26 USC 59 - Other definitions and special rules

Collapse to view only § 59. Other definitions and special rules

§ 55. Alternative minimum tax imposed
§ 56. Adjustments in computing alternative minimum taxable income
§ 56A. Adjusted financial statement income
§ 57. Items of tax preference
§ 58. Denial of certain losses
§ 59. Other definitions and special rules

§ 55. Alternative minimum tax imposed

(a) General ruleThere is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to the excess (if any) of—

(1) the tentative minimum tax for the taxable year, over

(2) the regular tax for the taxable year plus, in the case of an applicable corporation, the tax imposed by section 59A.

(b) Tentative minimum taxFor purposes of this part—

(1) Noncorporate taxpayersIn the case of a taxpayer other than a corporation—

(A) In generalThe tentative minimum tax for the taxable year is the sum of—

(i) 26 percent of so much of the taxable excess as does not exceed $175,000, plus

(ii) 28 percent of so much of the taxable excess as exceeds $175,000.

The amount determined under the preceding sentence shall be reduced by the alternative minimum tax foreign tax credit for the taxable year.

(B) Taxable excess

(D) Alternative minimum taxable incomeThe term “alternative minimum taxable income” means the taxable income of the taxpayer for the taxable year—

(i) determined with the adjustments provided in section 56 and section 58, and

(ii) increased by the amount of the items of tax preference described in section 57.

If a taxpayer is subject to the regular tax, such taxpayer shall be subject to the tax imposed by this section (and, if the regular tax is determined by reference to an amount other than taxable income, such amount shall be treated as the taxable income of such taxpayer for purposes of the preceding sentence).

(2) Corporations

(A) Applicable corporationsIn the case of an applicable corporation, the tentative minimum tax for the taxable year shall be the excess of—

(i) 15 percent of the adjusted financial statement income for the taxable year (as determined under section 56A), over

(ii) the corporate AMT foreign tax credit for the taxable year.

(B) Other corporations

(3) Maximum rate of tax on net capital gain of noncorporate taxpayersThe amount determined under the first sentence of paragraph (1)(A) shall not exceed the sum of—

(A) the amount determined under such first sentence computed at the rates and in the same manner as if this paragraph had not been enacted on the taxable excess reduced by the lesser of—

(i) the net capital gain; or

(ii) the sum of—(I) the adjusted net capital gain, plus(II) the unrecaptured section 1250 gain, plus

(B) 0 percent of so much of the adjusted net capital gain (or, if less, taxable excess) as does not exceed an amount equal to the excess described in section 1(h)(1)(B), plus

(i) so much of the adjusted net capital gain (or, if less, taxable excess) as exceeds the amount on which tax is determined under subparagraph (B), or

(ii) the excess described in section 1(h)(1)(C)(ii), plus

(D) 20 percent of the adjusted net capital gain (or, if less, taxable excess) in excess of the sum of the amounts on which tax is determined under subparagraphs (B) and (C), plus

(E) 25 percent of the amount of taxable excess in excess of the sum of the amounts on which tax is determined under the preceding subparagraphs of this paragraph.

Terms used in this paragraph which are also used in section 1(h) shall have the respective meanings given such terms by section 1(h) but computed with the adjustments under this part.

(1) In general

(2) Coordination with income averaging for farmers and fishermen

(3) Cross references

(d) Exemption amountFor purposes of this section—

(1) Exemption amount for taxpayers other than corporationsIn the case of a taxpayer other than a corporation, the term “exemption amount” means—

(A) $78,750 in the case of—

(i) a joint return, or

(ii) a surviving spouse,

(B) $50,600 in the case of an individual who—

(i) is not a married individual, and

(ii) is not a surviving spouse,

(C) 50 percent of the dollar amount applicable under subparagraph (A) in the case of a married individual who files a separate return, and

(D) $22,500 in the case of an estate or trust.

For purposes of this paragraph, the term “surviving spouse” has the meaning given to such term by section 2(a), and marital status shall be determined under section 7703.

(2) Phase-out of exemption amountThe exemption amount of any taxpayer shall be reduced (but not below zero) by an amount equal to 25 percent of the amount by which the alternative minimum taxable income of the taxpayer exceeds—

(A) $150,000 in the case of a taxpayer described in paragraph (1)(A),

(B) $112,500 in the case of a taxpayer described in paragraph (1)(B), and

(C) 50 percent of the dollar amount applicable under subparagraph (A) in the case of a taxpayer described in subparagraph (C) or (D) of paragraph (1).

In the case of a taxpayer described in paragraph (1)(C), alternative minimum taxable income shall be increased by the lesser of (i) 25 percent of the excess of alternative minimum taxable income (determined without regard to this sentence) over the minimum amount of such income (as so determined) for which the exemption amount under paragraph (1)(C) is zero, or (ii) such exemption amount (determined without regard to this paragraph).

(3) Inflation adjustment

(A) In generalIn the case of any taxable year beginning in a calendar year after 2012, the amounts described in subparagraph (B) shall each be increased by an amount equal to—

(i) such dollar amount, multiplied by

(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2011” for “calendar year 2016” in subparagraph (A)(ii) thereof.

(B) Amounts describedThe amounts described in this subparagraph are—

(i) each of the dollar amounts contained in subsection (b)(1)(A),

(ii) each of the dollar amounts contained in subparagraphs (A), (B), and (D) of paragraph (1), and

(iii) each of the dollar amounts in subparagraphs (A) and (B) of paragraph (2).

(4) Special rule for taxable years beginning after 2017 and before 2026

(A) In generalIn the case of any taxable year beginning after December 31, 2017, and before January 1, 2026—

(i) paragraph (1) shall be applied—(I) by substituting “$109,400” for “$78,750” in subparagraph (A), and(II) by substituting “$70,300” for “$50,600” in subparagraph (B),

(ii) paragraph (2) shall be applied—(I) by substituting “$1,000,000” for “$150,000” in subparagraph (A),(II) by substituting “50 percent of the dollar amount applicable under subparagraph (A)” for “$112,500” in subparagraph (B), and(III) in the case of a taxpayer described in paragraph (1)(D), without regard to the substitution under subclause (I), and

(iii) subsection (j) of section 59 shall not apply.

(B) Inflation adjustment

(i) In generalIn the case of any taxable year beginning in a calendar year after 2018, the amounts described in clause (ii) shall each be increased by an amount equal to—(I) such dollar amount, multiplied by(II) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “calendar year 2017” for “calendar year 2016” in subparagraph (A)(ii) thereof.

(ii) Amounts described

(iii) Rounding

(iv) Coordination with current adjustments

(Added and amended Pub. L. 99–514, title II, § 252(c), title VII, § 701(a), Oct. 22, 1986, 100 Stat. 2205, 2321; Pub. L. 100–647, title I, §§ 1002(l)(27), 1007(a), Nov. 10, 1988, 102 Stat. 3381, 3428; Pub. L. 101–508, title XI, §§ 11102(a), 11813(b)(5), Nov. 5, 1990, 104 Stat. 1388–406, 1388–551; Pub. L. 102–318, title V, § 521(b)(1), July 3, 1992, 106 Stat. 310; Pub. L. 102–486, title XIX, § 1913(b)(2)(D), Oct. 24, 1992, 106 Stat. 3020; Pub. L. 103–66, title XIII, § 13203(a)–(c)(1), Aug. 10, 1993, 107 Stat. 461, 462; Pub. L. 104–188, title I, §§ 1205(d)(6), 1401(b)(3), 1601(b)(2)(A), Aug. 20, 1996, 110 Stat. 1776, 1788, 1832; Pub. L. 105–34, title III, § 311(b)(1), (2)(A), title IV, § 401(a), title XVI, § 1601(f)(1)(C), Aug. 5, 1997, 111 Stat. 834, 835, 843, 1090; Pub. L. 105–206, title VI, §§ 6005(d)(2), 6006(a), July 22, 1998, 112 Stat. 804, 806; Pub. L. 107–16, title VII, § 701(a), (b), June 7, 2001, 115 Stat. 148; Pub. L. 108–27, title I, § 106(a), title III, § 301(a)(1), (2)(B), (b)(2), May 28, 2003, 117 Stat. 755, 758; Pub. L. 108–311, title I, § 103(a), title IV, § 406(d), Oct. 4, 2004, 118 Stat. 1168, 1189; Pub. L. 108–357, title III, § 314(a), Oct. 22, 2004, 118 Stat. 1468; Pub. L. 109–58, title XIII, §§ 1302(b), 1322(a)(3)(H), 1341(b)(3), 1342(b)(3), Aug. 8, 2005, 119 Stat. 991, 1012, 1049, 1051; Pub. L. 109–135, title IV, §§ 403(h), 412(p), Dec. 21, 2005, 119 Stat. 2624, 2638; Pub. L. 109–222, title III, § 301(a), May 17, 2006, 120 Stat. 353; Pub. L. 110–166, § 2(a), Dec. 26, 2007, 121 Stat. 2461;

§ 56. Adjustments in computing alternative minimum taxable income

(a) Adjustments applicable to all taxpayersIn determining the amount of the alternative minimum taxable income for any taxable year the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):

(1) Depreciation

(A) In general

(i) Property other than certain personal property

(ii) 150-percent declining balance method for certain propertyThe method of depreciation used shall be—(I) the 150 percent declining balance method,(II) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of the year will yield a higher allowance.

The preceding sentence shall not apply to any section 1250 property (as defined in section 1250(c)) (and the straight line method shall be used for such section 1250 property) or to any other property if the depreciation deduction determined under section 168 with respect to such other property for purposes of the regular tax is determined by using the straight line method.

(B) Exception for certain property

(i) In general

(ii) Treatment of certain property placed in service before 1987

(D) Normalization rules

(2) Mining exploration and development costs

(A) In general

(B) Loss allowedIf a loss is sustained with respect to any property described in subparagraph (A), a deduction shall be allowed for the expenditures described in subparagraph (A) for the taxable year in which such loss is sustained in an amount equal to the lesser of—

(i) the amount allowable under section 165(a) for the expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not previously been amortized under subparagraph (A).

(3) Treatment of certain long-term contracts

(4) Alternative tax net operating loss deduction

(5) Pollution control facilities

(6) Adjusted basis

(7) Section 87 not applicable

(b) Adjustments applicable to individualsIn determining the amount of the alternative minimum taxable income of any taxpayer (other than a corporation), the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):

(1) Limitation on deductions

(A) In generalNo deduction shall be allowed—

(i) for any miscellaneous itemized deduction (as defined in section 67(b)), or

(ii) for any taxes described in paragraph (1), (2), or (3) of section 164(a) or clause (ii) of section 164(b)(5)(A).

Clause (ii) shall not apply to any amount allowable in computing adjusted gross income.

(B) InterestIn determining the amount allowable as a deduction for interest, subsections (d) and (h) of section 163 shall apply, except that—

(i) in lieu of the exception under section 163(h)(2)(D), the term “personal interest” shall not include any qualified housing interest (as defined in subsection (e)),

(ii) interest on any specified private activity bond (and any amount treated as interest on a specified private activity bond under section 57(a)(5)(B)), and any deduction referred to in section 57(a)(5)(A), shall be treated as includible in gross income (or as deductible) for purposes of applying section 163(d),

(iii) in lieu of the exception under section 163(d)(3)(B)(i), the term “investment interest” shall not include any qualified housing interest (as defined in subsection (e)), and

(iv) the adjustments of this section and sections 57 and 58 shall apply in determining net investment income under section 163(d).

(D) Standard deduction and deduction for personal exemptions not allowed

(E) Section 68 not applicable

(2) Circulation and research and experimental expenditures

(A) In generalThe amount allowable as a deduction under section 173 or 174(a) in computing the regular tax for amounts paid or incurred after December 31, 1986, shall be capitalized and—

(i) in the case of circulation expenditures described in section 173, shall be amortized ratably over the 3-year period beginning with the taxable year in which the expenditures were made, or

(ii) in the case of research and experimental expenditures described in section 174(a), shall be amortized ratably over the 10-year period beginning with the taxable year in which the expenditures were made.

(i) the amount allowable under section 165(a) for the expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not previously been amortized under subparagraph (A).

(3) Treatment of incentive stock options

[(c) Repealed. Pub. L. 115–97, title I, § 12001(b)(8)(A), Dec. 22, 2017, 131 Stat. 2093]

(d) Alternative tax net operating loss deduction defined

(1) In generalFor purposes of subsection (a)(4), the term “alternative tax net operating loss deduction” means the net operating loss deduction allowable for the taxable year under section 172, except that—

(A) the amount of such deduction shall not exceed the sum of—

(i) the lesser of—(I) the amount of such deduction attributable to net operating losses (other than the deduction described in clause (ii)(I)), or(II) 90 percent of alternative minimum taxable income determined without regard to such deduction and the deduction under section 199,1 plus

(ii) the lesser of—(I) the amount of such deduction attributable to an applicable net operating loss with respect to which an election is made under section 172(b)(1)(H) (as in effect before its repeal by the Tax Increase Prevention Act of 2014), or(II) alternative minimum taxable income determined without regard to such deduction and the deduction under section 199 1 reduced by the amount determined under clause (i), and

(B) in determining the amount of such deduction—

(i) the net operating loss (within the meaning of section 172(c)) for any loss year shall be adjusted as provided in paragraph (2), and

(ii) appropriate adjustments in the application of section 172(b)(2) shall be made to take into account the limitation of subparagraph (A).

(2) Adjustments to net operating loss computation

(A) Post-1986 loss yearsIn the case of a loss year beginning after December 31, 1986, the net operating loss for such year under section 172(c) shall—

(i) be determined with the adjustments provided in this section and section 58, and

(ii) be reduced by the items of tax preference determined under section 57 for such year.

An item of tax preference shall be taken into account under clause (ii) only to the extent such item increased the amount of the net operating loss for the taxable year under section 172(c).

(B) Pre-1987 years

(e) Qualified housing interestFor purposes of this part—

(1) In generalThe term “qualified housing interest” means interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued during the taxable year on indebtedness which is incurred in acquiring, constructing, or substantially improving any property which—

(A) is the principal residence (within the meaning of section 121) of the taxpayer at the time such interest accrues, or

(B) is a qualified dwelling which is a qualified residence (within the meaning of section 163(h)(4)).

Such term also includes interest on any indebtedness resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence; but only to the extent that the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness immediately before the refinancing.

(2) Qualified dwellingThe term “qualified dwelling” means any—

(A) house,

(B) apartment,

(D) mobile home not used on a transient basis (within the meaning of section 7701(a)(19)(C)(v)),

including all structures or other property appurtenant thereto.

(3) Special rule for indebtedness incurred before July 1, 1982The term “qualified housing interest” includes interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued on indebtedness which—

(A) was incurred by the taxpayer before July 1, 1982, and

(B) is secured by property which, at the time such indebtedness was incurred, was—

(i) the principal residence (within the meaning of section 121) of the taxpayer, or

(ii) a qualified dwelling used by the taxpayer (or any member of his family (within the meaning of section 267(c)(4))).

(Added Pub. L. 99–514, title VII, § 701(a), Oct. 22, 1986, 100 Stat. 2322; amended Pub. L. 100–203, title X, §§ 10202(d), 10243(a), Dec. 22, 1987, 101 Stat. 1330–392, 1330–423; Pub. L. 100–647, title I, §§ 1002(a)(12), 1007(b)(1)–(14)(A), (15)–(19), title II, §§ 2001(c)(3)(A), 2004(b)(2), (3), title V, § 5041(b)(4), title VI, §§ 6079(a)(1), 6303(a), Nov. 10, 1988, 102 Stat. 3355, 3428–3432, 3594, 3599, 3674, 3709, 3755; Pub. L. 101–239, title VII, §§ 7205(b), 7611(a)–(f)(4), 7612(c)(1), (d)(1), 7811(d)(3), 7815(e)(2), (4), Dec. 19, 1989, 103 Stat. 2335, 2371–2374, 2408, 2419; Pub. L. 101–508, title XI, §§ 11103(b), 11301(b), 11531(a), (b)(1), 11704(a)(1), 11801(a)(3), (c)(2)(A)–(C), (9)(G), 11812(b)(4), Nov. 5, 1990, 104 Stat. 1388–406, 1388–449, 1388–488, 1388–490, 1388–518, 1388–520, 1388–522, 1388–523, 1388–526, 1388–535; Pub. L. 102–486, title XIX, § 1915(a)(2), (b)(2), (c)(1), (2), Oct. 24, 1992, 106 Stat. 3023, 3024; Pub. L. 103–66, title XIII, §§ 13115(a), 13171(b), 13227(c), Aug. 10, 1993, 107 Stat. 432, 454, 493; Pub. L. 104–188, title I, §§ 1601(b)(2)(B), (C), 1621(b)(2), 1702(c)(1), (e)(1)(A), (g)(4), (h)(12), 1704(t)(1), (48), Aug. 20, 1996, 110 Stat. 1832, 1833, 1867, 1869, 1870, 1873, 1874, 1887, 1889; Pub. L. 105–34, title III, § 312(d)(1), title IV, §§ 402, 403(a), title XII, § 1212(a), Aug. 5, 1997, 111 Stat. 839, 844, 1000; Pub. L. 105–277, div. J, title IV, § 4006(c)(2), Oct. 21, 1998, 112 Stat. 2681–912; Pub. L. 106–519, § 4(1), Nov. 15, 2000, 114 Stat. 2432; Pub. L. 106–554, § 1(a)(7) [title III, § 314(d)], Dec. 21, 2000, 114 Stat. 2763, 2763A–643; Pub. L. 107–147, title I, § 102(c)(1), title IV, § 417(5), Mar. 9, 2002, 116 Stat. 26, 56; Pub. L. 108–173, title XII, § 1202(b), Dec. 8, 2003, 117 Stat. 2480; Pub. L. 108–311, title IV, § 403(b)(4), Oct. 4, 2004, 118 Stat. 1187; Pub. L. 108–357, title I, §§ 101(b)(4), 102(b), title II, § 248(b)(1), title IV, § 422(b), title VIII, § 835(b)(1), Oct. 22, 2004, 118 Stat. 1423, 1428, 1457, 1519, 1593; Pub. L. 109–58, title XIII, § 1326(d), Aug. 8, 2005, 119 Stat. 1017; Pub. L. 109–135, title IV, § 403(a)(14), (r)(2), Dec. 21, 2005, 119 Stat. 2619, 2628; Pub. L. 109–304, § 17(e)(1), Oct. 6, 2006, 120 Stat. 1707; Pub. L. 110–172, § 11(g)(1), (2), Dec. 29, 2007, 121 Stat. 2489, 2490; Pub. L. 110–289, div. C, title I, § 3022(a)(2), July 30, 2008, 122 Stat. 2894; Pub. L. 110–343, div. C, title VII, §§ 706(b)(3), 708(c), Oct. 3, 2008, 122 Stat. 3922, 3925; Pub. L. 111–5, div. B, title I, §§ 1008(d), 1503(b), Feb. 17, 2009, 123 Stat. 318, 354; Pub. L. 111–92, § 13(b), Nov. 6, 2009, 123 Stat. 2993; Pub. L. 111–148, title IX, § 9013(c), Mar. 23, 2010, 124 Stat. 868; Pub. L. 113–295, div. A, title II, §§ 215(b), 221(a)(9), (25)(B), (30)(C), Dec. 19, 2014, 128 Stat. 4034, 4038, 4040, 4042; Pub. L. 115–97, title I, §§ 11027(b), 12001(b)(7), (8)(A), Dec. 22, 2017, 131 Stat. 2077, 2093; Pub. L. 115–141, div. U, title IV, § 401(b)(7), (8), Mar. 23, 2018, 132 Stat. 1202; Pub. L. 116–94, div. Q, title I, § 103(b), Dec. 20, 2019, 133 Stat. 3228.)

§ 56A. Adjusted financial statement income

(a) In general

(b) Applicable financial statement

(1) Statements covering different taxable years

(2) Special rules for related entities

(A) Consolidated financial statements

(B) Consolidated returns

(D) Treatment of partnerships

(i) In general

(ii) Adjusted financial statement income of partnerships

(3) Adjustments to take into account certain items of foreign income

(A) In general

(B) Negative adjustmentsIn any case in which the adjustment determined under subparagraph (A) would result in a negative adjustment for such taxable year—

(i) no adjustment shall be made under this paragraph for such taxable year, and

(ii) the amount of the adjustment determined under this paragraph for the succeeding taxable year (determined without regard to this paragraph) shall be reduced by an amount equal to the negative adjustment for such taxable year.

(4) Effectively connected income

(5) Adjustments for certain taxes

(6) Adjustment with respect to disregarded entities

(7) Special rule for cooperatives

(8) Rules for Alaska native corporationsAdjusted financial statement income shall be appropriately adjusted to allow—

(A) cost recovery and depletion attributable to property the basis of which is determined under section 21(c) of the Alaska Native Claims Settlement Act (43 U.S.C. 1620(c)), and

(B) deductions for amounts payable made pursuant to section 7(i) or section 7(j) of such Act (43 U.S.C. 1606(i) and 1606(j)) only at such time as the deductions are allowed for tax purposes.

(9) Amounts attributable to elections for direct payment of certain credits

(10) Consistent treatment of mortgage servicing income of taxpayer other than a regulated investment company

(A) In general

(B) Rules for amounts not representing reasonable compensation

(11) Adjustment with respect to defined benefit pensions

(A) In generalExcept as otherwise provided in rules prescribed by the Secretary in regulations or other guidance, adjusted financial statement income shall be—

(i) adjusted to disregard any amount of income, cost, or expense that would otherwise be included on the applicable financial statement in connection with any covered benefit plan,

(ii) increased by any amount of income in connection with any such covered benefit plan that is included in the gross income of the corporation under any other provision of this chapter, and

(iii) reduced by deductions allowed under any other provision of this chapter with respect to any such covered benefit plan.

(B) Covered benefit planFor purposes of this paragraph, the term “covered benefit plan” means—

(i) a defined benefit plan (other than a multiemployer plan described in section 414(f)) if the trust which is part of such plan is an employees’ trust described in section 401(a) which is exempt from tax under section 501(a),

(ii) any qualified foreign plan (as defined in section 404A(e)), or

(iii) any other defined benefit plan which provides post-employment benefits other than pension benefits.

(12) Tax-exempt entitiesIn the case of an organization subject to tax under section 511, adjusted financial statement income shall be appropriately adjusted to only take into account any adjusted financial statement income—

(A) of an unrelated trade or business (as defined in section 513) of such organization, or

(B) derived from debt-financed property (as defined in section 514) to the extent that income from such property is treated as unrelated business taxable income.

(13) DepreciationAdjusted financial statement income shall be—

(A) reduced by depreciation deductions allowed under section 167 with respect to property to which section 168 applies to the extent of the amount allowed as deductions in computing taxable income for the taxable year, and

(B) appropriately adjusted—

(i) to disregard any amount of depreciation expense that is taken into account on the taxpayer’s applicable financial statement with respect to such property, and

(ii) to take into account any other item specified by the Secretary in order to provide that such property is accounted for in the same manner as it is accounted for under this chapter.

(14) Qualified wireless spectrum

(A) In generalAdjusted financial statement income shall be—

(i) reduced by amortization deductions allowed under section 197 with respect to qualified wireless spectrum to the extent of the amount allowed as deductions in computing taxable income for the taxable year, and

(ii) appropriately adjusted—(I) to disregard any amount of amortization expense that is taken into account on the taxpayer’s applicable financial statement with respect to such qualified wireless spectrum, and(II) to take into account any other item specified by the Secretary in order to provide that such qualified wireless spectrum is accounted for in the same manner as it is accounted for under this chapter.

(B) Qualified wireless spectrumFor purposes of this paragraph, the term “qualified wireless spectrum” means wireless spectrum which—

(i) is used in the trade or business of a wireless telecommunications carrier, and

(ii) was acquired after December 31, 2007, and before the date of enactment of this section.

(15) Secretarial authority to adjust itemsThe Secretary shall issue regulations or other guidance to provide for such adjustments to adjusted financial statement income as the Secretary determines necessary to carry out the purposes of this section, including adjustments—

(A) to prevent the omission or duplication of any item, and

(B) to carry out the principles of part II of subchapter C of this chapter (relating to corporate liquidations), part III of subchapter C of this chapter (relating to corporate organizations and reorganizations), and part II of subchapter K of this chapter (relating to partnership contributions and distributions).

(d) Deduction for financial statement net operating loss

(1) In generalAdjusted financial statement income (determined after application of subsection (c) and without regard to this subsection) shall be reduced by an amount equal to the lesser of—

(A) the aggregate amount of financial statement net operating loss carryovers to the taxable year, or

(B) 80 percent of adjusted financial statement income computed without regard to the deduction allowable under this subsection.

(2) Financial statement net operating loss carryover

(3) Financial statement net operating loss defined

(e) Regulations and other guidance

(Added Pub. L. 117–169, title I, § 10101(b)(1), Aug. 16, 2022, 136 Stat. 1822.)

§ 57. Items of tax preference

(a) General rule

For purposes of this part, the items of tax preference determined under this section are—

(1) Depletion

(2) Intangible drilling costs

(A) In general

(B) Excess intangible drilling costs

For purposes of subparagraph (A), the amount of the excess intangible drilling costs arising in the taxable year is the excess of—

(i) the intangible drilling and development costs paid or incurred in connection with oil, gas, and geothermal wells (other than costs incurred in drilling a nonproductive well) allowable under section 263(c) or 291(b) for the taxable year, over

(ii) the amount which would have been allowable for the taxable year if such costs had been capitalized and straight line recovery of intangibles (as defined in subsection (b)) had been used with respect to such costs.

For purposes of subparagraph (A), the amount of the net income of the taxpayer from oil, gas, and geothermal properties for the taxable year is the excess of—

(i) the aggregate amount of gross income (within the meaning of section 613(a)) from all oil, gas, and geothermal properties of the taxpayer received or accrued by the taxpayer during the taxable year, over

(ii) the amount of any deductions allocable to such properties reduced by the excess described in subparagraph (B) for such taxable year.

(D) Paragraph applied separately with respect to geothermal properties and oil and gas properties

This paragraph shall be applied separately with respect to—

(i) all oil and gas properties which are not described in clause (ii), and

(ii) all properties which are geothermal deposits (as defined in section 613(e)(2)).

(E) Exception for independent producers

In the case of any oil or gas well—

(i) In general

(ii) Limitation on benefit

[(3) Repealed. Pub. L. 100–647, title I, § 1007(b)(14)(B), Nov. 10, 1988, 102 Stat. 3430]

[(4) Repealed. Pub. L. 104–188, title I, § 1616(b)(3), Aug. 20, 1996, 110 Stat. 1856]

(5) Tax-exempt interest

(A) In general

(B) Treatment of exempt-interest dividends

(i) In general

(ii) Exception for qualified 501(c)(3) bonds

(iii) Exception for certain housing bonds

For purposes of clause (i), the term “private activity bond” shall not include any bond issued after the date of the enactment of this clause if such bond is—

(I) an exempt facility bond issued as part of an issue 95 percent or more of the net proceeds of which are to be used to provide qualified residential rental projects (as defined in section 142(d)),(II) a qualified mortgage bond (as defined in section 143(a)), or(III) a qualified veterans’ mortgage bond (as defined in section 143(b)).

The preceding sentence shall not apply to any refunding bond unless such preceding sentence applied to the refunded bond (or in the case of a series of refundings, the original bond).

(iv) Exception for refundings

(v) Certain bonds issued before September 1, 1986

For purposes of this subparagraph, a bond issued before September 1, 1986, shall be treated as issued before August 8, 1986, unless such bond would be a private activity bond if—

(I) paragraphs (1) and (2) of section 141(b) were applied by substituting “25 percent” for “10 percent” each place it appears,(II) paragraphs (3), (4), and (5) of section 141(b) did not apply, and(III) subparagraph (B) of section 141(c)(1) did not apply.

(vi) Exception for bonds issued in 2009 and 2010(I) In general(II) Treatment of refunding bonds(III) Exception for certain refunding bonds

(6) Accelerated depreciation or amortization on certain property placed in service before January 1, 1987

(7) Exclusion for gains on sale of certain small business stock

(b) Straight line recovery of intangibles defined

For purposes of paragraph (2) of subsection (a)—

(1) In general

(2) Election

(Added Pub. L. 99–514, title VII, § 701(a), Oct. 22, 1986, 100 Stat. 2333; amended Pub. L. 100–647, title I, § 1007(b)(14)(B), (c), Nov. 10, 1988, 102 Stat. 3430, 3432; Pub. L. 101–508, title XI, §§ 11344, 11801(c)(12)(A), 11815(b)(3), Nov. 5, 1990, 104 Stat. 1388–472, 1388–527, 1388–558; Pub. L. 102–227, title I, § 112, Dec. 11, 1991, 105 Stat. 1689; Pub. L. 102–486, title XIX, § 1915(a)(1), (b)(1), Oct. 24, 1992, 106 Stat. 3023, 3024; Pub. L. 103–66, title XIII, §§ 13113(b)(1), 13171(a), Aug. 10, 1993, 107 Stat. 429, 454; Pub. L. 104–188, title I, § 1616(b)(3), Aug. 20, 1996, 110 Stat. 1856; Pub. L. 105–34, title III, § 311(b)(2)(B), Aug. 5, 1997, 111 Stat. 835; Pub. L. 105–206, title VI, § 6005(d)(3), July 22, 1998, 112 Stat. 805; Pub. L. 108–27, title III, § 301(b)(3), May 28, 2003, 117 Stat. 759; Pub. L. 110–289, div. C, title I, § 3022(a)(1), July 30, 2008, 122 Stat. 2893; Pub. L. 111–5, div. B, title I, § 1503(a), Feb. 17, 2009, 123 Stat. 354; Pub. L. 113–295, div. A, title II, § 221(a)(10), (11), Dec. 19, 2014, 128 Stat. 4038.)

§ 58. Denial of certain losses

(a) Denial of farm loss

(1) In general

For purposes of computing the amount of the alternative minimum taxable income for any taxable year of a taxpayer other than a corporation—

(A) Disallowance of farm loss

(B) Deduction in succeeding taxable year

(2) Tax shelter farm activity

For purposes of this subsection, the term “tax shelter farm activity” means—

(A) any farming syndicate as defined in section 461(k), and

(B) any other activity consisting of farming which is a passive activity (within the meaning of section 469(c)).

(3) Determination of loss

(b) Disallowance of passive activity loss

In computing the alternative minimum taxable income of the taxpayer for any taxable year, section 469 shall apply, except that in applying section 469—

(1) the adjustments of sections 56 and 57 shall apply, and

(2) in lieu of applying section 469(j)(7), the passive activity loss of a taxpayer shall be computed without regard to qualified housing interest (as defined in section 56(e)).

For purposes of this section—

(1) Special rule for insolvent taxpayers

(A) In general

(B) Insolvent

(2) Loss allowed for year of disposition of farm shelter activity

(Added Pub. L. 99–514, title VII, § 701(a), Oct. 22, 1986, 100 Stat. 2335; amended Pub. L. 100–203, title X, § 10212(b), Dec. 22, 1987, 101 Stat. 1330–406; Pub. L. 100–647, title I, § 1007(d), Nov. 10, 1988, 102 Stat. 3432; Pub. L. 113–295, div. A, title II, § 221(a)(58)(E), (60)(B), Dec. 19, 2014, 128 Stat. 4047, 4048; Pub. L. 115–97, title I, § 12001(b)(9), Dec. 22, 2017, 131 Stat. 2093; Pub. L. 115–141, div. U, title IV, § 401(a)(30), Mar. 23, 2018, 132 Stat. 1185.)

§ 59. Other definitions and special rules

(a) Alternative minimum tax foreign tax creditFor purposes of this part—

(1) In generalThe alternative minimum tax foreign tax credit for any taxable year shall be the credit which would be determined under section 27 for such taxable year if—

(A) the pre-credit tentative minimum tax were the tax against which such credit was taken for purposes of section 904 for the taxable year and all prior taxable years beginning after December 31, 1986,

(B) section 904 were applied on the basis of alternative minimum taxable income instead of taxable income, and

(C) the determination of whether any income is high-taxed income for purposes of section 904(d)(2) were made on the basis of the applicable rate specified in section 55(b)(1) in lieu of the highest rate of tax specified in section 1.

(2) Pre-credit tentative minimum tax

(3) Election to use simplified section 904 limitation

(A) In generalIn determining the alternative minimum tax foreign tax credit for any taxable year to which an election under this paragraph applies—

(i) subparagraph (B) of paragraph (1) shall not apply, and

(ii) the limitation of section 904 shall be based on the proportion which—(I) the taxpayer’s taxable income (as determined for purposes of the regular tax) from sources without the United States (but not in excess of the taxpayer’s entire alternative minimum taxable income), bears to(II) the taxpayer’s entire alternative minimum taxable income for the taxable year.

(B) Election

(i) In general

(ii) Election revocable only with consent

[(b) Repealed. Pub. L. 115–97, title I, § 12001(b)(10), Dec. 22, 2017, 131 Stat. 2093]

(d) Apportionment of differently treated items in case of certain entities

(1) In generalThe differently treated items for the taxable year shall be apportioned (in accordance with regulations prescribed by the Secretary)—

(A) Regulated investment companies and real estate investment trusts

(B) Common trust funds

(2) Differently treated items

(e) Optional 10-year writeoff of certain tax preferences

(1) In general

(2) Qualified expenditureFor purposes of this subsection, the term “qualified expenditure” means any amount which, but for an election under this subsection, would have been allowable as a deduction (determined without regard to section 291) for the taxable year in which paid or incurred under—

(A) section 173 (relating to circulation expenditures),

(B) section 174(a) (relating to research and experimental expenditures),

(D) section 616(a) (relating to development expenditures), or

(E) section 617(a) (relating to mining exploration expenditures).

(3) Other sections not applicable

(4) Election

(A) In general

(B) Revocable only with consent

(5) Dispositions

(A) Application of section 1254

(B) Application of section 617(d)

(6) Amounts to which election apply not treated as tax preference

[(f) Repealed. Pub. L. 115–97, title I, § 12001(b)(10), Dec. 22, 2017, 131 Stat. 2093]

(g) Tax benefit rule

(h) Coordination with certain limitations

(i) Special rule for amounts treated as tax preference

(j) Treatment of unearned income of minor children

(1) In generalIn the case of a child to whom section 1(g) applies, the exemption amount for purposes of section 55 shall not exceed the sum of—

(A) such child’s earned income (as defined in section 911(d)(2)) for the taxable year, plus

(B) $5,000.

(2) Inflation adjustmentIn the case of any taxable year beginning in a calendar year after 1998, the dollar amount in paragraph (1)(B) shall be increased by an amount equal to the product of—

(A) such dollar amount, and

(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting “1997” for “2016” in subparagraph (A)(ii) thereof.

If any increase determined under the preceding sentence is not a multiple of $50, such increase shall be rounded to the nearest multiple of $50.

(k) Applicable corporationFor purposes of this part—

(1) Applicable corporation defined

(A) In generalThe term “applicable corporation” means, with respect to any taxable year, any corporation (other than an S corporation, a regulated investment company, or a real estate investment trust) which meets the average annual adjusted financial statement income test of subparagraph (B) for one or more taxable years which—

(i) are prior to such taxable year, and

(ii) end after December 31, 2021.

(B) Average annual adjusted financial statement income testFor purposes of this subsection—

(i) a corporation meets the average annual adjusted financial statement income test for a taxable year if the average annual adjusted financial statement income of such corporation (determined without regard to section 56A(d)) for the 3-taxable-year period ending with such taxable year exceeds $1,000,000,000, and

(ii) in the case of a corporation described in paragraph (2), such corporation meets the average annual adjusted financial statement income test for a taxable year if—(I) the corporation meets the requirements of clause (i) for such taxable year (determined after the application of paragraph (2)), and(II) the average annual adjusted financial statement income of such corporation (determined without regard to the application of paragraph (2) and without regard to section 56A(d)) for the 3-taxable-year-period ending with such taxable year is $100,000,000 or more.

(C) ExceptionNotwithstanding subparagraph (A), the term “applicable corporation” shall not include any corporation which otherwise meets the requirements of subparagraph (A) if—

(i) such corporation—(I) has a change in ownership, or(II) has a specified number (to be determined by the Secretary and which shall, as appropriate, take into account the facts and circumstances of the taxpayer) of consecutive taxable years, including the most recent taxable year, in which the corporation does not meet the average annual adjusted financial statement income test of subparagraph (B), and

(ii) the Secretary determines that it would not be appropriate to continue to treat such corporation as an applicable corporation.

The preceding sentence shall not apply to any corporation if, after the Secretary makes the determination described in clause (ii), such corporation meets the average annual adjusted financial statement income test of subparagraph (B) for any taxable year beginning after the first taxable year for which such determination applies.

(D) Special rules for determining applicable corporation status

(E) Other special rules

(i) Corporations in existence for less than 3 years

(ii) Short taxable years

(iii) Treatment of predecessors

(2) Special rule for foreign-parented multinational groups

(A) In general

(B) Foreign-parented multinational groupFor purposes of subparagraph (A), the term “foreign-parented multinational group” means, with respect to any taxable year, two or more entities if—

(i) at least one entity is a domestic corporation and another entity is a foreign corporation,

(ii) such entities are included in the same applicable financial statement with respect to such year, and

(iii) either—(I) the common parent of such entities is a foreign corporation, or(II) if there is no common parent, the entities are treated as having a common parent which is a foreign corporation under subparagraph (D).

(D) Other rulesThe Secretary shall, applying the principles of this section, prescribe rules for the application of this paragraph, including rules for the determination of—

(i) the entities (if any) which are to be to be treated under subparagraph (B)(iii)(II) as having a common parent which is a foreign corporation,

(ii) the entities to be included in a foreign-parented multinational group, and

(iii) the common parent of a foreign-parented multinational group.

(3) Regulations or other guidanceThe Secretary shall provide regulations or other guidance for the purposes of carrying out this subsection, including regulations or other guidance—

(A) providing a simplified method for determining whether a corporation meets the requirements of paragraph (1), and

’(B) 1

1 So in original.

addressing the application of this subsection to a corporation that experiences a change in ownership.

(l) Corporate AMT foreign tax credit

(1) In generalFor purposes of this part, if an applicable corporation chooses to have the benefits of subpart A of part III of subchapter N for any taxable year, the corporate AMT foreign tax credit for the taxable year of the applicable corporation is an amount equal to sum of—

(A) the lesser of—

(i) the aggregate of the applicable corporation’s pro rata share (as determined under section 56A(c)(3)) of the amount of income, war profits, and excess profits taxes (within the meaning of section 901) imposed by any foreign country or possession of the United States which are—(I) taken into account on the applicable financial statement of each controlled foreign corporation with respect to which the applicable corporation is a United States shareholder, and(II) paid or accrued (for Federal income tax purposes) by each such controlled foreign corporation, or

(ii) the product of the amount of the adjustment under section 56A(c)(3) and the percentage specified in section 55(b)(2)(A)(i), and

(B) in the case of an applicable corporation that is a domestic corporation, the amount of income, war profits, and excess profits taxes (within the meaning of section 901) imposed by any foreign country or possession of the United States to the extent such taxes are—

(i) taken into account on the applicable corporation’s applicable financial statement, and

(ii) paid or accrued (for Federal income tax purposes) by the applicable corporation.

(2) Carryover of excess tax paid

(3) Regulations or other guidance

(Added Pub. L. 99–514, title VII, § 701(a), Oct. 22, 1986, 100 Stat. 2336; amended Pub. L. 100–647, title I, §§ 1007(e), 1014(e)(5)(A), Nov. 10, 1988, 102 Stat. 3432, 3561; Pub. L. 101–239, title VII, §§ 7611(f)(5)(B), (6), 7612(e)(1), 7811(d)(1)(A), (j)(7), Dec. 19, 1989, 103 Stat. 2373, 2374, 2408, 2412; Pub. L. 101–508, title XI, §§ 11101(d)(3), 11531(b)(2), 11702(d), 11801(c)(2)(D), Nov. 5, 1990, 104 Stat. 1388–405, 1388–490, 1388–514, 1388–523; Pub. L. 102–486, title XIX, § 1915(c)(3), Oct. 24, 1992, 106 Stat. 3024; Pub. L. 104–188, title I, §§ 1601(b)(2)(D), 1702(a)(1), 1703(e), 1704(m)(3), Aug. 20, 1996, 110 Stat. 1833, 1868, 1875, 1883; Pub. L. 105–34, title X, § 1057(a), title XI, § 1103(a), title XII, § 1201(b)(1), Aug. 5, 1997, 111 Stat. 945, 966, 994; Pub. L. 105–206, title VI, §§ 6011(a), 6023(2), July 22, 1998, 112 Stat. 817, 824; Pub. L. 108–357, title IV, § 421(a)(1), Oct. 22, 2004, 118 Stat. 1514; Pub. L. 115–97, title I, §§ 11002(d)(4), 12001(b)(3)(C), (10), Dec. 22, 2017, 131 Stat. 2061, 2093; Pub. L. 115–141, div. U, title IV, § 401(d)(1)(D)(ii), Mar. 23, 2018, 132 Stat. 1206; Pub. L. 117–169, title I, §§ 10101(a)(2), (c), 13904(a), Aug. 16, 2022, 136 Stat. 1818, 1827, 2014.)