Lawmakers vow to patch alternative minimum tax in lame duck

Democrats and Republicans joined together on Tuesday to pledge that Congress will approve relief to the alternative minimum tax during the lame-duck session. 

Senate Finance Chairman Max Baucus (D-Mont.), ranking member Chuck Grassley (R-Iowa), House Ways and Means Chairman Sandy Levin (D-Mich.) and ranking member Dave Camp (R-Mich.), on Tuesday vowed to "do everything possible" to enact AMT relief for more than 20 million taxpayers. 

"We believe the letter received from the committees will be very helpful," the Internal Revenue Service said today in a statement emailed to The Hill. 

The cost to patch the tax will run more than $60 billion and would ensure that more than 20 million taxpayers — including those making less than $250,000 annually — won't see tax increases.

In a letter to IRS Commissioner Douglas Shulman, the lawmakers said the agency should "take all steps necessary to plan for changes" to present law. 

"We plan to do everything possible to enact AMT relief legislation in a form mutually agreeable to the Congress and the president," the letter said. "We urge the Internal Revenue Service to take all steps necessary to plan for changes that would be made by the legislation."

Today's letter was in response to letters sent by Shulman to the committee chairmen and the ranking members on Nov. 5. 

The last AMT patch expired in 2009, and lawmakers will need to move forward soon on the issue that indexes the levy for inflation to keep it from hitting lower-income taxpayers. Last year's patch meant that only 4 million people paid the tax, accounting for about $32 billion in revenue last year. 

"Under current law, AMT receipts will increase to $102 billion in 2011, or 8 percent of the total," according to the Congressional Budget Office (CBO).

"We realize that this fact is causing concern for many taxpayers and is creating administrative difficulties for the IRS as the agency prepares for the upcoming filing season," the letter said.

If lawmakers don't make the changes, "one in six taxpayers will be affected by the AMT, paying on average an additional $3,900 in tax, and nearly every married taxpayer with income between $100,000 and $500,000 will owe some alternative tax," according to the CBO. 

The legislation will allow the personal credits against the AMT and the exemption amounts for 2010 to be set at $47,450 for individuals and $72,450 for married taxpayers filing jointly.

Without action, the CBO report shows that taxpayers with adjusted gross incomes of less than $200,000 will account for 84 percent of AMT payers in 2010, up from 30 percent in 2009. The average tax increase for that group will be $2,900. 

Of that 84 percent, 3 percent of households making less than $50,000 a year and 35 percent of households making between $50,000 and $100,000 would pay more this year. Forty-seven percent of taxpayers earning between $100,000 and $200,000 annually will also pay the tax, up from 23 percent last year.