Directions: Please read the discussion response below and simply write a 100 word response to what you read.

Because people became concerned about corporations paying their fair share of taxes in the 1980’s, the fact that several major companies, like Georgia Pacific, didn’t pay taxes for one year in the early 80’s did not sit well. They were able to avoid paying taxes due to exclusions, deductions, and credits, which soon became more limited. And to ensure that healthy corporations paid their share of income tax the Alternative Minimum Tax (AMT) was enacted with §11, which requires corporations to pay a minimum of taxes. So, if their regularly calculated taxes were below this level, they would have to pay their calculated taxes plus enough to equal the AMT.

The AMT is calculated separately from regular taxes and several normally non-taxable items are added in to increase taxable income and reach the pre-adjusted Alternative Minimum Taxable Income (AMTI). Adjusted Current Earnings (ACE) are either added or subtracted depending on whether they exceed the pre-adjusted AMTI, and then the net operating loss (NOL) deduction is added (up to 90%), and any exemptions. Finally, the tentative minimum tax is reached and multiplied by the 20% AMT rate, any foreign tax credits are taken, and AMT is calculated.

There is an AMT exemption for small corporations, however. If in its first year a corporation makes only $5 million in gross receipts it is exempt from the AMT in its second year. After this, if the corporation can make less than an average of $7.5 million for the past three years (or the portion of it), it will remain exempt. But if a corporation loses its AMT exemption by earning more than $7.5 million it will be subject to the AMT for now on, but the AMT and ACE are usually just figured from the investments and transactions that occur after they lost their AMT exemption.

“Tax in the news” s (p. 3-25) one can see clearly how AMT taxes have not raised much revenue since they were enacted. As the article points out the reason for this is because of the minimum tax credit which allows corporations to apply current year AMT liability to offset future regular tax liability (that exceeds the tentative minimum tax). This credit can be carried forward indefinitely though cannot be carried back. You can see why this would significantly lessen future revenue for the government with each corporation.

I do believe it is ethical to legally pay taxes so long as one is not trying to trick the government or work around their rules. In Mark 17:12 Jesus evades the Pharisees trap by speaking the truth when He answers, “Render to Caesar the things that are Caesar’s, and to God the things that are God’s” (New American Standard). And Paul, inspired by God, tells us that we are to pay taxes because all governments are given their authority by God (Romans 13). We are to obey the law and if the law says we can take a credit, or deduction, or exemption, then we can. But God does not want His people to be honest and free from any deceit. Proverbs 11:3 warns that the “unfaithful are destroyed by their duplicity.” And Paul models good behavior by “taking pains to do what is right” (2 Corinthians 8:21). I think as Christians we are well aware when we are sinning, and even non-Christians know right from wrong. God can give us the strength to make every effort to abide by the laws our country imposes.

References

Hoffman, W., Raabe, W., Maloney, D., and Young, J (2017). Corporations, Partnerships, Estates & Trusts: 2017 Edition. Stamford, CT: South-Western (Cengage Learning).