend AMT tax relief through 2006. The
 full Senate approved S. 2020 on November 18. On November 15, the Ways and Means
 Committee approved H.R. 4297 which, among other things, would provide partial AMT
 relief through a one-year extension of the treatment of nonrefundable personal tax
 credits under the AMT.

     In addition, 15 stand-alone bills modifying the AMT have been introduced in the
 109'h Congress. The Administration did not include modifications to the AMT in its
 FY2006 budget proposal.

     This report will be updated as legislative action warrants.

     The alternative minimum tax (AMT) for individuals was originally enacted to ensure
that all taxpayers, especially high-income taxpayers, paid at least a minimum amount of


       Congressional Research Service x The Library of Congress

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