§59. Other definitions and special rules

(a) Alternative minimum tax foreign tax credit

For purposes of this part-

(1) In general

The alternative minimum tax foreign tax credit for any taxable year shall be the credit which would be determined under section 27(a) for such taxable year if-

(A) the amount determined under section 55(b)(1)(A) were the tax against which such credit was taken for purposes of section 904 for the taxable year and all prior taxable years beginning after December 31, 1986,

(B) section 904 were applied on the basis of alternative minimum taxable income instead of taxable income, and

(C) the determination of whether any income is high-taxed income for purposes of section 904(d)(2) were made on the basis of the applicable rate specified in section 55(b)(1)(A) in lieu of the highest rate of tax specified in section 1 or 11 (whichever applies).

(2) Limitation to 90 percent of tax

(A) In general

The alternative minimum tax foreign tax credit for any taxable year shall not exceed the excess (if any) of-

(i) the amount determined under section 55(b)(1)(A) for the taxable year, over

(ii) 10 percent of the amount which would be determined under section 55(b)(1)(A) without regard to the alternative tax net operating loss deduction and section 57(a)(2)(E).

(B) Carryback and carryforward

If the alternative minimum tax foreign tax credit exceeds the amount determined under subparagraph (A), such excess shall, for purposes of this part, be treated as an amount to which section 904(c) applies.

(C) Exception

Subparagraph (A) shall not apply to any domestic corporation if-

(i) more than 50 percent of the stock of such domestic corporation (by vote and value) is owned by United States persons who are not members of an affiliated group (as defined in section 1504 of such Code) which includes such corporation,

(ii) all of the activities of such corporation are conducted in 1 foreign country with which the United States has an income tax treaty in effect and such treaty provides for the exchange of information between such foreign country and the United States,

(iii) all of the current earnings and profits of such corporation are distributed at least annually (other than current earnings and profits retained for normal maintenance or capital replacements or improvements of an existing business), and

(iv) all of such distributions by such corporation to United States persons are used by such persons in a trade or business conducted in the United States.

(b) Minimum tax not to apply to income eligible for section 936 credit

In the case of any corporation for which a credit is allowable for the taxable year under section 936, alternative minimum taxable income shall not include any amount with respect to which the requirements of subparagraph (A) or (B) of section 936(a)(1) are met.

(c) Treatment of estates and trusts

In the case of any estate or trust, the alternative minimum taxable income of such estate or trust and any beneficiary thereof shall be determined by applying part I of subchapter J with the adjustments provided in this part.

(d) Apportionment of differently treated items in case of certain entities

(1) In general

The differently treated items for the taxable year shall be apportioned (in accordance with regulations prescribed by the Secretary)-

(A) Regulated investment companies and real estate investment trusts

In the case of a regulated investment company to which part I of subchapter M applies or a real estate investment company to which part II of subchapter M applies, between such company or trust and shareholders and holders of beneficial interest in such company or trust.

(B) Common trust funds

In the case of a common trust fund (as defined in section 584(a)), pro rata among the participants of such fund.

(2) Differently treated items

For purposes of this section, the term "differently treated item" means any item of tax preference or any other item which is treated differently for purposes of this part than for purposes of computing the regular tax.

(e) Optional 10-year writeoff of certain tax preferences

(1) In general

For purposes of this title, any qualified expenditure to which an election under this paragraph applies shall be allowed as a deduction ratably over the 10-year period (3-year period in the case of circulation expenditures described in section 173) beginning with the taxable year in which such expenditure was made (or, in the case of a qualified expenditure described in paragraph (2)(C), over the 60-month period beginning with the month in which such expenditure was paid or incurred).

(2) Qualified expenditure

For purposes of this subsection, the term "qualified expenditure" means any amount which, but for an election under this subsection, would have been allowable as a deduction (determined without regard to section 291) for the taxable year in which paid or incurred under-

(A) section 173 (relating to circulation expenditures),

(B) section 174(a) (relating to research and experimental expenditures),

(C) section 263(c) (relating to intangible drilling and development expenditures),

(D) section 616(a) (relating to development expenditures), or

(E) section 617(a) (relating to mining exploration expenditures).

(3) Other sections not applicable

Except as provided in this subsection, no deduction shall be allowed under any other section for any qualified expenditure to which an election under this subsection applies.

(4) Election

(A) In general

An election may be made under paragraph (1) with respect to any portion of any qualified expenditure.

(B) Revocable only with consent

Any election under this subsection may be revoked only with the consent of the Secretary.

(C) Partners and shareholders of S corporations

In the case of a partnership, any election under paragraph (1) shall be made separately by each partner with respect to the partner's allocable share of any qualified expenditure. A similar rule shall apply in the case of an S corporation and its shareholders.

(5) Dispositions

(A) Application of section 1254

In the case of any disposition of property to which section 1254 applies (determined without regard to this section), any deduction under paragraph (1) with respect to amounts which are allocable to such property shall, for purposes of section 1254, be treated as a deduction allowable under section 263(c), 616(a), or 617(a), whichever is appropriate.

(B) Application of section 617(d)

In the case of any disposition of mining property to which section 617(d) applies (determined without regard to this subsection), any deduction under paragraph (1) with respect to amounts which are allocable to such property shall, for purposes of section 617(d), be treated as a deduction allowable under section 617(a).

(6) Amounts to which election apply not treated as tax preference

Any portion of any qualified expenditure to which an election under paragraph (1) applies shall not be treated as an item of tax preference under section 57(a) and section 56 shall not apply to such expenditure.

(f) Coordination with section 291

Except as otherwise provided in this part, section 291 (relating to cutback of corporate preferences) shall apply before the application of this part.

(g) Tax benefit rule

The Secretary may prescribe regulations under which differently treated items shall be properly adjusted where the tax treatment giving rise to such items will not result in the reduction of the taxpayer's regular tax for the taxable year for which the item is taken into account or for any other taxable year.

(h) Coordination with certain limitations

The limitations of sections 704(d), 465, and 1366(d) (and such other provisions as may be specified in regulations) shall be applied for purposes of computing the alternative minimum taxable income of the taxpayer for the taxable year with the adjustments of sections 56, 57, and 58.

(i) Special rule for amounts treated as tax preference

For purposes of this subtitle (other than this part), any amount shall not fail to be treated as wholly exempt from tax imposed by this subtitle solely by reason of being included in alternative minimum taxable income.

(j) Treatment of unearned income of minor children

(1) Limitation on exemption amount

In the case of a child to whom section 1(g) applies, the exemption amount for purposes of section 55 shall not exceed the sum of-

(A) such child's earned income (as defined in section 911(d)(2)) for the taxable year, plus

(B) $1,000 (or, if greater, the child's share of the unused parental minimum tax exemption).

(2) Limitation based on parental minimum tax

(A) In general

In the case of a child to whom section 1(g) applies, the amount of the tax imposed by section 55 shall not exceed such child's share of the allocable parental minimum tax.

(B) Allocable parental minimum tax

For purposes of this paragraph, the term "allocable parental minimum tax" means the excess of-

(i) the tax which would be imposed by section 55 on the parent if-

(I) the amount of the parent's tentative minimum tax were increased by the aggregate of the tentative minimum taxes of all children of the parent to whom section 1(g) applies, and

(II) the amount of the parent's regular tax were increased by the aggregate of the regular taxes of all children of the parent to whom section 1(g) applies, over

(ii) the tax imposed by section 55 on the parent without regard to this subparagraph.

(C) Child share

A child's share of any allocable parental minimum tax shall be determined under rules similar to the rules of section 1(g)(3)(B).

(D) Other rules made applicable

For purposes of this paragraph, rules similar to the rules of paragraphs (3)(D), (5), and (6) of section 1(g) shall apply.

(3) Unused parental minimum tax exemption

(A) In general

For purposes of this subsection, the term "unused parental minimum tax exemption" means the excess (if any) of-

(i) the exemption amount applicable to the parent under section 55(d), over

(ii) the parent's alternative minimum taxable income.

(B) Certain rules made applicable

A child's share of any unused parental minimum tax exemption shall be determined under rules similar to the rules of section 1(i)(3)(B),¹ and rules similar to the rules of paragraphs (3)(D) and (5) of section 1(g) shall apply for purposes of this paragraph.

(Added Pub. L. 99–514, title VII, §701(a), Oct. 22, 1986, 100 Stat. 2336 ; amended Pub. L. 100–647, title I, §§1007(e), 1014(e)(5)(A), Nov. 10, 1988, 102 Stat. 3432 , 3561; Pub. L. 101–239, title VII, §§7611(f)(5)(B), (6), 7612(e)(1), 7811(d)(1)(A), (j)(7), Dec. 19, 1989, 103 Stat. 2373 , 2374, 2408, 2412; Pub. L. 101–508, title XI, §§11101(d)(3), 11531(b)(2), 11702(d), 11801(c)(2)(D), Nov. 5, 1990, 104 Stat. 1388–405 , 1388-490, 1388-514, 1388-523; Pub. L. 102–486, title XIX, §1915(c)(3), Oct. 24, 1992, 106 Stat. 3024 .)

References in Text

Section 1(i)(3)(B), referred to in subsec. (j)(3)(B), was redesignated section 1(g)(3)(B) of this title by Pub. L. 101–508, title XI, §11101(d)(2), Nov. 5, 1990, 104 Stat. 1388–405 .

Codification

Pub. L. 101–508, title XI, §11801(c)(2)(B), Nov. 5, 1990, 104 Stat. 1388–523 , which directed that pars. (1) and (2) of "section 59(g) are each amended by striking 'beginning after 1989' ", could not be executed because subsec. (g) of this section contains neither paragraphs nor such language. Such amendment was executed to pars. (1) and (2)(A) of section 56(g) of this title to reflect the probable intent of Congress.

Amendments

1992-Subsec. (a)(2)(A)(ii). Pub. L. 102–486 substituted "and section 57(a)(2)(E)" for "and the alternative tax energy preference deduction under section 56(h)".

1990-Subsec. (a)(1)(B) to (D). Pub. L. 101–508, §11801(c)(2)(D), inserted "and" at end of subpar. (B), redesignated subpar. (D) as (C), and struck out former subpar. (C) which read as follows: "for purposes of section 904, any increase in alternative minimum taxable income by reason of section 56(c)(1)(A) (relating to adjustment for book income) shall have the same proportionate source (and character) as alternative minimum taxable income determined without regard to such increase, and".

Subsec. (a)(2)(A)(ii). Pub. L. 101–508, §11531(b)(2), inserted before period at end "and the alternative tax energy preference deduction under section 56(h)".

Subsec. (j). Pub. L. 101–508, §11101(d)(3)(A), substituted "section 1(g)" for "section 1(i)" in pars. (1), (2)(A), (B)(i)(I), (II), (D), and (3).

Subsec. (j)(1)(B). Pub. L. 101–508, §11702(d)(1), inserted "(or, if greater, the child's share of the unused parental minimum tax exemption)" before period at end.

Subsec. (j)(2)(C). Pub. L. 101–508, §11101(d)(3)(B), substituted "section 1(g)(3)(B)" for "section 1(i)(3)(B)".

Subsec. (j)(2)(D). Pub. L. 101–508, §11702(d)(3), substituted "paragraphs (3)(D), (5), and (6)" for "paragraphs (5) and (6)".

Subsec. (j)(3). Pub. L. 101–508, §11702(d)(2), added par. (3).

1989-Subsec. (a)(2)(C). Pub. L. 101–239, §7612(e)(1), added subpar. (C).

Subsec. (e)(1). Pub. L. 101–239, §7611(f)(5)(B), inserted before period at end "(or, in the case of a qualified expenditure described in paragraph (2)(C), over the 60-month period beginning with the month in which such expenditure was paid or incurred)".

Subsec. (g). Pub. L. 101–239, §7811(d)(1)(A), substituted "for the taxable year for which the item is taken into account or for any other taxable year" for "for any taxable year".

Subsec. (i). Pub. L. 101–239, §7611(f)(6), substituted "amounts" for "interest" in heading and "any amount shall" for "interest shall" in text.

Subsec. (j)(2)(D). Pub. L. 101–239, §7811(j)(7), substituted "Other rules" for "Others rules" in heading.

1988-Subsec. (a)(1)(D). Pub. L. 100–647, §1007(e)(3), added subpar. (D).

Subsec. (e)(2). Pub. L. 100–647, §1007(e)(1), inserted "(determined without regard to section 291)" after "as a deduction".

Subsec. (h). Pub. L. 100–647, §1007(e)(2), substituted "taxable year with the adjustments of sections 56, 57, and 58" for "taxable year-

"(1) with the adjustments of section 56, and

"(2) by not taking into account any deduction to the extent such deduction is an item of tax preference under section 57(a)".

Subsec. (i). Pub. L. 100–647, §1007(e)(4), inserted "(other than this part)" after "of this subtitle" and substituted "subtitle" for "title" before "solely".

Subsec. (j). Pub. L. 100–647, §1014(e)(5)(A), added subsec. (j).

Effective Date of 1992 Amendment

Amendment by Pub. L. 102–486 applicable to taxable years beginning after Dec. 31, 1992, see section 1915(d) of Pub. L. 102–486, set out as a note under section 56 of this title.

Effective Date of 1990 Amendment

Amendment by section 11101(d)(3) of Pub. L. 101–508 applicable to taxable years beginning after Dec. 31, 1990, see section 11101(e) of Pub. L. 101–508, set out as a note under section 1 of this title.

Amendment by section 11531(b)(2) of Pub. L. 101–508 applicable to taxable years beginning after Dec. 31, 1990, see section 11531(c) of Pub. L. 101–508, set out as a note under section 56 of this title.

Section 11702(j) of Pub. L. 101–508 provided that: "Any amendment made by this section [amending this section and sections 135, 216, 355, 367, 447, 453B, 468B, 2056, 2056A, 2523, 4980B, and 6114 of this title] shall take effect as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988 [Pub. L. 100–647] to which such amendment relates."

Effective Date of 1989 Amendment

Amendment by section 7611(f)(6) of Pub. L. 101–239 applicable to taxable years beginning after Dec. 31, 1989, see section 7611(g)(1) of Pub. L. 101–239, set out as a note under section 56 of this title.

Amendment by section 7611(f)(5)(B) of Pub. L. 101–239 applicable to costs paid or incurred in taxable years beginning after Dec. 31, 1989, see section 7611(g)(2) of Pub. L. 101–239, set out as a note under section 56 of this title.

Section 7612(e)(2) of Pub. L. 101–239 provided that:

"(A) In general.-The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after March 31, 1990.

"(B) Special rule for year which includes march 31, 1990.-In the case of any taxable year (of a corporation described in subparagraph (C) of section 59(a)(2) of the Internal Revenue Code of 1986 (as added by paragraph (1))) which begins after December 31, 1989, and includes March 31, 1990, the amount determined under clause (ii) of section 59(a)(2)(A) of such Code shall be an amount which bears the same ratio to the amount which would have been determined under such clause without regard to this subparagraph as the number of days in such taxable year on or before March 31, 1990, bears to the total number of days in such taxable year."

Amendment by section 7811(d)(1)(A), (j)(7) of Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.

Effective Date of 1988 Amendment

Amendment by section 1007(e) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

Section 1014(e)(5)(B) of Pub. L. 100–647 provided that: "The amendment made by subparagraph (A) [amending this section] shall apply to taxable years beginning after December 31, 1988."

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1986, with certain exceptions and qualifications, see section 701(f) of Pub. L. 99–514, set out as a note under section 55 of this title.

Savings Provision

For provisions that nothing in amendment by section 11801 of Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 29 of this title.

Consideration of Certain Taxes Treated as Paid or Accrued Under Section 904(c) in Determination of Alternative Minimum Tax Foreign Tax Credit

Section 1007(f)(5) of Pub. L. 100–647 provided that: "In determining the amount of the alternative minimum tax foreign tax credit under section 59 of the 1986 Code, there shall not be taken into account any taxes paid or accrued in a taxable year beginning after December 31, 1986, which are treated under section 904(c) of the 1986 Code as paid or accrued in a taxable year beginning on or before December 31, 1986."

Applicability of Certain Amendments by Pub. L. 99–514 in Relation to Treaty Obligations of United States

For applicability of amendment by section 701(a) of Pub. L. 99–514 [enacting this section] notwithstanding any treaty obligation of the United States in effect on Oct. 22, 1986, with provision that for such purposes any amendment by title I of Pub. L. 100–647 be treated as if it had been included in the provision of Pub. L. 99–514 to which such amendment relates, see section 1012(aa)(2), (4) of Pub. L. 100–647, set out as a note under section 861 of this title.

Section Referred to in Other Sections

This section is referred to in sections 53, 173, 174, 263, 263A, 616, 617, 904, 1016, 6103 of this title.

¹ See References in Text note below.