Order Code RS22083
June 14, 2006
CRS Report for Congress
Received through the CRS Web
Alternative Minimum Taxpayers By State:
2003, 2004, and Projections for 2007
Gregg A. Esenwein
Specialist in Public Finance
Government and Finance Division
Summary
Personal exemptions, itemized deductions for state/local taxes, and miscellaneous
itemized deductions account for 90% of the preference items that are subject to tax
under the alternative minimum tax (AMT) but not subject to tax under the regular
income tax. As a result, over certain income ranges, taxpayers who claim itemized
deductions for state/local taxes, miscellaneous deductions, or have large families are
more likely to fall under the AMT than taxpayers who do not have these characteristics.
In 2003, just over 2 million taxpayers were subject to the AMT. By 2004, some
3 million taxpayers were subject to the AMT. New Jersey, New York, Connecticut, the
District of Columbia, and California had the highest percentage of taxpayers subject to
the AMT. Tennessee, South Dakota, Alaska, Alabama, and Mississippi had the lowest
percentage of taxpayers subject to the AMT.
By 2007, absent legislative change, some 23 million taxpayers will be subject to
the AMT. At that time, whether a married taxpayer has itemized deductions for
state/local taxes and/or miscellaneous deductions will become a much less important
factor in determining AMT coverage than it is at present. This occurs because, whether
they itemize their deductions or not, married taxpayers across a wide range of the
income spectrum will be subject to the AMT. This report will be updated as legislative
action warrants or as new data become available.
The alternative minimum tax for individuals (AMT) was originally enacted to ensure
that high-income taxpayers paid a fair share of the federal income tax. However, the lack
of indexation of the AMT coupled with the recent reductions in the regular income tax
has greatly expanded the potential impact of the AMT.1
Temporary increases in the AMT exemptions are scheduled to expire at the end of
2006. If this occurs, then the number of taxpayers subject to the AMT will rise from
around 3.1 million in 2004 to over 23 million in 2007. Absent legislation, by 2010, some
1 See CRS Report RL30149, The Alternative Minimum Tax for Individuals, by Gregg Esenwein.
Congressional Research Service ˜ The Library of Congress

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31 million taxpayers will be subject to the AMT. Taxpayers with incomes in the
$100,000 to $500,000 income range will be the hardest hit: 90% of these taxpayers will
be subject to the AMT in 2010.
Personal exemptions (22%), itemized deductions for state/local taxes (48%), and
miscellaneous itemized deductions (20%) together account for over 90% of the preference
items that are subject to tax under the AMT but not subject to tax under the regular
income tax. As a result, over certain income ranges, taxpayers who claim itemized
deductions for state/local taxes, miscellaneous deductions, and/or have large families are
more likely to fall under the AMT than taxpayers who do not have these characteristics.
Table 1 and Table 2 show for 2003 and 2004, respectively, the percentage of
taxpayers in each state that were subject to the AMT. Of all the states, Tennessee, South
Dakota, Alaska, Alabama, and Mississippi had the smallest percentage of taxpayers
subject to the AMT. In these five states, only four to five out of every 1,000 taxpayers
paid the AMT in 2003. By 2004, the number of AMT taxpayers had increased to about
six to seven out of every 1,000 taxpayers. These are states in which either many taxpayers
have relatively low incomes, or state/local taxes that are deductible from the federal
income tax are relatively low. As a result of the combination of these factors, taxpayers
in these states tend not to itemize their deductions and hence, are less likely to be subject
to the AMT than taxpayers in other states.2
On the other hand, New Jersey, New York, Connecticut, the District of Columbia,
and California were the states with the largest percentage of taxpayers subject to the
AMT. For instance, in New Jersey, about 43 out of every 1,000 taxpayers fell under the
AMT in 2003. By 2004, about 55 taxpayers out of every 1,000 paid the AMT. In these
states, many taxpayers have relatively high incomes and the state/local tax burden is also
relatively high. The combination of these factors produces a larger number of itemizers
and, consequently, a larger percentage of taxpayers being pushed into the AMT.
It should be noted that absent legislative change, whether a married taxpayer has
itemized deductions for state/local taxes and/or miscellaneous deductions will become
a less important factor in determining whether taxpayers are subject to the AMT. This
will result because, if the AMT is not modified, then across a broad range of the income
spectrum all married taxpayers will be subject to the AMT whether they itemize their
deductions or not.
The negative effects of the AMT have been mitigated through temporary increases
in the basic exemption for the AMT and temporary changes that allow taxpayers to use
nonrefundable personal tax credits to reduce their AMT liabilities. The most recent
increase in the basic AMT exemption occurred in May 2006 with the enactment of the
Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). Under provisions of
this act, the AMT exemption for 2006 was set at $62,550 for joint returns and $42,500
for unmarried taxpayers. In addition, this act allows taxpayers to temporarily use
nonrefundable tax credits to offset AMT liability. The Joint Committee on Taxation
2 This relationship might change given the recent enactment of a temporary provision allowing
itemized deductions for state/local sales taxes in lieu of income taxes. See CRS Report RL32781,
Federal Deductibility of State and Local Taxes, by Steven Maguire.

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estimates that these two changes will reduce federal revenues by almost $34 billion. In
2007, the basic AMT exemption is scheduled to decrease to its prior law level of $45,000
for joint returns ($35,750 for unmarried taxpayers), and nonrefundable tax credits will not
be allowed to offset AMT liability.
If these temporary patches to the AMT expire at the end of 2006, then in 2007,
almost 20 million more taxpayers will be subject to the AMT than was the case in 2004.
An increase of this magnitude will affect taxpayers in every state, regardless of whether
taxpayers in that state itemize and deduct their state/local taxes and/or miscellaneous
deductions from their federal tax returns.
For example, in 2004, approximately 17,000 taxpayers in Tennessee were subject to
the AMT. Thus, Tennessee taxpayers accounted for only 0.54% of the total AMT returns
filed in the country that year. However, if that percentage remains constant, and the
temporary patches to the AMT expire, then by 2007 up to 128,000 taxpayers in Tennessee
could be subject to the AMT.
Table 3 shows the potential number of AMT returns by state in 2007 if the
temporary patches to the AMT are allowed to expire. The calculations are an
extrapolation based on the assumption that the ratio of AMT taxpayers in each state to
total AMT taxpayers in the entire country will remain the same in 2007 as it was in 2004.

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Table 1. Number of Alternative Minimum Taxpayers by State Tax Year 2003
(Returns in thousands)
Number of
AMT returns as
Number of
AMT
AMT returns as
Rank
State
AMT returns
Rank
State
returns
% of total
returns
returns
% of total
U.S.A.
131,357
2,359
1.80%
48
Alabama
1,884
10
0.52
30
Montana
434
5
1.04%
49
Alaska
343
2
0.49
21
Nebraska
803
10
1.26
35
Arizona
2,285
20
0.90
39
Nevada
1,044
8
0.79
38
Arkansas
1,122
9
0.79
20
New Hampshire
635
8
1.28
5
California
15,172
475
3.13
1
New Jersey
4,082
179
4.38
26
Colorado
2,079
23
1.11
36
New Mexico
814
7
0.87
3
Connecticut
1,654
61
3.68
2
New York
8,590
357
4.15
23
Delaware
388
5
1.18
17
North Carolina
3,681
53
1.45
4
District of Columbia
276
9
3.27
46
North Dakota
302
2
0.56
34
Florida
7,850
72
0.91
12
Ohio
5,444
97
1.78
16
Georgia
3,709
54
1.45
37
Oklahoma
1,461
12
0.84
25
Hawaii
591
7
1.11
10
Oregon
1,572
29
1.85
28
Idaho
578
6
1.07
19
Pennsylvania
5,772
79
1.37
18
Illinois
5,723
81
1.41
8
Rhode Island
498
11
2.13
41
Indiana
2,817
20
0.71
27
South Carolina
1,805
20
1.08
33
Iowa
1,325
13
0.95
50
South Dakota
357
2
0.43
22
Kansas
1,219
15
1.19
51
Tennessee
2,565
11
0.42
29
Kentucky
1,741
18
1.06
40
Texas
9,299
69
0.74
42
Louisiana
1,880
13
0.69
31
Utah
970
10
1.03
15
Maine
615
9
1.52
13
Vermont
302
5
1.61
7
Maryland
2,602
75
2.90
11
Virginia
3,432
61
1.79
6
Massachusetts
3,052
89
2.92
43
Washington
2,809
18
0.65
24
Michigan
4,546
52
1.14
45
West Virginia
744
5
0.62
9
Minnesota
2,384
46
1.92
14
Wisconsin
2,590
41
1.57
47
Mississippi
1,170
6
0.53
44
Wyoming
241
2
0.63
32
Missouri
2,564
26
1.02
Source: Department of the Treasury. Internal Revenue Service.

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Table 2. Number of Alternative Minimum Taxpayers by State Tax Year 2004
(Returns in thousands)
Number of
AMT returns as
Number of
AMT
AMT returns as
Rank
State
AMT returns
Rank
State
returns
% of total
returns
returns
% of total
U.S.A.
133,092
3,146
2.4%
47
Alabama
1,910
14
0.73
31
Montana
439
6
1.38%
48
Alaska
345
2
0.69
21
Nebraska
808
13
1.63
34
Arizona
2,372
30
1.30
37
Nevada
1,092
13
1.23
39
Arkansas
1,136
12
1.09
20
New Hampshire
643
11
1.74
5
California
15,327
606
3.95
1
New Jersey
4,107
228
5.54
26
Colorado
2,110
32
1.51
41
New Mexico
827
8
1.06
3
Connecticut
1,665
80
4.82
2
New York
8,625
437
5.06
22
Delaware
395
6
1.63
19
North Carolina
3,769
69
184
4
District of Columbia
277
11
4.23
46
North Dakota
305
2
0.77
27
Florida
8,173
118
1.45
12
Ohio
5,447
120
2.21
16
Georgia
3,782
73
1.93
40
Oklahoma
1,476
16
1.07
23
Hawaii
606
9
1.60
11
Oregon
1,604
37
2.30
29
Idaho
594
8
1.38
14
Pennsylvania
5,811
114
1.97
15
Illinois
5,762
112
1.94
8
Rhode Island
500
13
2.69
42
Indiana
2,854
29
1.01
28
South Carolina
1,844
26
1.41
35
Iowa
1,334
17
1.27
51
South Dakota
362
2
0.59
24
Kansas
1,229
19
1.56
49
Tennessee
2,606
17
0.67
32
Kentucky
1,757
23
1.35
36
Texas
9,431
118
1.25
43
Louisiana
1,869
18
0.97
30
Utah
996
13
1.38
18
Maine
618
11
1.88
17
Vermont
306
5
1.92
6
Maryland
2,635
102
3.90
9
Virginia
3,491
89
2.55
7
Massachusetts
3,061
116
3.79
38
Washington
2,860
35
1.23
25
Michigan
4,561
69
1.52
45
West Virginia
747
6
0.82
10
Minnesota
2,407
57
2.38
13
Wisconsin
2,621
51
1.98
47
Mississippi
1,165
7
0.67
44
Wyoming
243
2
0.86
33
Missouri
2,585
34
1.33
Source: Department of the Treasury. Internal Revenue Service.

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Table 3. Potential AMT Returns by State in 2007
(Returns in thousands)
Potential AMT returns in
Potential AMT returns in
State
AMT returns in 2004
State
AMT returns in 2004
2007
2007
U.S.A.
3,146
23,000
Alabama
14
102 Montana
6
44
Alaska
2
17 Nebraska
13
96
Arizona
30
226 Nevada
13
98
Arkansas
12
90 New Hampshire
11
81
California
606
4,434 New Jersey
228
1,665
Colorado
32
234 New Mexico
8
64
Connecticut
80
587 New York
437
3,194
Delaware
6
47 North Carolina
69
509
District of Columbia
11
85 North Dakota
2
17
Florida
118
866 Ohio
120
881
Georgia
73
534 Oklahoma
16
116
Hawaii
9
71 Oregon
37
270
Idaho
8
60 Pennsylvania
114
837
Illinois
112
819 Rhode Island
13
98
Indiana
29
212 South Carolina
26
190
Iowa
17
124 South Dakota
2
15
Kansas
19
140 Tennessee
17
128
Kentucky
23
174 Texas
118
865
Louisiana
18
132 Utah
13
100
Maine
11
85 Vermont
5
43
Maryland
102
751 Virginia
89
651
Massachusetts
116
848 Washington
35
258
Michigan
69
507 West Virginia
6
45
Minnesota
57
420 Wisconsin
51
379
Mississippi
7
57 Wyoming
2
15
Missouri
34
253
Source: Calculations by CRS assuming that the ratio of AMT taxpayers in each state to total AMT taxpayers in the entire country will remain the same in 2007 as it was in 2004.
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