Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations
Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, refund payments issued, as well as credit elect and refund offset transactions, for corporations claiming refundable prior year minimum tax liability, are subject to sequestration. This means that refund payments processed on or after Oct. 1, 2016, and on or before Sept. 30, 2017, as well as credit elect and refund offset transactions processed on or after Jan. 1, 2017 and on or before Sept. 30, 2017, will be reduced by the fiscal year 2017 sequestration rate of 6.9 percent, irrespective of when the original or amended tax return was received by the Service. The sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise impacts the sequester, at which time the sequestration reduction rate is subject to change.
A corporation that can claim an additional first-year depreciation deduction under section 168(k) can choose instead to accelerate the use of its prior year minimum tax credits, treating the accelerated credits as refundable credits. Corporations making this section 168(k)(4) election and claiming a refund of prior year minimum tax credits should complete Form 8827. These corporations will be notified that a portion of their requested refund was subject to the sequester reduction.
Corporations making the section 168(k)(4) election but not claiming a refund of prior year minimum tax credits are not subject to this reduction.