The America’s Small Business Tax Relief Act of 2013 (H.R. 886), proposed by Representative Jim Gerlach (R-PA) on February 28, 2013, would provide a permanent turn-off of the Alternative Minimum Tax (AMT) limitation for general business credits claimed by eligible small businesses. The law would also permit a special 5-year carry-back of eligible small business credits, permitting refunds that can then be reinvested in the small business. Under current law, a company’s ability to utilize a general business credit is limited to the difference between their regular tax and AMT liabilities, and credits are subject to a limited 1-year carryback.

In 2010, Congress passed a one-year exception to the AMT limitation, allowing small business taxpayers to utilize general business credits, such as the credit for increasing research activities (R&D tax credit), up to the “25/25 limitation” – 25% of so much of their tax liability that exceeds $25,000. The one-year 2010 AMT turnoff provided a powerful incentive to businesses to invest in their businesses by allowing taxpayers to claim refunds that were otherwise limited by AMT and the carryback period. H.R. 886 would revive this successful program – currently available only to credits generated in 2010 tax years – and make it a permanent feature of the tax code.

The AMT turnoff would apply to eligible small businesses – businesses with average annual gross receipts of under $50,000,000 over the prior three taxable years (aggregated in the case of a controlled group of corporations).

For more information on how this proposed bill will affect you or your business, contact alliantgroup here.