Of the approximately 2.1 million corporations that were subject to AMT in 1992, about 2,000 corporations with assets of $100 million or more paid 85 percent of the total corporate AMT liability. However, most corporations that paid AMT from 1987 through 1992 were relatively small. By far the most important elements that caused corporations to pay AMT were the depreciation adjustment for property placed in service after 1986 and the book income and adjusted current earnings adjustments. AMT has partially achieved the congressional objectives of ensuring that taxpayers with substantial economic income in a given year, and taxpayers with positive book income in a given year, pay some tax in that year. The effects of AMT on corporate investment are not clear. Objectives, Scope, and Methodology

Our objectives for this report were to (1) determine which corporations paid AMT and why they were liable for it, (2) examine whether AMT has achieved its purpose, and (3) discuss how AMT might affect corporate investment. Cannot be used to reduce AMT. This appendix contains information on the amount of corporate AMT payments, the size of the firms paying AMT, the industry breakdown of these firms, the frequency of AMT payments and AMT credits claimed, the significant elements of AMT, and the relationship of AMT to net operating losses (NOL) and to the foreign tax credit (FTC). AMT revenues were between $2.7 and $8.6 billion, or between 3 and 9 percent of the regular tax revenues collected during the period. Large corporations represented a small percentage of AMT payers. The data show that the manufacturing, transportation, and finance industries paid the most AMT. Fewer AMT payers had positive taxable income and owed no regular tax. In addition, as AMT credits are reclaimed in the future, cash flow would increase at that time, possibly increasing investment.
Why GAO Did This Study

Pursuant to a congressional request, GAO provided information on the corporate alternative minimum tax (AMT), focusing on: (1) the corporations that paid AMT between 1987 and 1992; (2) whether AMT achieved its purpose; and (3) how AMT might affect corporate investment.

What GAO Found

GAO found that: (1) AMT accelerated tax payments of $27.4 billion and corporations used credits totalling $5.8 billion from 1987 to 1992; (2) at the end of 1992, corporations had accumulated $21.6 billion in credits that would result in lower tax revenues in the future; (3) of the 2.1 million corporations subject to AMT, 2,000 large corporations paid 85 percent of all AMT in 1992; (4) the two AMT provisions that produced the largest increases in taxable income were the depreciation adjustment, used by 87 percent of all AMT payers, and the adjusted current earnings adjustment, used by 67 percent of all AMT payers; (5) manufacturing, transportation, and finance industries paid the most AMT; (6) AMT has achieved its objectives of making profitable corporations pay tax and causing corporations that report positive amounts of income in a particular year to pay some tax in that year; (7) the effects of AMT on corporate investment are unclear due to insufficient data; and (8) while AMT might reduce present cash flows, future cash flows may be enhanced as taxpayers recover AMT credits.