Order Code RL30149
Report for Congress
Received through the CRS Web
The Alternative Minimum Tax for Individuals
Updated January 30, 2003
Gregg A. Esenwein
Specialist in Public Finance
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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The Alternative Minimum Tax for Individuals
Summary
Over time, the individual income tax has been used as a vehicle to promote
various social and economic goals. This has been accomplished by according
preferential tax treatment to certain items of income and expense. The net result,
however, has been that by taking advantage of the preferences and incentives in the
tax code, some individuals can substantially reduce their income taxes.
To make sure that everyone paid at least a minimum of taxes and still preserve
the economic and social incentives in the tax code, Congress, in 1969, enacted the
individual alternative minimum tax (AMT).
It is calculated in the following manner.
First, an individual adds back various tax preference items to his taxable income
under his regular income tax. This grossed up amount then becomes his tax base for
the AMT. Next, the amount of the basic exemption is calculated and subtracted from
the AMT tax base. A two-tiered tax rate structure of 26% and 28% is then assessed
against the remaining AMT tax base to determine AMT tax liability. The taxpayer
then pays whichever is greater, his regular income tax liability or his AMT tax
liability. Finally, the AMT tax credit is calculated as an item to be carried forward
to offset regular income tax liabilities in future years
Since its inception, the value and effectiveness of the minimum tax has often
been the subject of congressional debate. Recently, the combined effects of inflation
and the legislative reductions in the regular income tax enacted as part of the
Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) have
increased congressional concern about the expanding impact of the alternative
minimum tax. It is now estimated that if no changes are made to the AMT, then the
number of taxpayers subject to the AMT will increase from around 1.8 million in
2001 to over 35 million by 2010. If the EGTRRA provisions are made permanent,
then 41million taxpayers will be subject to the AMT by 2012. Fixing the problem
will be expensive. It is estimated that repealing the individual AMT would cost,
depending on whether EGTRRA provisions are made permanent, $640 to $840
billion over the 2003-2012 period. Indexation of the AMT would cost around $400
billion over the same period.
This report will be updated as legislative action warrants.

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Contents
Evolution of the Current System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Calculating AMT Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
AMT Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Legislative Initiatives in the 106th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legislative Initiatives in the 107th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Legislative Issues in the 108th Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

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The Alternative Minimum Tax for Individuals
Over time, the individual income tax has been used as a vehicle to promote
various social and economic goals. This has been accomplished by according
preferential tax treatment to certain items of income and expense. The net result,
however, has been an erosion in the individual income tax base. By taking advantage
of the preferences and incentives in the tax code, some individuals can substantially
reduce their income taxes.
To make sure that everyone paid at least a minimum of taxes and still preserve
the economic and social incentives in the tax code, Congress, in 1969, enacted the
individual alternative minimum tax (AMT). Since its inception, the value and
effectiveness of the minimum tax has often been the subject of congressional debate.
Recently, the combined effects of inflation and the legislated reductions in the regular
individual income tax enacted as part of the Economic Growth and Tax Relief
Reconciliation Act of 2001 (EGTRRA) have increased congressional concern about
the effects of the alternative minimum tax. It is now estimated that if no changes are
made to the AMT the number of taxpayers subject to the AMT will increase from
around 1.8 million in 2001 to over 35 million by 2010. If the EGTRRA provisions
are made permanent, then 41million taxpayers will be subject to the AMT by 2012.
Fixing the problem will be expensive. It is estimated that repealing the individual
AMT would cost, depending on whether EGTRRA provisions are made permanent,
$640 to $840 billion over the 2003-2012 period. Indexation of the AMT would cost
around $400 billion over the same period.1
This report provides a brief overview of the alternative minimum tax for
individuals, discusses the issues associated with the current system, and describes
current legislation to amend the AMT. The report will be updated as legislative
action warrants.
Evolution of the Current System
The first individual minimum tax was enacted in 1969 and was an add-on
minimum tax. That is, it was a tax that was paid in addition to the regular income
tax. The tax rate for the add-on minimum tax was 10% and the tax base consisted
of eight tax preference items, the most significant of which was the portion of capital
gains income that was excluded from tax under the regular income tax.
1 For more information see: The Individual AMT: Problems and Potential Solutions, by
Leonard Burman et al, The Urban-Brookings Tax Policy Center. September 2002. The
Impact of the 2001 Tax Bill on the Individual AMT, by Jerry Tempalski, U.S. Treasury
Department. October 23, 2001.

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CRS-2
Since its enactment in 1969, the individual minimum tax has been significantly
modified numerous times, in 1971, in 1976, in 1977, in 1978, in 1982, in 1986, in
1990, in 1993, and in 2001. For example, the Tax Reform Act of 1976 added new
preference items to the add-on minimum tax base and increased the tax rate to 15%.
Another major change occurred under the Revenue Act of 1978, which created
the predecessor of the current alternative minimum tax (AMT). This was an entirely
new tax which was assessed on a taxpayer’s regular taxable income increased by
certain itemized deductions and the excluded portion of capital gains income (capital
gains income was dropped as a preference item under the add-on minimum tax). The
tax rates on the alternative minimum tax ranged from 10 to 25%. The alternative
minimum tax was payable to the extent that it exceeded the sum of the taxpayer’s
regular income tax liability and his add-on minimum tax liability.
Between 1978 and 1982, individuals were subject to both the add-on minimum
tax and the alternative minimum tax. Citing the need to simplify the system and
focus the tax on high-income taxpayers, Congress, in provisions contained in the Tax
Equity and Fiscal Responsibility Act of 1982, repealed the add-on minimum tax,
expanded the tax base of the alternative minimum tax, and changed the AMT tax rate
to 20%.
The Tax Reform Act of 1986 substantially changed the alternative minimum
tax. It increased the tax rate to 21%, changed the basic exemption amount,
considerably broadened the tax base, and revamped the alternative minimum tax
credit. It also introduced a phase-out of the AMT exemption amount for taxpayers
whose AMT taxable income exceeded certain limits. For taxpayers filing joint
returns the AMT exemption was reduced by 25% of the amount by which the
taxpayer’s AMT taxable income exceeded $150,000 ($112,000 for single taxpayers
and $75,000 for married taxpayers filing separately, trusts, and estates).
By far, however, the most significant change affecting the AMT was indirect
and resulted from modifications in the tax treatment of capital gains income under
the regular income tax. Under pre-1986 law, 60% of a long-term capital gain was
exempt from regular income taxes. The excluded portion of the gain, however, was
taxable as a tax preference under the AMT. Since the 1986 Act repealed the
exclusion for long-term capital gains income and capital gains income was taxed in
full under the regular income tax, it was no longer taxed as a tax preference item
under the AMT. This change substantially reduced the number of taxpayers subject
to the AMT.
The Revenue Reconciliation Act of 1990 increased the AMT tax rate from 21
to 24%. The Revenue Reconciliation Act of 1993 made two major changes in the
AMT. First, it increased the AMT exemption amounts from $40,000 to $45,000 for
taxpayers filing joint returns, from $30,000 to $33,750 for taxpayers filing single
returns, and from $20,000 to $22,500 for married taxpayers filing separately, estates,
and trusts.

Second, it created a two-tiered tax rate structure for the AMT. A 26% tax rate
is applicable to the first $175,000 of a taxpayer’s alternative minimum taxable

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CRS-3
income in excess of the exemption amount and 28% on alternative minimum taxable
income in excess of $175,000.
A more recent legislative change occurred in the Omnibus Consolidated and
Emergency Supplemental Appropriations Act of 1998. This Act allowed the
nonrefundable personal tax credits to offset an individual’s regular income tax in full
for tax year 1998 only, even though the personal tax credits might be larger than the
amount by which the taxpayer’s regular income tax exceeded his tentative minimum
tax. In addition, it repealed, for tax year 1998 only, the provision that reduced the
additional child tax credit by the amount by which an individual’s AMT exceeded his
regular income tax liability.
Another legislative change in the AMT occurred in the Ticket to Work and
Work Incentives Improvement Act of 1999, H.R. 1180, which extended, through
December 31, 2001, the existing law tax provision that allows individuals to offset
their regular income tax by the full amount of their nonrefundable personal tax
credits regardless of the AMT.
The Economic Growth and Tax Relief Reconciliation Act of 2001, H.R. 1836,
permanently allowed the child tax credit, the adoption tax credit, and the IRA
contribution tax credit to be claimed to the extent of the full amount of a taxpayer’s
regular income tax and alternative minimum tax.2 The Act also temporarily
increased the AMT exemption amount by $4,000 for joint returns ($2,000 for
unmarried individuals) effective for tax years between 2001 and 2004. In tax year
2005, the AMT exemption amount reverts back to its previous levels.
The most recent legislative change occurred in the Job Creation and Worker
Assistance Act of 2002 (P.L. 107-147). This Act extends the temporary provisions,
first enacted in 1998, that allow individuals to use all personal tax credits against
both their regular and AMT tax liabilities. This change is effective through
December 31, 2003.
Calculating AMT Liability
The alternative minimum tax for individuals is calculated in the following
manner. First, an individual adds back various tax preference items to his taxable
income under his regular income tax. This grossed up amount then becomes his tax
base for the AMT. Next, the amount of the basic exemption is calculated and
subtracted from the AMT tax base. A two-tiered tax rate structure of 26 and 28% is
then assessed against the remaining AMT tax base to determine AMT tax liability.
The taxpayer then pays whichever is greater, his regular income tax liability or his
AMT tax liability. Finally, the AMT tax credit is calculated as an item to be carried
forward to offset regular income tax liabilities in future years.
2 For a detailed discussion of changes affecting the child tax credit and the AMT see CRS
Report RS20988, The Child Tax Credit After the Economic Growth and Tax Relief
Reconciliation Act of 2001, by Gregg Esenwein. August 13, 2001.

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Tax preference items that are added to the AMT tax base include tax-exempt
interest on certain private-activity bonds and excess depletion deductions. Also, for
most types of property placed in service before 1987, the excess of accelerated
depreciation over straight-line depreciation is considered a tax preference item and
is added to the AMT tax base.
In addition to the tax preference items, certain adjustments are made to
deductions that were allowed under the regular income tax calculation of taxable
income. For instance, for certain assets, depreciation rates under the AMT differ
from the depreciation rates under the regular income tax. In some cases the
differences will be positive and increase the AMT tax base, while in other cases, the
differences will be negative and decrease the AMT tax base.
Another major adjustment to the tax base for the AMT involves itemized
deductions that are allowed under the regular income tax. For purposes of the AMT
a taxpayer cannot claim deductions for miscellaneous expenses, for tax payments to
state, local, or foreign governments, and for medical expenses except to the extent
they exceed 10% of adjusted gross income (as opposed to the 7.5% floor under the
regular income tax). Also deductions for investment interest expenses are limited to
net investment income.
Other adjustments to determine the AMT tax base include: for long-term
contracts the percentage of completion method of accounting must be used rather
than the completed contract or cash basis method of accounting; mining exploration
and development costs must be capitalized and amortized rather than expensed; and
the excess of the fair market value over the amount actually paid on incentive stock
options must be included in the AMT tax base.3
Furthermore, the AMT tax base is not reduced by personal exemptions
applicable under the regular income tax nor is it reduced by the standard deductions
applicable under the regular income tax.
After the AMT tax base is calculated, the AMT exemption is subtracted prior
to the calculation of AMT tax liability. For tax years between 2001 and 2004, the
basic exemption for the AMT is $49,000 for joint returns, $35,750 for single returns,
and $24,500 for joint returns filing separately. The exemption amounts, however, are
phased out over certain income ranges. (These exemption amounts were temporarily
increased by the 2001 Tax Act and are scheduled to revert, in 2005, to their prior law
levels of $45,000 for joint, $35,750 for single, and $22,500 for joint returns filing
separately.)
The AMT exemption is reduced by 25% of the amount by which a taxpayer’s
AMT taxable income exceeds certain threshold amounts. In the case of joint returns,
the basic exemption starts to phase out at AMT taxable income levels in excess of
$150,000 and is reduced to zero at AMT taxable income levels in excess of
3 For more information on the interaction of the AMT and incentive stock options see CRS
Report RS20874, Taxes and Incentive Stock Options, by Jane G. Gravelle. April 4, 2001.

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$330,000. For single returns, the exemption is phased out between AMT taxable
income levels of $112,500 and $247,000.
Once the AMT tax base has been reduced by the applicable exemption amount,
the AMT tax liability is determined by applying the AMT tax rate schedule. The
AMT tax rate schedule is 26% of the first $175,000 of AMT taxable income in
excess of any AMT exemption and 28% on any additional AMT taxable income.
(For joint returns filing separately, the AMT tax rate schedule is 26% of the first
$87,500 AMT taxable income in excess of any AMT exemption amount and 28% on
any additional AMT taxable income). The AMT tax is then reduced by the
alternative minimum tax foreign tax credit (FTC), the child tax credit, the adoption
tax credit, and the IRA tax credit.
It is important to note that even though a taxpayer may not be subject to the
AMT, it can still affect his regular income tax liability. The reason is that some
personal tax credits under the regular income tax are limited to the amount by which
regular income tax liability exceeds AMT liability. These credits include the
dependent care credit, the credit for the elderly and disabled, the HOPE Scholarship
and Lifetime Learning credit, and the D.C. homebuyer’s credit. Thus, a taxpayer who
has a regular income tax liability of $5,000 and $1,000 of these affected personal tax
credits, will effectively see these regular income tax credits reduced by $300 if his
AMT liability is $4,300.4 (The Job Creation and Worker Assistance Act of 2002
allows taxpayers to offset their AMT liability by the full amount of their personal tax
credits. This provision, however, expires after 2003.)
The final step in the process involves calculating the AMT tax credit, a multi-
step operation. Essentially, the AMT credit is designed to prevent those preference
items that represent tax deferrals (depreciation, for example) from being taxed one
year under the AMT and again later under the regular income tax. The AMT tax
credit can be carried forward to offset regular income tax liabilities in future years.
AMT Issues
Many analysts have voiced concern over the expected increase in the number
of upper-middle income taxpayers who may be subject to AMT coverage in the near
future. This increase in the number of taxpayers covered by the AMT will occur
because of the combined effects of cumulative inflation and recent legislative
changes to the regular income tax.
Under the regular income tax, the tax rate structure, the standard deductions, the
personal exemptions, and certain other structural components are indexed so that they
do not lose their real (inflation-adjusted) value over time. This prevents real income
tax liabilities from increasing solely due to the effects of inflation.
4 The adoption tax credit, child tax credit, and the IRA tax credit are allowed to the full
extent of the individual’s regular and AMT tax liability.

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The structural components of the AMT, however, are not indexed for inflation.
This lack of indexation means that over time real AMT tax liabilities will increase
because of inflation induced increases in items of nominal income and expense. The
end result will be that the gap between tax liabilities under the regular income tax and
the AMT will shrink and many taxpayers could end up subject to the unindexed
AMT or experience reductions in their nonrefundable tax credits under the regular
income tax.
For example, in 1993, a married couple with two children under 17 and a total
income of $65,000 would have owed $9,035 in federal income taxes under the
regular income tax. Their tentative AMT tax liability would have been $5,200.
Because of tax indexation of the regular income tax and the addition of the new child
tax credit, in 1999, a married couple with two children under 17 and a total income
of $65,000 will only owe $6,021 under the regular income tax. Their AMT liability,
however, remains at $5,200. As shown by this example, indexation of the regular
income tax combined with new tax credits has greatly narrowed the gap between
regular income tax liabilities and AMT liabilities.
The potential problems of an indexed regular tax and an unindexed AMT have
long been recognized by tax analysts. In 1997, approximately 605,000 taxpayers or
about 1% of all taxpayers were subject to the AMT.
Preliminary estimates indicate that by 2010, when the effects of both inflation
and the legislative changes contained in the Economic Growth and Tax Relief
Reconciliation Act of 2001 are taken into account, the number of taxpayers falling
under either the AMT or AMT limits on their tax credits under the regular income
tax will grow to 35 million (33% of total taxpayers). If the EGTRRA provisions are
made permanent, then by 2012, 41 million taxpayers (37% of total taxpayers) would
be affected by the AMT.
The individual income tax rate reductions and the marriage penalty tax relief
provisions of the 2001 Act are expected to increase the number of taxpayers subject
to the AMT. Indeed, many taxpayers in the middle income ranges will find that the
AMT will “take back” much of the tax reductions contained in the 2001 Act.
To demonstrate the interaction of inflation, the EGTRRA 2001 tax reductions,
and the AMT consider the following example of a married couple with four children
who have a $80,000 income in 2002. Their pre-tax credit effective tax rate under the
regular income tax would be 10.52% in 2002. Their pre-tax credit effective AMT tax
rate would be 10%. They would not pay the AMT since their regular income tax
liability exceeds their AMT liability. If the family receives four child tax credits at
$600 per credit, then their final effective tax rate would be 7.52%.
If inflation averaged 3% per annum over the period 2002 to 2010, then a
$80,000 income in 2002 would equate to a $101,342 income in 2010. The tax
reductions in EGTRRA would reduce this family’s pre-tax credit effective income
tax rate to 9.11% in 2010. Hence, their pre-credit regular income tax would fall from
10.52% in 2002 to 9.11% in 2010.

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However, in 2010, this family’s pre-tax credit effective AMT rate would be
14.45%. Since their AMT liability is higher than their regular income tax liability
the family would pay the AMT. If the family received four child tax credits at $1,000
per credit, then their final effective tax rate would be 10.50%.
Hence, not only does the AMT “take back” all of the EGTRRA tax reductions,
the family will actually have a higher tax burden in 2010 than they did in 2002.

In addition, any future reductions in the federal income tax burden without
modifications to the AMT will likely increase the number of taxpayers subject to the
AMT or subject to AMT limitations on their personal tax credits. For example,
proposals to stimulate the economy through reductions in the individual income tax
would likely push more taxpayers into the AMT.
The fact that the AMT is going to affect many upper middle income taxpayers
and taxpayers with large families who were not subject to the tax in the past has
prompted calls in Congress to remedy the situation. However, any changes to fix the
AMT would be costly in terms of forgone revenue. For example, outright repeal of
the AMT is estimated to cost $800 billion over the 2003-2012 period (assuming
EGTRRA provisions are made permanent). Other solutions such as indexation of
the AMT could cost as much as $400 billion over the same period. If, in addition to
indexation, the basic AMT exemption were increased or other changes were made
to the AMT, then the revenue loss would be considerably larger.
From an economic perspective, the alternative minimum tax poses a dilemma.
Under an income tax system designed to be consistent with economic theory, there
would be no need for an alternative minimum tax. An economically ideal income tax
would correctly measure real income and expense and then assess tax on a taxpayer’s
real net income. In these circumstances, where there is no erosion in the tax base,
there would be no need for an alternative minimum tax. All taxpayers would already
be paying what legislators have determined is their “fair share” of taxes as assessed
by the regular income tax.
Given this, economic theory suggests that efforts might be better made to reform
the regular income tax so as to bring it more in line with an economically ideal
income tax. Then the alternative minimum tax could be eliminated.
It is unlikely, however, that the tax base of the regular individual income will
be broadened to the point where there would be no place for an alternative minimum
tax. If, in this environment, Congress wants to preserve all of the social and
economic incentives in the tax code while still maintaining the concept that everyone
should pay at least a minimum level of income tax and wants to limit the number of
taxpayers subject to the AMT, then it will have to modify the tax. Modifying the
system basically involves two issues: inflation and AMT coverage.
It has been suggested that the most important change that could be made would
be to index the structural components of the alternative minimum tax for inflation.
This would allow a consistent separation of the two tax systems to be maintained
over time. It would also substantially reduce the number of taxpayers projected to
be affected by the AMT in the future.

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The second issue concerns the coverage of the AMT. Originally, the AMT was
intended to cover only high-income taxpayers. This end of the income spectrum was
where the use of tax incentives and preferences had produced the greatest deviation
in income tax payments, allowing some taxpayers to significantly lower their income
taxes.
Recent changes to the tax code, however, have markedly increased the
availability of special tax incentives and preferences to taxpayers in the middle and
upper-middle range of the income spectrum. This will produce substantial reductions
in the income tax liabilities of those taxpayers who have the ability or find
themselves in the right circumstances to take advantage of the tax preferences. This
is likely to produce large deviations in the income tax liabilities of otherwise
similarly situated taxpayers in the middle and upper-middle income ranges.
To minimize these deviations and satisfy the AMT rationale that everyone pays
at least a minimum of income taxes, it has been suggested that for consistency, the
AMT should also be applied across the middle- and upper-middle portion of the
income spectrum. The AMT would then be adjusted to reflect coverage of this
portion of the income spectrum. While this approach would add to the complexity
of the current system and would mean that some middle and upper-middle income
taxpayers may not see the full benefits of some recently enacted tax breaks, it would
help maintain some consistency in AMT approach across the income spectrum.
Legislative Initiatives in the 106th Congress
The Financial Freedom Act of 1999 was passed by the House on July 22, 1999.
It would have phased out the individual AMT with full repeal effective by tax year
2009. In addition, during the phase out period it would have allowed nonrefundable
tax credits to fully offset AMT tax liability. The JCT estimated that these changes
would have cost $63.6 billion through fiscal year 2009.
The Taxpayer Refund Act of 1999 was passed by the Senate in late July and
would have allowed taxpayers to offset their entire regular income tax liability by the
amount of their nonrefundable personal credits without regard to the AMT. In
addition, it would have repealed the provision reducing refundable child care tax
credit by the AMT. These two provisions would have been effective beginning in tax
year 1999. The Taxpayer Refund Act of 1999 would have also allowed personal
exemptions to be deducted for purposes of calculating AMT tax liability, with this
provision taking effect in tax year 2005. The JCT estimated that these changes
would have cost $96 billion through fiscal year 2009.
The Conference Agreement (H.R. 2488) that was approved by both the House
and the Senate on August 5, 1999 adopted the House proposal for changes in the
AMT. The Conference Agreement would have allowed individuals to offset their
entire regular tax liability (without regard to their AMT) by the amount of their
personal nonrefundable tax credits. The Agreement would have also repealed the
current law provision limiting the refundable portion of the child credit by the

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taxpayer’s AMT. Finally, it would have phased out the AMT starting in 2005 with
full AMT repeal starting in 2008.
On September 23, 1999, however, H.R. 2488 was vetoed by President Clinton.
In response to the veto of their major tax cut legislation, both the House and the
Senate produced more targeted bills that would extend several expiring tax
provisions. The final compromise bill (H.R. 1180) extending these expiring tax
provisions was approved by the House on November 18 and by the Senate on
November 19. As part of this bill, the existing tax provision, that allows individuals
to offset their regular income tax by the full amount of their nonrefundable personal
tax credits regardless of the AMT, was extended through December 31, 2001.
In mid July 2000, both the House and the Senate passed the Marriage Tax
Penalty Relief Reconciliation Act of 2000 (H.R. 4810). One of the provisions of this
Act would have permanently allowed the personal nonrefundable and refundable tax
credits to offset both an individual’s regular and alternative minimum income tax.
Citing concerns over the revenue and distributional consequences of this legislation,
however, President Clinton vetoed the bill on August 5, 2000.
Legislative Initiatives in the 107th Congress
As part of his original tax cut plan in the spring of 2001, President Bush
proposed increasing the child tax credit from $500 to $1,000. In addition, he
proposed making permanent the temporary rule in current law that allows the child
tax credit to offset a taxpayer’s alternative minimum tax (AMT).
The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
was approved by both chambers of Congress on May 26, 2001 and signed by
President George W. Bush on June 7, 2001 (P.L. 107-16). This Act permanently
allowed the child tax credit, the adoption tax credit, and the IRA contribution tax
credit to be claimed to the extent of the full amount of a taxpayer’s regular income
tax and alternative minimum tax. The Act also temporarily increased the AMT
exemption amount by $4,000 for joint returns ($2,000 for unmarried individuals)
effective for tax years between 2001 and 2004. In tax year 2005, the AMT
exemption amount reverts back to its previous levels.
On March 9, 2002, President Bush signed the Job Creation and Worker
Assistance Act of 2002 (P.L. 107-147). This Act extends the temporary provisions,
first enacted in 1998, that allow individuals to use all personal tax credits against
both their regular and AMT tax liabilities. This change is effective through
December 31, 2003.

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Legislative Issues in the 108th Congress
In January 2003, concern over the sluggish economy prompted President Bush
to propose a plan to stimulate the economy, in part, by speeding up the
implementation of the 2001 EGTRRA tax cuts. Specifically, the President proposed
accelerating all of the EGTRRA marginal tax rate cuts to 2003, accelerating the
increase in the 10% bracket to 2003, increasing the child tax credit to $1,000
effective in 2003, and accelerating the EGTRRA marriage tax cut provisions to 2003.
In order to mitigate the effects of the AMT on the acceleration of these reductions in
the regular income tax, the President also proposed to increase the basic AMT
exemption by $4,000 (for single returns) and $8,000 (for joint returns) through 2005.
The Treasury Department has estimated that the 10-year cost of this change would
be $29 billion.
If the 108th Congress approves significant tax cuts, it is highly probable that it
will also have to consider the interaction of these tax cuts with the AMT.

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