Subject: AMT's Unintended Consequences Comment: Dear Honorable Chairman Charles Grassley and Honorable Ranking Member Max Baucus: I would like to briefly describe to you my experiences as a taxpayer and hard-working American as it pertains to the Alternative Minimum Tax. I am 45 years old and have worked hard and paid taxes faithfully for 30 of those years. I am civic-minded, contribute to charitable causes and am a member of the B.P.O.E. (Elk's) and I vote. I have incurred an AMT tax liability from tax year 2000 of over $81,000 and have experienced severe credit damage and collection actions by the IRS. All this is due to tax on an asset (stock options) which had less value to me than the tax that was due on them!. My situation is not unique and I know that the application of the AMT in this situation qualifies as an unintended consequence (and for those of us hit with it, a dire one) of the tax. Here are my observations regarding the AMT as it applies to this situation: 1) In a stock market downturn, the government AMT collection is unaffected, while the basis asset value (stock option) is decreased by the stock market loss. 2) In a down stock market, even if other taxpayer assets can be used to pay the AMT, the real tax rate remains incredibly high and can easily exceed 100%! And it is not certain that the taxpayer’s basis asset value (stock option) will ever recover. 3) AMT tax credit can easily outlive a taxpayer since it can be appiled only to the difference between successive years’ AMT v. regular income tax. 4) The government does not pay interest on the collected AMT that generates a subsequent credit. 5) AMT drastically exacerbates the risk of holding the asset for long-term capital gain. And holding capital is fundamental to our economic system and is even incentivized by the very same tax code in the form of a lower long term capital tax rate. 6) AMT collection, based on date-of-exercise unrealized gain, can be ultimately legitimized only in a bull market. In a bear market, its unintended consequences unmask it as contrary to any fair, reasonable tax-collection process. 7) The base income subject to AMT has not been adjusted for inflation for over 32 years. Therefore, every year, this tax impacts increasing numbers of middle-income households. 8) Due to the complexity of the AMT, taxpayers, employers, tax experts and investment counselors are frequently either unable or unwilling to advise constituents about consequences of AMT, making AMT a major taxpayer hazard. Currently, the IRS has no authority to handle this unque situation and is wreaking havoc with those of us who truly have bneen trapped by these untintended consequences of the AMT. I ask for your immediate help in this matter. Thank you for your time and consideration. ROBERT ALLAN |