Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has announced that it will temporarily suspend collection of incentive stock option (ISO) alternative minimum tax (AMT) liabilities through September 30, 2008. The suspension is intended to provide lawmakers with time to enact legislation related to the collection of this AMT liability, IRS Commissioner Douglas H. Shulman indicated in a just-released letter to Sen. Charles E. Grassley, R-Iowa, ranking member of the Senate Finance Committee.

Lawmakers' Request

  The IRS's decision to temporarily halt its collection activities involving ISO AMT liabilities is in response to a July request from Grassley and more than 20 other members of Congress. These lawmakers asked the IRS for the suspension in order to work on legislation aimed at providing relief to individuals and families affected by ISO AMT liability.

  "We are currently working to help these ISO AMT families through the enactment of AMT Credit Fairness and Relief Act of 2007 (HR 3861), and its companion bill (Sen 2389). These bills work off earlier legislation contained in the Tax Relief and Health Care Act of 2006 (P.L. 109-432) to increase the AMT refundable credit amount for families and individuals with long-term unused credits for prior-year minimum tax liability," the lawmakers told Shulman. "There is now a very broad bipartisan consensus to abate all interest and penalties attributable to ISO AMT liabilities and permit taxpayers to apply the full amount of their future refundable credits towards the entirety of the current ISO AMT liabilities," the lawmakers added.

  Under current law, taxpayers who exercise ISOs must realize income subject to the AMT upon exercise, rather than only at any subsequent sale. However, taxpayers are not subject to regular income tax upon exercise of an ISO.

Suspension

  Shulman reported that the IRS is taking steps to identify all collection cases involving ISO AMT liabilities. "To provide the Congress with an opportunity to enact the pending legislation, the IRS will not undertake any collection enforcement action through the end of this fiscal year (September 30, 2008) on these cases," said Shulman.

  By Hilary Goehausen, CCH News Staff