Home
Lead Tax Report
The following story is from the September 2 issue of the Daily Tax Report.
Stock Options
IRS Will Not Collect AMT ISO
For Next Month, Shulman Says
The Internal Revenue Service will suspend collection enforcement activities regarding incentive stock options and alternative minimum tax liabilities through Sept. 30, 2008, to give lawmakers time to enact related legislation, Commissioner Douglas Shulman said in an Aug. 26 letter.
The letter was in response to a July 3 letter from Senate Finance Committee ranking member Charles Grassley (R-Iowa) and more than two dozen House and Senate members seeking the suspension while they work to enact the AMT Credit Fairness and Relief Act of 2007 (H.R. 3861) and the related Senate bill (S. 2389).
"In response to your request, we are taking steps to identify all Collection cases that involve AMT ISO liabilities," Shulman wrote. "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 on these cases."
Shulman warned lawmakers that, if pending legislation is not enacted this fiscal year, "the IRS will then continue to administer programs in accordance with current law, and in fairness to the thousands of taxpayers who have already made sacrifices to pay taxes due under this provision of the tax code."
Under current law, taxpayers exercising ISOs realize income subject to the AMT, but not the regular income tax. Lawmakers have sought for some time now to provide relief for some taxpayers who have exercised ISOs and are paying taxes on "phantom income" they never received because of the high value of the shares when the ISOs were exercised.
Most recently, the provision is also pending in the energy and tax extenders bill (H.R. 6049) that passed the House in May (99 DTR GG-1, 5/22/08 ). According to the Joint Committee on Taxation, abatement of ISO AMT liability, penalty, and interest would cost $1.325 billion over 10 years.
Senate Finance Committee Chairman Max Baucus (D-Mont.) also included an abatement provision in his energy and tax extenders bill (S. 3335), although an unrelated debate on whether or not to offset the extenders package has resulted in a stalemate preventing either extenders bills from coming to the Senate floor (147 DTR G-7, 7/31/08 ).
Texts of the congressional and IRS letters and H.R. 3861 and S. 2389 are in TaxCore.
By Heather M. Rothman
