For tax years beginning on or after January 1, 1987, the minimum tax is imposed only to the extent that it exceeds the taxpayer's regular tax liability computed under Iowa Code section 42263.. The minimum tax rate is 60 percent of the maximum franchise tax rate rounded to the nearest one-tenth of 1 percent or 3 percent. Minimum taxable income is computed as follows:
State taxable income as adjusted by Iowa Code sections 42235. and 42261(4).
Plus: Tax preference items, adjustments and losses added back
Less: Allocable income including allocable preference items Subtotal
Times: Apportionment percentage Result
Plus: Income allocable to Iowa including allocable preference items
Less: Iowa alternative tax net operating loss deduction $40,000 exemption amount
Equals: Iowa alternative minimum taxable income
For taxable years beginning on or after January 1,1987, the items of tax preference are the same items of tax preference under Section 57 except for subsections (a)(1) and (a)(5) of the Internal Revenue Code used to compute federal alternative minimum taxable income. The adjustments to state taxable income are those adjustments required by Section 56 except for subsections (a)(4), (c)(1), (d), and (g) of the Internal Revenue Code used to compute federal alternative minimum taxable income computed without adjustments and the $40,000 exemption. The state alternative tax net operating loss deduction shall be substituted for the amounts in Section 56(g)(1)(B) of the Internal Revenue Code. For taxyears beginning on or after January 1, 1988, in making the adjustment under Section 56(c)(1) of the Internal Revenue Code, interest and dividends from state and other political subdivisions and from regulated investment companies exempt from federal income tax under the Internal Revenue Code shall be subtracted net of amortization of any discount or premium. Losses to be added are those losses required to be added by Section 58 of the Internal Revenue Code in computing federal alternative minimum taxable income.
Computation of Iowa alternative minimum tax net operating loss deduction.
Net operating losses computed under rule 701-592. (422) carried forward from tax years beginning before January 1, 1987, are deductible without adjustment.
Net operating losses from tax years beginning after December 31, 1986, which are carried back or carried forward to the current tax year shall be reduced by the amount of tax preferences and adjustments taken into account in computing the net operating loss prior to applying allocation and apportionment. The deduction for a net operating loss from a tax year beginning after December 31, 1986, which is carried back or carried forward shall not exceed 90 percent of the alternative minimum taxable income computed without regard for the net operating loss deduction.
The exemption amount shall be reduced by 25 percent of the amount that the alternative minimum taxable income computed without regard to the $40,000 exemption exceeds $150,000. The exemption shall not be reduced below zero.
EXAMPLE: The following example shows the computation of the alternative minimum tax when there are net operating loss carryforwards and carrybacks including an alternative minimum tax net operating loss.
For tax year 1987, the following information is available: | |
Federal taxable income before NOL | $ 35,000 |
Interest exempt from federal tax | 5,000 |
Tax preferences and adjustments | 53,400 |
Iowa income tax expensed on federal | 878 |
Iowa NOL carryforward | <25,000 > |
For tax year 1988, the following information is available: | |
Federal taxable income before NOL | $ <90,000 > |
Interest exempt from federal tax | 4,000 |
Tax preferences and adjustments | 20,000 |
Iowa franchise tax refund reported on federal | 878 |
The alternative minimum tax for 1987 before the 1988 net operating loss carryback should be computed as follows:
Regular Iowa Tax | |
Federal taxable income | $ 35,000 |
Add interest exempt from federal tax | 5,000 |
Add Iowa franchise tax expensed | 878 |
Iowa taxable income before NOL carryforward | $ 40,878 |
Less NOL carryforward | <25,000 > |
Iowa taxable income | $ 15,878 |
Iowa income tax | $794 |
Alternative Minimum Tax | |
Iowa taxable income before NOL | $ 40,878 |
Add preferences and adjustments | 53,400 |
Total | $ 94,278 |
Less NOL carryforward* | <25,000 > |
Iowa alternative taxable income | $ 69,278 |
Less exemption amount | <40,000 > |
Total | $ 29,278 |
Times 3% | 878 |
Less regular tax | 794 |
Alternative minimum tax | $ 84 |
*Net operating loss carryforwards from tax years beginning before January 1, 1987, are deductible at 100 percent without reduction for items of tax preference or adjustments arising in the tax year.
The alternative minimum taxfor 1987 after the 1988 net operating loss carryback should be computed as follows:
Regular Iowa Tax | |
Federal taxable income | $ 35,000 |
Add interest exempt from federal tax | 5,000 |
Add Iowa franchise tax expensed | 878 |
Iowa taxable income before NOL carryforward | $ 40,878 |
Less NOL carryforward | <25,000 > |
$ 15,878 | |
Less NOL carryback from 19881 | <86,878 > |
NOL carryforward | $ <71,000 > |
Alternative Minimum Tax | |
Iowa taxable income before NOL | $ 40,878 |
Add preferences and adjustments | 53,400 |
Total | $ 94,278 |
Less NOL carryforward from pre-1987 tax year | <25,000 > |
Total | $ 69,278 |
Less alternative minimum tax NOL2 | <62,350 > |
Total | $ 6,928 |
Less exemption | <40,000 > |
Alternative minimum taxable income after NOL | $ -0- |
Computation of 1988 Iowa NOL | |
Federal NOL | $ <90,000 > |
Add interest exempt from federal tax | 4,000 |
Less Iowa refund in federal income | <878 > |
Iowa NOL | $ <86,878 > |
Computation of 1988 Alternative Minimum Tax NOL | |
Iowa NOL | $ <86,878 > |
Add preferences and adjustments | 20,000 |
Total | $ <66,878 > |
NOL carryback limited to 90% of alternative minimum income before NOL and exemption* | $ <62,350> |
Alternative minimum tax NOL carryforward | $ 4,528 |
*For purposes of the alternative minimum tax, net operating loss carryforward or carryback from tax years beginning after December 31, 1986, must be reduced by items of tax preference and adjustments, and are limited to 90 percent of alternative minimum taxable income before deduction of the post-1986 NOL and the $40,000 exemption amount ($69,278 x 90% = $62,350).
regular tax of $8,000, and the minimum tax liability is $6,000. The minimum tax credit is $2,000 for 2012 because, although the taxpayer had an $8,000 regular tax liability, the credit is allowed only to the extent that the regular tax exceeds the minimum tax. Since only $2,000 of the carryover credit from 2011 was used, there is a $3,000 minimum tax carryover credit to 2013.
EXAMPLE 2. Taxpayer reported $2,500 of minimum tax for 2011. For 2012, taxpayer reported regular tax of $8,000, and the minimum tax liability is $5,000. The minimum tax credit is $2,500 for 2012 because, although the regular tax exceeded the minimum tax by $3,000, the credit is allowed only to the extent of minimum tax paid for prior tax years. There is no minimum tax carryover credit to 2013.
This rule is intended to implement Iowa Code section 422.60.
Iowa Admin. Code r. 701-58.5