ATNOL carryback reduces later minimum tax credit

Plain-English summary

Chief Counsel advised that a corporation must recompute its minimum tax credit carryover when it carries back an alternative tax net operating loss, or ATNOL. The ATNOL deduction reduces alternative minimum taxable income in the prior year, just as a net operating loss deduction reduces taxable income. Because the alternative minimum tax is based on alternative minimum taxable income, the ATNOL carryback reduces the prior year's alternative minimum tax and adjusted net minimum tax. That reduction also decreases the minimum tax credit available for use in a later year.

Ruling snapshot

• Question: Does carrying back an ATNOL require recomputation of the minimum tax credit carryover?
• Outcome: Advice given
• Key authorities: IRC §§ 53, 55, 56, 57, 58, 168(k)(4), and 172

Full text (IRS public release)

ID: CCA_2012080816521839 Number: 201246034
Release Date: 11/16/2012
Office: ----------------
UILC: 53.00-00, 168.00-00

From: ----------------------
Sent: Wednesday, August 08, 2012 4:52:20 PM
To: --------------------------------------------
Cc: --------------------------------------------
Subject: Section 168(k)(4) and ATNOL carryback

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As promised, here is a summary why a recomputation of the minimum tax credit carryover is required if a taxpayer carries back an ATNOL:

The minimum tax credit for any taxable year is the adjusted net minimum tax imposed for prior years (less the amount of minimum tax credit used in prior years). Section 53(b).

In the case of a corporation (the taxpayer in this case), the adjusted net minimum tax for any taxable year is the amount of net minimum tax for the year. Section 53(d)(1)(iii)(II).

The net minimum tax means the tax imposed by section 55 (the "AMT"). Section 53(d)(1)(A).

The AMT is the excess of the tentative minimum tax for the taxable year, over the regular tax for the year. Section 55(a). The tentative minimum tax is a percentage of so much of a taxpayer's alternative minimum taxable income (AMTI) as exceeds an exemption amount. Section 55(b). AMTI is taxable income of a taxpayer for the taxable year, determined with the adjustments and preferences described in sections 56, 57, and 58. Section 55(b)(2).

Among the adjustments listed in section 56 used in computing AMTI is the adjustment under section 56(a)(4) for the alternative tax net operating loss deduction (ATNOL deduction). The ATNOL deduction is allowed in computing AMTI in lieu of the net operating loss deduction allowed under section

172. The ATNOL deduction is defined in section 56(d) as the NOL deduction allowable under section 172
     with certain adjustments.

Section 172(a) allows an NOL deduction in computing taxable income for the taxable year. The NOL deduction includes NOL carrybacks to such taxable year.

There's nothing in the AMT provisions that treats the effect of an ATNOL deduction in computing AMTI any different than the effect of an NOL deduction in computing taxable income. In other words, the ATNOL deduction (including an ATNOL carryback) reduces AMTI.

The AMT liability is based on a percentage of a taxpayer's AMTI (through the tentative minimum tax). Consequently, anything that reduces AMTI (such as an ATNOL deduction) will reduce a taxpayer's AMT. A reduction in a taxpayer's AMT will also be a reduction of the taxpayer's adjusted net minimum tax, which determines the amount of a taxpayer's minimum tax credit.

Consequently, an ATNOL carryback to a prior taxable year can reduce AMT imposed in that prior year and, as a result, the amount of minimum tax credit available for use by the taxpayer in a later year.--

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