General Instructions

Purpose of Form

Use Form 4626 to figure the alternative minimum tax (AMT) under section 55 for a corporation that is not exempt from the AMT.

Consolidated returns.   For an affiliated group filing a consolidated return under the rules of section 1501, AMT must be figured on a consolidated basis.

Who Must File

Generally, file Form 4626 if any of the following apply.

  • The corporation is not a “small corporation” exempt from the AMT (as explained below).

  • The corporation's taxable income or (loss) before the net operating loss (NOL) deduction plus its adjustments and preferences total more than $40,000 or, if smaller, its allowable exemption amount.

  • The corporation claims any general business credit, any qualified electric vehicle passive activity credit from prior years, or the credit for prior year minimum tax.

Exemption for Small Corporations

A corporation is treated as a small corporation exempt from the AMT for its current tax year:

  1. The current year is the corporation's first tax year in existence (regardless of its gross receipts for the year), or

  2. Both of the following apply.

    1. It was treated as a small corporation exempt from the AMT for all prior tax years beginning after 1997.

    2. Its average annual gross receipts for all 3-tax-year periods (or portions thereof during which the corporation was in existence) ending before its current tax year did not exceed $7.5 million ($5 million for the corporation's first 3-tax-year period. See section 55(e)).

The following rules apply when figuring gross receipts under 2b above.

  • Gross receipts must be figured using the corporation's tax accounting method and include total sales (net of returns and allowances), amounts received for services, and income from investments and other sources. See Temporary Regulations section 1.448-1T(f)(2)(iv) for more details.

  • Gross receipts include those of any predecessor of the corporation, including non-corporate entities.

  • For a short tax year, gross receipts must be annualized by multiplying them by 12 and dividing the result by the number of months in the tax year.

  • The gross receipts of all persons treated as a single employer under section 52(a), 52(b), 414(m), or 414(o) must be aggregated.

Loss of small corporation status.   If the corporation qualified as a small corporation exempt from the AMT for its previous tax year, but does not meet the gross receipts test for its current tax year, it loses its AMT exemption status. Special rules apply in figuring AMT for the tax year beginning on the “change date.” The change date is the first day of the corporation's tax year for which the corporation ceased to be a small corporation. Where this applies, complete Form 4626 taking into account the following modifications.
  • The adjustments for depreciation and amortization of pollution control facilities apply only to property placed in service on or after the change date.

  • The adjustment for mining exploration and development costs applies only to amounts paid or incurred on or after the change date.

  • The adjustment for long-term contracts applies only to contracts entered into on or after the change date.

  • When figuring the amount to enter on line 6, for any loss year beginning before the change date, use the corporation's regular tax NOL for that year.

  • Figure the limitation on line 4d only for prior tax years beginning on or after the change date.

  • Enter zero on line 2c of the Adjusted Current Earnings (ACE) Worksheet. When completing line 5 of the ACE Worksheet, take into account only amounts from tax years beginning on or after the change date. Also, for line 8 of the ACE Worksheet, take into account only property placed in service on or after the change date.

Note.

No additional modification in figuring AMT is required for exceptions related to any item acquired in a corporate acquisition under section 381 or to any substituted basis property, if any of the AMT adjustment modifications listed earlier applied to the item or property while it was held by the transferor.

  
Once the corporation loses its small corporation status, it cannot qualify for any subsequent tax year.

Credit for Prior Year Minimum Tax

A corporation may be able to take a minimum tax credit against the regular tax for AMT incurred in prior years. See Form 8827, Credit for Prior Year Minimum Tax—Corporations, for details.

Recordkeeping

Certain items of income, deductions, credits, etc., receive different tax treatment for the AMT than for the regular tax. Therefore, the corporation should keep adequate records to support items refigured for the AMT. Examples include:

  • Tax forms used for regular tax purposes that are completed a second time to refigure items of income, deductions, etc., for the AMT;

  • The computation of a carryback or carryforward to other tax years of certain deductions or credits (for example, net operating loss, capital loss, and foreign tax credit) if the AMT amount is different from the regular tax amount;

  • The computation of a carryforward of a passive loss or tax shelter farm activity loss if the AMT amount is different from the regular tax amount; and

  • A “running balance” of the excess of the corporation's total increases in alternative minimum taxable income (AMTI) from prior year adjusted current earnings (ACE) adjustments over the total reductions in AMTI from prior year ACE adjustments (see the instructions for line 4d).

Short Period Return

If the corporation is filing for a period of less than 12 months, AMTI must be annualized and the tentative minimum tax prorated based on the number of months in the short period. Complete Form 4626 as follows.

  1. Complete lines 1 through 6 in the normal manner. Subtract line 6 from line 5 to figure AMTI for the short period, but do not enter it on line 7.

  2. Multiply AMTI for the short period by 12. Divide the result by the number of months in the short period. Enter this result on line 7 and write “Sec. 443(d)(1)” on the dotted line to the left of the entry space.

  3. Complete lines 8 through 11.

  4. Subtract line 11 from line 10. Multiply the result by the number of months in the short period and divide that result by 12. Enter the final result on line 12 and write “Sec. 443(d)(2)” on the dotted line to the left of the entry space.

  5. Complete the rest of the form in the normal manner.

Allocating Differently Treated Items Between Certain Entities and Their Investors

For a regulated investment company, a real estate investment trust, or a common trust fund, see section 59(d) for details on allocating certain differently treated items between the entity and its investors.

Optional Write-Off for Certain Expenditures

There is no AMT adjustment for the following items if the corporation elects to deduct them ratably over the period of time shown for the regular tax.

  • Circulation expenditures (personal holding companies only)—3 years.

  • Mining exploration and development costs—10 years.

  • Intangible drilling costs—60 months.

See section 59(e) for more details.


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