Peter Barnes Weighs in on Corporate Alternative Minimum Tax in Bloomberg Tax

There’s an emerging quirk to the new tax aimed at forcing some big companies to pay more: They can still keep paying less—simply by reporting lower profits. 

The corporate alternative minimum tax that took effect last year requires large, profitable US companies to pay at least 15% in taxes on the “book income” they report on their financial statements. That’s supposed to make it harder for them to pay little or nothing by using tax deductions, credits, and other advantages to reduce their taxable profit, as many have done in the past.

. . .

But last year, some companies that have enjoyed low effective tax rates in the past recorded big charges or sharp increases in discretionary costs that they acknowledge had a positive effect on their taxes.

Defense contractor RTX Corp., for instance, took a $2.9 billion charge for a jet-engine recall, and said in its annual report that the charge had a favorable impact on its effective tax rate, lowering it to 11.9%, below what is supposed to be the new minimum.

RTX didn’t respond to requests for comment, and it didn’t say anything in its annual report about any effect that CAMT might have on it.

Some argue companies owe it to their shareholders to do what they can to minimize their tax liability.

“They’d be irresponsible not to,” said Peter Barnes, a tax attorney at Caplin & Drysdale. “This is not illegal, not underhanded or wrong.”

For the full article, please visit Bloomberg Tax’s website (subscription required).