The small business AMT exception.

The Taxpayer Relief Act of 1997 simplified corporate taxpaying and reporting for small businesses by exempting them from alternative minimum tax (AMT) if the new rules are met. These rules include an average annual gross receipts test that seems straightforward on its face. However, on closer inspection, the new rules are fraught with problems, such as when the "lookback period" begins for tallying average gross receipts. This article explains the new provisions and offers examples for corporations seeking to qualify for the AMT exemption.

The Taxpayer Relief Act of 1997 (TRA '97), Section 401(a), enacted a significant change to the corporate alternative minimum tax (AMT) system as it affects small businesses. Under new Sec. 55(e), effective for tax years beginning after 1997, the AMT is repealed for "small business corporations." According to Sec. 448(c) (1), a C corporation that had average gross receipts of less than $5 million for the prior three years is a small business corporation for this purpose. Further, a corporation that meets the $...

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