Temporary AMT Relief Bills Introduced in Congress

Richard Neal (D-MA) and Zoe Lofgren (D-CA) in the House and Joseph Lieberman (D-CT) in the Senate have introduced parallel legislation that would curtail the tax on incentive stock options exercised in 2000 and subject to the Alternative Minimum Tax (AMT) in 2001. The legislation would limit AMT to the difference between the option exercise price and the share price on April 15, 2001, or, if the stock were sold before then, the amount realized on the sale. Thus, someone who exercised an option in 2000 at, for instance, $10 per share on shares worth $50, but then sold the shares (or held them on April 15th) when they were only worth $15, would only owe AMT on $5 per share, not $40 per share, as would be the case under current law. The bills are limited just to options exercised in 2000; sponsors of both bills have other legislation to exempt incentive options from the AMT on a permanent basis.

While the bills are attracting some support, they will have to compete in a crowded tax reform environment in a time of disappearing surpluses.