New Legislation Allows CPA's to Offset AMT with General Business Credits

Posted by Jeffrey Feingold on 10.02.10

(Newswire Today) —  South Walpole, MA, United States, 09/28/2010 -

Businesses under $50m will be able to use general business tax credits - including the R&D tax credit - to offset Alternative Minimum Tax in 2010.

President Obama's signing of H.R. 5297 this week marks a significant modification in the law for both corporations and business owners with respect to their utilization of General Business Credits.  Prior to this new law, the maximum amount of General Business Credits that a company or individual business owner could utilize in a given year could be no greater than the amount that their regular tax exceeded their AMT.  Likewise, they could not utilize any General Business Credits if their AMT exceeded their regular tax.  With H.R. 5297 in place, these limitations no longer exist.  General Business Credits can be utilized up to the full amount of the corporation or individual's tax liability.  In addition, the new law allows for a carry-back of 2010 General Business Credits to any of the previous five years; whereas, the previous law only allowed for a carry-back of one year.

There are two very important points to keep in mind with this change, however.  The first is that only General Business Credits resulting from activities in the current 2010 tax year can be utilized, so you can not use credits that have been carried forward from previous years.  The second is that you can not offset AMT if you are carrying back credit from the 2010 tax year to one of the previous five years.

"This new bill is a significant benefit for many of our small to mid-sized clients across the country," noted Jeffrey Feingold, Managing Partner of Tax Point Adviors, a national tax consultancy which specializes in government-sponsored credits and incentives. "Previously," Feingold added, "many of our clients who qualify for R&D credits were unable to utilize the credits due AMT. This bill will begin to address that problem for the first time. Still, Congress should go one step further and allow the credit to offset AMT for prior years as well as for 2010."

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