Grassley Introduces AMT Penalty Relief Bill

by Mike Godfrey, Tax-News.com, Washington

27 July 2007

Sen. Chuck Grassley, ranking member of the Committee on Finance, has introduced new legislation which proposes to excuse many millions of taxpayers from calculating their taxes under the Alternative Minimum Tax system.

Under the AMT Penalty Reduction Act of 2007 - announced by Grassley at a recent hearing - in computing tax for purposes of the penalties in the tax code dealing with estimated tax, a taxpayer would be permitted to disregard the alternative minimum tax if the individual was not liable for the AMT for the preceding tax year.

"Right now millions of Americans don’t know whether they should be paying an estimated tax because Congress hasn’t passed Alternative Minimum Tax relief. In other words, there are many taxpayers who will be facing a big tax bill if we don’t pass AMT relief," Grassley said in a floor statement. "By law, many of these taxpayers should be paying estimated tax right now based on the fact that as the law is today, they are subject to the AMT."

"So if you didn’t have to pay AMT last year we aren’t going to penalize you if you don’t file estimated taxes for AMT this year. Just because Congress can’t do its job, doesn’t mean the taxpayer should be punished. I ask unanimous consent that the text of the bill be printed in the record," he added.

Grassley, a long-time advocate of total AMT repeal, last month called the system that was originally intended to catch 155 of America's wealthiest taxpayers "a complete policy failure" which threatens to consume 23 million taxpayers this year, while still allowing the wealthiest taxpayers to reduce their tax liabilities to zero through various deductions and exemptions.

House Democrats are reportedly planning to propose a 'surtax' on wealthy individuals to pay for the removal of AMT on the increasing number of middle income taxpayers now caught in the system's trap. However, Grassley is firmly of the view that Congress should not be trying to replace revenues that were never intended to be collected.

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