Magazine article The CPA Journal

Connecticut AMT Requires Federal AMT

Magazine article The CPA Journal

Connecticut AMT Requires Federal AMT

Article excerpt

In the April 1994 issue of The CPA Journal, it was noted that the State of Connecticut enacted an alternative minimum tax (AMT). The tax applies only if the taxpayer is subject to the Federal AMT. The state AMT is computed at 23% of state alternative minimum taxable income (AMTI). State AMTI is defined as Federal AMTI with certain modifications.

This brings about many anomalies. For example, one requirement in determining Federal alternative minimum taxable income (AMTI), and hence the Federal AMT liability, is to add back state taxes deducted in calculating Federal taxable income. Thus, state taxes yield no Federal tax benefit for taxpayers who are is subject to the Federal AMT.

The anomalies arise because Connecticut does not make an adjustment for is state taxes in calculating its AMTI. In other words, the greater the itemized deduction for state taxes is, the greater the taxpayer's state AMT liability will be. This is true even though-

1. the taxpayer is not getting a Federal benefit of the itemized deduction; and

2. Connecticut's tax is a tax on gross income, and state taxes (and other itemized deductions) would otherwise never enter into the determination of the State's tax computation. …

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