Printing Industries of New England

5 Crystal Pond Road, Southborough, MA 01772-1758
508-804-4100 508-804-4119 (fax)

The largest trade association to serve commercial printing and graphic communications companies in five New England states.

Issue
The Alternative Minimum Tax (AMT) was enacted to prevent individual and corporate taxpayers from excessively reducing or eliminating their tax liability. However, the AMT has had unexpected negative consequences that Congress has started to address in a piecemeal fashion. Should PIA support legislation to eliminate the AMT and work to incrementally reduce its burden?

Status
In 1997, PIA successfully supported major AMT reform. Businesses earning $5 million or less were exempted from paying the AMT, and the AMT adjustment relating to depreciation was repealed with respect to class lives. These two changes eased the burden for many in our industry. However, considering the capital intensive nature of the printing industry and as businesses continue to grow the repeal of AMT has continued to be a priority for PIA members.

In an effort to combine our resources in a unified voice with other industries plagued by this tax, PIA joined with other businesses and trade associations seeking repeal or reforms to reduce the negative impact of the AMT. Most recently, we were able to achieve an AMT victory in the Job Creation and Worker Assistance Act of 2002. This bill allowed for a temporary extension of the net operating loss (NOL) carry-back period from two to five years for NOLs in taxable years ending in 2001 and 2002. The 90 percent limitation rule was also suspended for 2001 and 2002, allowing for a 100 percent offset of AMT income in those years.

Concerns
Under current law, a company that may be subject to AMT must calculate its taxes under AMT as well as under the regular tax system and pay the greater of the two. When a company pays the AMT, the government issues a credit for the difference between the AMT tax paid and the regular tax obligation. AMT credits can only be used when regular tax liability exceeds AMT liability. For many taxpayers, the AMT has become a permanent tax increase due to the restriction on credit use.

An NOL is the amount of allowable deductions exceeding a taxpayer's gross income. A carry-back of an NOL generally results in the refund of federal income tax for that year and, other than 2001 and 2002, the carry-back period is two years. An NOL may be carried forward 20 years to offset taxable income and reduce federal income tax for the carry-forward year. Furthermore, NOLs can offset only 90 percent of AMT liability. When a company incurs significant losses, it should not be required to borrow money to pay the AMT due to limitations on the recovery of NOLs.

Position
PIA supports the elimination of the AMT. Short of total elimination, PIA will pursue the broadest possible reforms including NOL carry-back extensions and limitation increases.