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Taxation in the Real World Blog
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Contributing Author: Kristina Zvinakis

As a result of the TCJA of 2017, C corporations no longer are required to pay a Federal-level alternative minimum tax (AMT). However, C corporations may not be able to avoid an AMT liability entirely; a handful of states that tax corporate income also impose a version of the corporate AMT. 

Generally, states conform (i.e., incorporate provisions of the Federal tax law into their own tax codes) in one of two ways. The first approach is known as “rolling” conformity. Such a state adopts any new Federal tax provisions unless the state specifically indicates that it will not. In state-tax terms, unless the state decouples from one or more of the new Federal tax law provisions, the provisions will be adopted at the state level as they are adopted at the Federal level.

Under the second approach, states conform to changes in the Federal tax law on a “fixed date” basis. This means that the state conforms to the IRC “in effect on” or “as amended through” a specific date. Thus, the state will not conform to any of the TCJA provisions unless or until the state enacts legislation adopting a specific federal change.

Per the Tax Foundation, as of 2014, seven states that taxed corporate income (California, Minnesota, Iowa, Kentucky, Florida, Maine, and New Hampshire) also included a minimum tax in their corporate income tax liability calculation. For context, data from the California Franchise Tax Board suggest that from 2005 to 2015, on average, 2,400 state corporate tax returns (out of 751,000 returns filed) indicated an AMT liability. On average, these AMT revenues comprised approximately 1% of total corporate tax revenues collected in that same time period.

For 2018, California, Florida, Kentucky, Maine and Minnesota have retained the corporate AMT. New Hampshire has repealed its corporate AMT, and Iowa’s corporate AMT is repealed for tax years after December 31, 2020.

Whether the five states that retained the corporate AMT will continue to do so may depend on how the TCJA provisions affect state tax revenues. The Tax Foundation suggests that the base-broadening provisions of the TCJA will likely flow through to states, while the corresponding income tax rate reductions will not. Thus, most states will experience tax revenue increases as a result of the TCJA. This suggests that states that retained the corporate AMT may yet eliminate that component of their corporate tax system. Such an elimination would allow the state to both simplify its corporate tax structure and earn taxpayer goodwill while not necessarily resulting in a significant loss of tax revenue.  


Ideas for classroom discussion or assignments.

Internet research


  1. Go to the California Franchise Tax Board’s data page ( Compare the number of returns that report an individual AMT liability (dataset B-4A, Adjusted Gross Income Class Comparison, All Filing Statuses) with the number of returns that report a corporate AMT liability (dataset C-2, Tax Liability Computations All Corporations). What is the average AMT liability amount per corporate return? Per individual return? All else equal, would the elimination of the California corporate AMT or the individual AMT result in a larger revenue loss for the state?


  1. Kentucky levies a $175 minimum tax on both corporations and limited liability entities. (Instructions for the KY Form 720 - The minimum tax does not require a recalculation of taxable income, which differentiates the Kentucky minimum tax from a more traditional AMT. What could explain the state’s rationale for levying this form of a minimum tax? Why is the tax levied on both corporate and pass through entities?


Tax policy

  1. Many taxpayers complain about the complexity of the AMT and the requirement to calculate their tax liability under two systems (the regular income tax and the parallel AMT system). Given the elimination of the corporate AMT at the Federal level, what explains a state’s unwillingness to eliminate the AMT from their corporate income tax system? Is there a policy justification for keeping an AMT system rather than increasing the corporate income tax rate or broadening the regular corporate income tax base, to achieve the same outcomes (e.g., raising additional tax revenue, discouraging certain taxpayer behavior)?

SWFT Chapters:

SWFT Individuals , Chapter 12

SWFT Comprehensive, Chapter 15

SWFT Essentials, Chapter 17