FROM THE OFFICE OF PUBLIC AFFAIRS

Attachment Tax Data

Today the Treasury Department released information (attached) on the corporate alternative minimum tax (AMT) that shows more than 30,000 companies paid higher taxes due to the AMT in 1998-a year in which the economy grew at a rate exceeding 4 percent. In a weaker economy like today's, the number of firm impacted by the corporate AMT would have been even greater. The 1998 information is the latest data available.

"The corporate AMT can be pro-cyclical. It can be triggered simply by a reduction in a company's sales and profits. It tends to increase a company's tax burden during an economic downturn, which may result in deeper and prolonged economic weakness by reducing business activity. Company's that are thrown into the AMT may be reluctant to hire new workers, or less able to retain as many of their current workers," stated Mark Weinberger, Treasury Assistant Secretary for Tax Policy. "Repeal of the AMT is one means of helping stimulate the economy, and it is one of the President's four priorities for the economic stimulus package."

The attached fact sheet explains the corporate AMT and types of companies affected. The AMT is a pre-payment of tax that is offset when and if the company returns to a sufficient level of profitability. Highlights include:

• The AMT increased the tax liability of 30,226 companies in 1998.
• Over one-quarter of all corporate assets were held by companies paying higher taxes due to the AMT.
• The 30,226 companies facing increased tax liabilities are spread over all industries, from agriculture to the service sector.
• The AMT particularly burdens the manufacturing sector of the economy, which employs over 17 million workers:
• Within manufacturing, more than 5,500 companies paid higher taxes due to the AMT.
• Over one-half of all manufacturing assets were held by companies paying higher taxes under the AMT.

Companies move in and out of AMT based on their profitability and spending patterns. Over time, a greater percentage of companies are affected by the AMT than in any single year. Using a continuous sample of tax returns of larger companies (over $50 million in assets) over the 1993-1998 period, nearly one-half of companies paid higher taxes due to the AMT in at least one year. Companies paying higher taxes due to the AMT in at least one year during this period account for about 70 percent of corporate assets in the sample.