Corporate AMT, tax-exempt organizations, and Form 4626

Oct 30, 2024 Last reply: 1 year ago 2 Replies
A

Here's a weird one.



As we recall, the Inflation Reduction Act of 2022 created a 15% AMT on adjusted financial statement income of corporations over $1 billion.



The unrelated businesses of tax-exempt organizations are also subject to AMT over $1 billion.



In a proposed regulation Corporate Alternative Minimum Tax Applicable After 2022

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provided a simplified method of whether AMT is applicable to a given corporate taxpayer but the method didn't take into account how it would apply to unrelated businesses of tax-exempt entities.



Because of this, tax-exempt organizations are exempted from filing Form



4626 Corporate AMT for 2023.

Nevertheless, they remain subject to AMT. The tax computation on the form must still be made even though the form isn't filed.



I don't see how the taxpayer would defend a position. Given the size of entity, this would be subject to agency review. Once the final regulation is in place, I assume it'll be retroactive to 2023 any and the orgnization must file anyway.



The organizations I work with aren't that large.


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J

According to Adam H. Kerman snipped-for-privacy@chinet.com:

If you owe UBIT, you have to file form 990-T and pay the tax. Alternative m Alternative Minimum Tax

Line 5. Organizations liable for tax on unrelated business taxable income may be liable for alternative minimum tax. Trusts attach Schedule I, Alternative Minimum Tax–Estate and Trusts, and enter any tax from Schedule I on this line. Corporations may need to complete and attach Form 4626, Alterative Minimum Tax–Corporation, and enter any tax from Form 4626 on this line. See the Instructions for Form 4626 for more information.

So no matter what that Federal Register page says, if you owe AMT it'd be pretty dumb to file a 990-T and not include the 4626.

By the way, what kind of charity has a billion dollars of UBI? Maybe Columbia University which owns a lot of NYC real estate such as the land under Rockefeller Center.

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A

Treasury doesn't need to have a specific charity in mind. The whole point of a tax-exempt organization being subject to UBIT on UBTI (and now AMT) is to try to avoid a tax shelter from being set up.

Tax-exempt organizations include more than just charities. For individuals, retirement funds are tax-exempt organizations which might hold investments that create UBTI. If you recall, a few months back, someone asked a question about a self-directed retirement fund and may have been required to file the 990-T himself.

The largest pension plans hold enormous pools of monies and can certainlu have UBTI.

I think the point is to prevent a tax attorney from advising a client to hold a major income-producing entity under a tax-exempt organization as a tax avoidance scheme.

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