On Jan. 16, the IRS announced it will return the sequestered portions of refunds of alternative minimum tax (AMT) credits to taxpayers who made a tax code Section 168(k)(4) election to forgo bonus depreciation in return for refundable minimum tax credits (MTCs). The announcement followed the Office of Management and Budget’s (OMB) recent policy change on the matter.
In the IRS announcement, the agency said it had a complete list of all taxpayers affected. They will not need to take any action. The IRS will send refunds with applicable overpayment interest in fiscal year 2020. Any funds due to a taxpayer, however, will first offset current tax liabilities. The IRS estimates the OMB determination will affect less than 1,000 businesses.
Refund payments issued to, and credit elect and refund offset transactions for, corporations claiming refundable MCTs for prior year AMT liability were formerly subject to sequestration. The OMB determination corrects and reverses the previous determination.