IRS posting - Sequestration reduces refunds of AMT credit triggered by election to forego bonus depreciation 

August 14: According to an IRS website posting (dated August 12), sequestration-related spending cuts during fiscal year 2013 require a reduction of the refundable portion of the corporate alternative minimum tax (AMT) credit that has been available to a corporation that made an election to forego bonus depreciation, and use straight-line depreciation.

These refunds have been available, subject to numerous limitations, for tax years ending after March 31, 2008 (though generally not for calendar year 2010).


The IRS posting states that, as a result of the sequestration, the refundable portion of these AMT credits will be reduced by 38%. The IRS posting says the reduction is effective for original or amended tax returns beginning August 13, 2013.


The IRS reported that the sequestration reduction rate will be applied until the end of the fiscal year (September 30, 2013) at which time the sequestration rate is subject to change depending on congressional action.


The IRS release states:

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.



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