IRS: Fiscal year blended rate calculations OK’d for AMT

Tax Hot Topics: Guidance consistent for corporations

Tax Hot Topics newsletterIRS confirms fiscal year corporate taxpayers eligible for blended AMT rate The IRS has released guidance (Notice 2018-38) on the blended rate calculations for taxpayers with fiscal ending in 2018, and it confirms that the rules also apply to the alternative minimum tax (AMT).

The cut in the corporate tax rate is effective for tax years beginning after Dec. 31, 2017, but Section 15 provides that fiscal year taxpayers can use a blended rate for the year beginning in 2017 and ending in 2018. The rate is calculated by blending the new 21% rate with the former 35% rate weighted based on the ratio of days in the tax year that occur in 2017 versus 2018. It applies for the entire taxable year, as there is no segregation of income by date.

Notice 2018-38 provides several examples, but also confirms that a similar calculation applies for the corporate AMT. The corporate AMT is repealed for tax years beginning after Dec. 31, 2017, so the blended AMT rate for the fiscal year ending in 2018 will use the previous 20% rate and a zero rate for post-repeal. This calculation should decrease the chances the AMT applying at all for taxpayers with fiscal years ending in 2018. Any AMT that is still due can be taken as a fully refundable credit over the following four years, but the sequestration will apply to the refundable credit amount.

Contact Dustin Stamper
Director, Washington National Tax Office
T +1 202 861 4144

Shamik Trivedi
Senior Manager, Washington National Tax Office
T +1 202 521 1511

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