Order Code RS22563
Updated December 6, 2007
The Alternative Minimum Tax for Individuals:
Legislative Initiatives in the 110th Congress
Gregg A. Esenwein
Specialist in Public Finance
Government and Finance Division
Steven Maguire
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The alternative minimum tax (AMT) for individuals was originally enacted to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, pay 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 will expire at
the end of 2006. As a result, the number of taxpayers subject to the AMT will increase
from 3.5 million in 2006 to 23 million in 2007. The Congressional Budget Office
estimates that extending AMT tax relief would reduce federal revenue by $282 billion
over the period FY2007 through FY2011.
On October 30, 2007, Ways and Means Committee Chairman Charles Rangel
introduced H.R. 3996, legislation that, among other things, would set the 2007 AMT
exemption levels at $66,250 for joint returns and $44,350 for single returns. In addition,
this bill would allow nonrefundable personal tax credits to offset AMT tax liability for
2007. The Ways and Means Committee approved H.R. 3996 on November 1 and the
full House approved the bill on November 9. This one-year AMT patch is estimated to
cost $50.59 billion. 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The alternative minimum tax (AMT) for individuals was originally enacted to ensure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, pay at least a minimum amount of
federal taxes.1 It was designed so that individuals could not take unfair advantage of the
various preferences and incentives under the regular income tax to substantially reduce
1 There is also a corporate minimum tax, but it is not addressed in this report.

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their regular income tax liability below what was considered appropriate for their income
level. The AMT functions as a parallel tax system to the regular income tax. Taxpayers
calculate their regular income tax and then calculate their AMT. If their AMT liability
is larger than their regular income tax liability, then they pay the AMT.
However, absent legislative action, there will be a significant increase in the number
of middle- to upper-middle-income taxpayers affected by the AMT in the near future. In
2006, about 4.2 million taxpayers were subject to the AMT, but by 2007, up to 23 million
taxpayers could be subject to the AMT.2
There are two main reasons for the increase in the number of taxpayers affected by
the AMT. First, the regular income tax is indexed for inflation, but the AMT is not. Over
time this has produced a reduction in the differences between regular income tax
liabilities and AMT liabilities at any given nominal income level, differences that will
continue to shrink in the absence of AMT indexation. The second reason is that the 2001
and 2003 reductions in the regular income tax have further narrowed the differences
between regular and AMT tax liabilities. The combination of these two factors means
that, absent legislative changes, there will be significant growth in the number of
taxpayers affected by the AMT.3

Since 1998, the effects of the AMT have been mitigated through temporary
provisions allowing certain personal tax credits to offset AMT liability and temporary
increases in the basic exemption for the AMT. The Tax and Trade Relief Extension Act
of 1998, allowed taxpayers to use nonrefundable personal tax credits in full against their
regular income tax even though the use of the credits might reduce a taxpayers regular
income tax liability below their AMT liability.

The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)
temporarily increased the AMT exemption amounts from $45,000 to $49,000 for joint
returns and from $33,750 to $35,750 for unmarried individuals with the changes effective
for tax years between 2001 and 2004.
The Job Creation and Worker Assistance Act of 2002 extended the temporary
provisions, first enacted in 1998 and then extended in 1999, that allowed individuals to
use all personal tax credits against both their regular and AMT tax liabilities. This change
was effective through December 31, 2003.
The Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) increased
the basic AMT exemption amount to $58,000 for joint returns and to $40,250 for
unmarried taxpayers. These increases were in effect for tax years 2003 and 2004.
2 U.S. Congress. Joint Committee on Taxation. Present Law and Background Relating to the
Individual Alternative Minimum Tax, JCX-38-07, June 25, 2007.
3 For more detailed information on which taxpayers will be affected by the AMT, see CRS Report
RS21817, The Alternative Minimum Tax (AMT): Income Entry Points and “Take Back” Effects,
by Gregg Esenwein; CRS Report RS22200, The Potential Distribution Effects of the Alternative
Minimum Tax, by Gregg Esenwein and Steven Maguire; and CRS Report RS22083, Alternative
Minimum Taxpayers By State: 2003, 2004, and Projections for 2007, by Gregg Esenwein and
Steven Maguire.

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JGTRRA also established that the new maximum tax rate of 15% applicable to capital
gains and dividend income under the regular income tax would also apply to the taxation
of capital gains and dividend income under the AMT.
The Working Families Tax Relief Act of 2004 (WFTRA) extended through 2005
JGTRRAs increase in the basic AMT exemption amounts. WFTRA also extended the
provision allowing nonrefundable personal tax credits to offset both regular and AMT tax
liability in full for taxable years 2004 and 2005.
The American Jobs Creation Act of 2004 made several changes to the AMT. It
coordinated farmer and fisherman income averaging with the AMT so that the use of
income averaging did not push taxpayers into the AMT. It repealed the 90% limitation
on the use of the AMT foreign tax credit. The act also allowed the credits for alcohol
used as a fuel and electricity produced by renewable resources to be used in full against
the AMT.
Legislative Action in the 109th Congress
In May 2006, Congress approved the Tax Increase Prevention and Reconciliation Act
of 2005 (TIPRA) that included a one-year extension (through 2006) of both the AMT’s
personal-credit and increased-exemption provisions. For 2005, the exemption amount
was $58,000 for joint returns and $40,250 for unmarried taxpayers. TIPRA increased the
2006 AMT exemption to $62,550 for joint returns and $42,500 for unmarried taxpayers.
According to estimates by the Joint Committee on Taxation, the one-year cost of these
AMT provisions would be $33.9 billion.
In December 2006, Congress passed the Tax Relief and Health Care Act of 2006.
This act included a provision making the AMT tax credit refundable. Under the act,
taxpayers can claim an AMT refundable credit amount that is the greater of (1) the lesser
of $5,000 or the unused minimum credit, or (2) 20% of the unused minimum credit. The
unused credit is the credit attributable to tax years prior to the previous three years. The
AMT refundable credit is reduced for taxpayers with adjusted gross incomes in excess of
certain threshold amounts. (For joint returns in 2007, the threshold is $234,600). This
provision applies to tax years beginning before January 1, 2013.
Absent legislation the basic AMT exemption is scheduled to decrease to $45,000 for
joint returns and $35,750 for unmarried taxpayers in 2007. In addition, in 2007, several
personal tax credits will not be allowed against the AMT.
Legislative Action in the 110th Congress
The U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq
Accountability Appropriations Act of 2007 (H.R. 2206) was enacted on May 25, 2007,
and allowed the tax credits for the work opportunity credit and the credit for taxes paid
with respect to employee cash tips to be used in full against both the corporate and
individual alternative minimum taxes.
On October 30, 2007, Ways and Means Committee Chairman Charles Rangel
introduced the Temporary Tax Relief Act of 2007 (H.R. 3996). Among other things,

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this bill would set the 2007 AMT exemption levels at $66,250 for joint returns and
$44,350 for single returns. It would also allow nonrefundable personal tax credits to offset
AMT tax liability for 2007. Finally, the bill would increase the amount of the refundable
AMT tax credit and remove the income phaseouts for the credit. The Ways and Means
Committee approved H.R. 3996 on November 1 and the House approved the bill on
November 9. This one-year AMT patch is estimated to cost $50.59 billion.

Table 1 summarizes additional legislative proposals affecting the AMT introduced
in the 110th Congress.
Table 1. AMT Legislation in the 110th Congress
Bill
Sponsor
Effect on AMT
S. 55
Sen. Max Baucus
Repeals the AMT effective for tax years after 2006.
Jan. 4, 2007
Sen. Chuck
Grassley
S. 102
Sen. John Kerry
Increases the basic AMT exemption and allows personal tax
Jan. 4, 2007
credits to offset AMT liability. Offsets part of the cost of
these changes by repealing, in 2009 and 2010, the lower tax
rates on dividends and capital gains income.
S. 590
Sen. Gordon
Allows the investment tax credit for solar energy property and
Feb. 14, 2007
Smith
qualified fuel cell property against the AMT.
S. 614
Sen. Charles
Increases the basic AMT exemption for tax years 2007 and
Feb. 15, 2007
Schumer
2008. Permits personal tax credits to offset AMT liabilities.
S. 734
Sen. Arlen
Reduces the AMT tax rate to 24%.
Mar. 1, 2007
Specter
S. 1040
Sen. Richard
Among other things, this bill repeals the AMT.
Mar. 29, 2007
Shelby
S. 1111
Sen. Ron
Among other things, this bill repeals the AMT.
Apr. 16, 2007
Wyden
S. 14
Sen. Jon Kyl
Repeals the AMT effective in 2007.
Apr. 17, 2007
S. 1405
Sen. Sam
Repeals the individual AMT effective in 2008.
May 16, 2007
Brownback
S. 1851
Sen. Jeff
Indexes the AMT for inflation and allows personal exemptions
July 23, 2007
Sessions
under the AMT.
S. 1855
Sen. Chuck
Provides relief from penalty for failure to pay estimated taxes
July 23, 2007
Grassley
attributable to the AMT.
S. 1875
Sen. Jim
Repeals the AMT effective in 2007.
July 25, 2007
DeMint
H.R. 370
Rep. Geoff
Allows certain coal to liquid fuel tax credits to be applied
Jan. 10, 2007
Davis
against the AMT.
H.R. 550
Rep. Michael
Allows the investment tax credit for solar energy property and
Jan. 18, 2007
McNulty
qualified fuel cell property against the AMT.

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Bill
Sponsor
Effect on AMT
H.R. 1112
Rep. Thomas
Increases the basic AMT exemption to $66,400 for joint
Feb. 16, 2007
Reynolds
returns and $45,100 for unmarried taxpayers.
Allows personal tax credits to offset AMT liabilities in full.
H.R. 1366
Rep. Phil
Repeals the AMT starting in 2007.
Mar. 7, 2007
English
H.R. 1591
Rep. David
Makes permanent the allowance for the work opportunity tax
Mar. 20, 2007
Obey
credit and the credit for taxes paid with respect to employee
tips to offset AMT liability. Passed by the House and the
Senate, but was vetoed by President Bush on May 1, 2007.
H.R. 1869
Rep. Nydia
Repeals the AMT starting in 2008.
Apr. 17, 2007
Velazques
H.R. 1923
Rep. Kevin
Increases and indexes the basic exemption for the AMT.
Apr. 18, 2007
McCarthy
Increases the point at which the basic exemption is phased-out.
H.R. 1942
Rep. Scott
Allows deductions for state and local taxes against AMT.
Apr. 19, 2007
Garrett
Indexes the basic AMT exemption.
H.R. 2253
Rep. Edward
Reduces the AMT tax rate to 24%.
May 9, 2007
Royce
H.R. 2318
Rep. Robert
Allows state and local property taxes to be deducted from the
May 15, 2007
Andrews
AMT tax base.
H.R. 2691
Rep. Timothy
Allows the tax credit for electricity produced from wind
June 12, 2007
Walz
facilities against the AMT.
H.R. 2748
Rep. Rodney
Allows the alternative motor vehicle tax credit against the
June 15, 2007
Frelinghuysen
AMT.
H.R. 2776
Rep. Charles
Allows certain energy tax credits against the AMT.
June 27, 2007
Rangel
H.R. 2902
Rep. Thomas
For 2007 and 2008, increases the AMT exemption and allows
June 28, 2007
Allen
all personal tax credits against the AMT .
H.R. 2983
Rep. Anthony
Eliminates the AMT for taxpayers with adjusted gross
July 10, 2007
Weiner
incomes (AGIs) under $100,000 for unmarried taxpayers and
$200,000 for married taxpayers.
H.R. 3486
Rep. Brad
Creates new mine safety credit, revises the credit for mine
Sept. 6, 2007
Ellsworth
rescue team training and allows these credits against the
AMT.
H.R. 3726
Rep. Baron Hill
Allows real property tax on principal residence to be deducted
Oct. 2, 2007
by non-itemizers and allows this deduction against the AMT.
H.R. 3590
Rep. Nick
Extends the AMT tax relief provisions through 2007.
Sept. 19, 2007
Lampson
H.R. 3818
Rep. Paul
Repeals the AMT. Allows taxpayers to pay their regular
Oct. 10, 2007
Ryan
income tax or pay taxes under a new simplified tax system.
H.R. 3861
Rep. Chris Van
Increases the AMT refundable credit amount for individuals
Oct. 16, 2007
Hollen
with unused credits for prior years minimum tax liability.
H.R. 3953
Rep. Tim
Allows a deduction for property taxes in the determination of
Oct. 24, 2007
Mahoney
AMT taxable income.

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Bill
Sponsor
Effect on AMT
H.R. 3970
Rep. Charles
Among other things, for 2007, this bill would provide for
Oct. 25, 2007
Rangel
increased/indexed AMT exemption amounts and would allow
nonrefundable personal credits to offset AMT liabilities. For
years after 2007, the AMT would be repealed as part of a
fundamental restructuring of the individual and corporate tax
systems.
H.R. 3996
Rep. Charles
Among other things, this bill allows nonrefundable personal
Oct. 30, 2007
Rangel
tax credits to offset AMT tax liability and increases the AMT
exemption amounts to $66,250 for joint returns and $44,350
for single returns. These changes would be effective for one
year, 2007.
S. 2293
Sen. Trent Lott
Among other things, this bill would repeal the individual
Nov. 1, 2007
AMT.
S. 2318
Sen. John
Among other things, this bill would repeal the individual
Nov. 7, 2007
Ensign
AMT.
S. 2389
Sen. John
This bill would increase the amount of the AMT refundable
Nov. 16, 2007
Kerry
credit from 20% to 50% and remove the income phaseouts for
the credit.
S. 2416
Sen. Jim
Repeals the current AMT and replaces it with an alternative
Dec. 5, 2007
DeMint
tax that taxpayers have the option to pay instead of their
regular income tax.
S.Con.Res. 21
n/a
House and Senate adopted the FY2008 budget resolution.
May 17, 2007
The resolution calls for a one-year patch for the AMT.
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Administration’s Proposals
In its FY2005 budget proposal, the Administration proposed a one-year extension
for both the increased AMT exemption levels and the provision allowing personal credits
to offset AMT tax liability. Both of these proposals were ultimately enacted as part of the
Working Families Tax Relief Act of 2004.
In its FY2006 budget proposal, the Administration did not address the AMT issue.
Subsequent statements by the Administration indicated that the AMT issue was to be
addressed by the tax reform panel appointed by the Administration. In November 2005,
the tax reform panel recommended that the AMT be repealed.
The Administration’s FY2007 budget proposal included a provision to extend,
through 2006, the higher AMT exemption levels and a provision allowing nonrefundable
personal credits to apply to the AMT.
The Administration’s FY2008 budget proposal includes a one-year patch for the
AMT. The Administration’s proposal would increase the basic AMT exemption to
$65,350 for joint returns and to $43,900 for unmarried taxpayers. It would also allow
personal tax credits to offset AMT liability in full. These changes would be effective for
2007.

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