Gerald Marx
San Diego, California
March 3, 2007
The
Honorable Chairman Richard Neal
The
Honorable Ranking Member Phil English
Select
Revenue Measures Subcommittee
1102 Longworth House Office Building
Washington DC 20515
Dear Chairman Neal and Ranking Member English:
My
name is Gerald Marx and I am writing on behalf of myself and my family,
regarding a huge AMT tax debt that we incurred on “phantom” gains due to the
application of the Alternative Minimum Tax to incentive stock options (ISOs). I
reside in the 50th Congressional District in California.
I would first like to thank
Congress and in particular the Members of the Ways and Means Committee and
Select Revenue Measures Subcommittee, for the ISO AMT Relief passed last year.
This relief brings a ray of hope and the beginning of the end to a financial
nightmare that my family and I have been living for nearly seven years. We
struggle to express our deep gratitude for the Relief Legislation, which takes
a big step forward to restoring fair return of tax overpayment credits that
were generated when the stock value plummeted and ISO AMT tax became grossly
disproportionate to any gain actually made on the stock.
I would respectfully ask for your continued support for
important issues that remain unresolved for many ISO AMT victims, my family
included. These issues are (i) ongoing ISO AMT liability and associated
interest and penalties, and (ii) the income phase-outs that leave many families
with limited or no relief. These are discussed in more detail below, but
first I would like to briefly tell my family’s story.
In Year 2000, I exercised ISOs and incurred approximately
$39,000 in AMT. This depleted my family’s financial savings. As a result, in
Year 2001 and 2002, we maintained a strict budget where a few dollars did not
get unnoticed. This was especially true with a new baby in the family. I have
recovered approximately $35,000 of the original AMT but unfortunately, we will
be subject to AMT this year so the ultimate recovery is still at least a few
years away.
I know of several people who
were subject to AMT due to ISO exercises in Year 2000. One individual that I
know incurred approximately $500,000 in AMT. He was financially broke after that
experience. Tough financial times were had by all of these people.
Addressing Ongoing Liability, Interest and Penalties.
Many ISO AMT liabilities were so incredibly disproportional to actual gain,
that thousands of families across the country are still, six years after being
trapped by ISO AMT, embroiled in offers in compromise. I am hopeful that the
IRS will see that Congress did not intend to provide relief to people who were
significantly harmed (but were somehow able to pay), but deny relief to those
that were so completely devastated by the unintended consequences of the ISO
AMT provisions that they have been unable to pay. In addition, many families
had no choice but to enter into devastating offers in compromise that are
subjecting them to crushing ongoing monthly payments that are preventing them
from properly caring for their families.
I would respectfully request your help in instructing the
IRS to fulfill Congress’s intent to provide relief to all ISO AMT
victims, and end the collection nightmare that has been unfairly plaguing
hard-working families trapped by ISO AMT. Families who have suffered for
almost seven years are in desperate need of having remaining ongoing liability,
interest and penalties abated, or they will continue to be caught in the
downward spiral in which they have been suffering for years due to the
unintended consequences of the ISO AMT provisions.
Removing Relief Phase-out for American Families. A
significant change was made to the relief in HR3385 when it was included in the
Tax Relief and Health Care Act of 2006, in that an income phase-out provision
was added that leaves many American families with no relief or only partial
relief. This phase-out was not a part of the widely supported Johnson/Neal
HR3385. HR3385 recognized that families should pay their fair share of tax on
money actually received, regardless of income level. Also, these income
phase-outs unfairly targeting families in high cost-of-living States and
Districts such as Silicon Valley, Massachusetts, New York, Connecticut and
Virginia; those families are suffering as much from unfairly disproportionate
taxation as people with lower incomes in other areas.
The phase-outs themselves have
serious unintended consequences by forcing affected employees to quit work or
lower productivity in order to recover their credits, thereby robbing companies
and the economy of the services of high value employees, and robbing the
Treasury of tax revenue that would otherwise be collected from these people if
they were fully productive. Additionally families are frozen in their
footsteps for 5 years, for instance if they were to receive a spike in salary
or one-time bonus, they're also prevented from selling their homes and god
forbid a relative passed away and left some of their estate to you are left
with the Hobson's choice having to forgo some or all of your intended credit
refund because your collective AGI exceeded the Cap thresholds or limits.
I want to once again express my gratitude to Congress for all it has done and
is doing to help families across the country suffering from ISO AMT.
Please do not hesitate to contact me if
you have any questions.
Sincerely,
Gerald Marx
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