26 U.S.C. § 56: Adjustments in computing alternative minimum taxable income

§ 1.56-0 Table of contents to § 1.56-1, adjustment for book income of corporations.§ 1.56(g)-0 Table of Contents.§ 1.56(g)-1 Adjusted current earnings.Prop. § 1.56-0 Proposed 2024 · [Removed]Prop. § 1.56(g)-0 Proposed 2024 · Prop. § 1.56(g)-1 Proposed 2024 ·

Amended 1987, 1988, 1989, 1990, 1992, 1993, 1996, 1997, 2000, 2003, 2004, 2007, 2008, 2009, 2014, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 12001(b)(8)(A), struck out subsec. (g) which related to adjustments based on adjusted current earnings.
2014 Pub. L. 113-295 Pub. L. 113–295, § 215(b), substituted “an organization to which part I of subchapter T (relating to tax treatment of cooperatives) applies which is engaged in the marketing of agricultural or horticultural products” for “a cooperative described in section 927(a)(4)”. See 2007 Amendment note below.
2014 Pub. L. 113-295 Pub. L. 113–295, § 221(a)(9), substituted “Clause (i)” for “In the case of any taxable year beginning after December 31, 1992, clause (i)”.
2009 Pub. L. 111-5 Pub. L. 111–5, § 1503(b), added cl. (iv).
2008 Pub. L. 110-289 Pub. L. 110–289 added cl. (iii).
2007 Pub. L. 110-172 Pub. L. 110–172, § 11(g)(1), substituted “921 (as in effect before its repeal by the FSC Repeal and Extraterritorial Income Exclusion Act of 2000)” for “921”.
2007 Pub. L. 110-172 Pub. L. 110–172, § 11(g)(2), which purported to amend subsec. (g)(4)(C)(iv) of this section, but directed the amendment of section 54(g)(4)(C)(iv) of this title, by substituting “an organization to which part I of subchapter T (relating to tax treatment of cooperatives) applies which is engaged in the marketing of agricultural or horticultural products” for “a cooperative described in section 927(a)(4)”, was not executed in light of the identical amendment made by Pub. L. 113–295, § 215(b), effective as if included in Pub. L. 110–172. See 2014 Amendment note above.
2004 Pub. L. 108-357 Pub. L. 108–357, § 248(b)(1), inserted “or 1357” after “section 139A” in concluding provisions.
2004 Pub. L. 108-357 Pub. L. 108–357, § 101(b)(4), struck out “114 or” before “139A” in concluding provisions.
2004 Pub. L. 108-357 Pub. L. 108–357, § 102(b), added cl. (v).
2004 Pub. L. 108-357 Pub. L. 108–357, § 422(b), added cl. (vi).
2004 Pub. L. 108-357 Pub. L. 108–357, § 835(b)(1), substituted “or REMIC” for “REMIC, or FASIT”.
2003 Pub. L. 108-173 Pub. L. 108–173 inserted “or 139A” after “section 114” in concluding provisions.
2000 Pub. L. 106-519 Pub. L. 106–519 inserted “or under section 114” before the period at end of first sentence in concluding provisions.
1997 Pub. L. 105-34 Pub. L. 105–34, § 1212(a), inserted at end of concluding provisions “In the case of any insurance company taxable under section 831(b), this clause shall not apply to any amount not described in section 834(b).”
1996 Pub. L. 104-188 Pub. L. 104–188, § 1704(t)(48), provided that section 11801(c)(2)(B) of Pub. L. 101–508 shall be applied as if “section 56(g)” appeared instead of “section 59(g)”. See 1990 Amendment note below.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1601(b)(2)(B), inserted “30A,” before “936” and substituted “, (i), and (j)” for “and (i)”.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1704(t)(1), substituted “of subclause” for “of the subclause”.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1601(b)(2)(C), added subcl. (VI).
1996 Pub. L. 104-188 Pub. L. 104–188, § 1702(g)(4), inserted “, but only with respect to taxable years beginning after December 31, 1989” before period at end.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1702(c)(1), redesignated subpars. (I) and (J) as (H) and (I), respectively.
1996 Pub. L. 104-188 Pub. L. 104–188, § 1621(b)(2), substituted “REMIC, or FASIT” for “or REMIC”.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13115(a), inserted at end “The preceding sentence shall not apply to any property placed in service after December 31, 1993, and the depreciation deduction with respect to such property shall be determined under the rules of subsection (a)(1)(A).”
1993 Pub. L. 103-66 Pub. L. 103–66, § 13227(c)(1), substituted “sections 936 (including subsections (a)(4) and (i) thereof) and 921” for “sections 936 and 921”.
1993 Pub. L. 103-66 Pub. L. 103–66, § 13227(c)(2), added subcls. (IV) and (V).
1993 Pub. L. 103-66 Pub. L. 103–66, § 13171(b), added subpar. (J).
1992 Pub. L. 102-486 Pub. L. 102–486, § 1915(b)(2), inserted at end “In the case of a taxpayer other than an integrated oil company (as defined in section 291(b)(4)), in the case of any oil or gas well, this clause shall not apply in the case of amounts paid or incurred in taxable years beginning after December 31, 1992.”
1992 Pub. L. 102-486 Pub. L. 102–486, § 1915(a)(2), amended subpar. (F) generally. Prior to amendment, subpar. (F) read as follows: “The allowance for depletion with respect to any property placed in service in a taxable year beginning after 1989 shall be cost depletion determined under section 611.”
1992 Pub. L. 102-486 Pub. L. 102–486, § 1915(c)(1), struck out subsec. (h) which related to adjustment based on energy preferences.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(a)(3), struck out subsec. (f) which related to adjustments for book income of corporations with respect to minimum taxable income, adjusted net book income, adjustments for certain taxes, special rules for related corporations for consolidated returns, treatment of dividends, statements covering different periods, special rule for cooperatives, treatment and limitation of taxes on dividends from 936 corporations, rules for Alaska native corporations, special rules for life insurance companies, exclusion of certain income from transfer of stock for debt, secretarial authority to adjust items, applicable financial statements, earnings and profits used, special rules for more than one statement and exception for certain corporations.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(2)(B), which directed that pars. (1) and (2) “of section 59(g) are each amended by striking ‘beginning after 1989’ ”, was executed to pars. (1) and (2)(A) of subsec. (g) of this section after “any taxable year”. See 1996 Amendment note above.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(2)(C), substituted heading for one which read: “Special rule for dividends from section 936 companies” and amended text generally. Prior to amendment, text read as follows: “In the case of any dividend received from a corporation eligible for the credit provided by section 936, rules similar to the rules of subparagraph (F) of subsection (f)(1) shall apply, except that ‘75 percent’ shall be substituted for ‘50 percent’ in clause (i) thereof.”
1990 Pub. L. 101-508 Pub. L. 101–508, § 11704(a)(1), substituted “years” for “year”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11301(b), redesignated subpars. (G) and (H) as (F) and (G), respectively, and struck out former subpar. (F) which provided that acquisition expenses for life insurance companies be capitalized and amortized in accordance with the treatment generally required under generally accepted accounting principles as if this subparagraph applied to all taxable years.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11531(a), added subsec. (h).
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(a)(1)(A), amended cl. (i) generally. Prior to amendment cl. (i) read as follows: “The depreciation deduction with respect to any property placed in service in a taxable year beginning after 1989 shall be determined under whichever of the following methods yields deductions with a smaller present value:
“(I) The alternative system of section 168(g), or
“(II) The method used for book purposes.”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(a)(2), inserted “and which is placed in service in a taxable year beginning before 1990” after “thereof) applies”.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(a)(1)(B), redesignated cl. (vii) as (v), and struck out former cl. (v), which related to use of slower method if used for book purposes, and cl. (vi), which related to election to have cumulative limitation.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(f)(2), inserted at end “The preceding sentence shall not apply in the case of any amount excluded from gross income under section 108 (or the corresponding provisions of prior law).”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(f)(3), repealed cl. (iii) which read as follows: “In the case of any annuity contract, the income on such contract (as determined under section 72(u)(2)) shall be treated as includible in gross income for such year. The preceding sentence shall not apply to any annuity contract which is held under a plan described in section 403(a) or which is described in section 72(u)(3)(C).”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(d), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “Clause (i) shall not apply to any deduction allowable under section 243 or 245 for a 100-percent dividend—
“(I) if the corporation receiving such dividend and the corporation paying such dividend could not be members of the same affiliated group under section 1504 by reason of section 1504(b),
“(II) but only to the extent such dividend is attributable to income of the paying corporation which is subject to tax under this chapter (determined after the application of sections 936 and 921).
For purposes of the preceding sentence, the term ‘100 percent dividend’ means any dividend if the percentage used for purposes of determining the amount allowable as a deduction under section 243 or 245 with respect to such dividend is 100 percent.”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(e), added cl. (iv).
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(b), amended subpar. (D) generally, in cl. (i), substituting provisions directing that adjustments in section 312(n)(2)(A) be applied, for provisions directing adjustments in section 312(n) be applied, with certain exceptions, in cl. (ii), substituting provisions directing that sections 173 and 248 not apply to expenditures paid or incurred in taxable years beginning after December 31, 1989, for material relating to special rule for intangible drilling costs and mineral exploration and development costs, and adding cls. (iii) and (iv).
1989 Pub. L. 101-239 Pub. L. 101–239, § 7815(e)(4), added subcl. (IV) relating to inapplicability of pars. (6) to (8) and struck out former subcls. (IV) and (V), which read as follows:
1989 “(IV) paragraph (6) shall apply only to contracts entered into on or after March 1, 1986, and
1989 “(V) paragraphs (7) and (8) shall not apply.”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(c), amended subpar. (G) generally. Prior to amendment, subpar. (G) read as follows: “The allowances for depletion with respect to any property placed in service in a taxable year beginning after 1989, shall be determined under whichever of the following methods yields deductions with a smaller present value:
“(i) cost depletion determined under section 611, or
“(ii) the method used for book purposes.”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7205(b), added cl. (ii) and concluding provision and struck out former cl. (ii) and concluding provision which read as follows:
1989 “(ii)(I) the aggregate adjusted bases of the assets of such corporation (immediately after the change), exceed
1989 “(II) the value of the stock of such corporation (as determined for purposes of section 382), properly adjusted for liabilities and other relevant items,
then the adjusted basis of each asset of such corporation (as of such time) shall be its proportionate share (determined on the basis of respective fair market values) of the amount referred to in clause (ii)(II).”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(f)(1), substituted “in a taxable year beginning after 1989” for “after the date of the enactment of the Tax Reform Act of 1986”.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(f)(4), redesignated subpar. (B) as (A) and struck out former subpar. (A) which defined “book purposes”.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(f)(4), redesignated subpar. (D) as (B). Former subpar. (B) redesignated (A).
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(f)(4), struck out subpar. (C) which read as follows: “Present value.—Present value shall be determined as of the time the property is placed in service (or, if later, as of the beginning of the first taxable year beginning after 1989) and under regulations prescribed by the Secretary.”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7611(f)(4), redesignated subpar. (D) as (B).
1988 Pub. L. 100-647 Pub. L. 100–647, § 2001(c)(3)(A), inserted at end “No adjustment shall be made under this subparagraph for the tax imposed by section 59A.”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(7), inserted “(otherwise eligible for the credit provided by section 901 without regard to section 901(j))” after “any such taxes”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(11)(A), substituted “Treatment of taxes on dividends from 936 corporations” for “Treatment of dividends from 936 corporations” in heading and amended text generally, substituting cls. (i) to (iii) for former cls. (i) and (ii).
1988 Pub. L. 100-647 Pub. L. 100–647, § 6303(a), added subpar. (I) and redesignated former subpar. (I) as (J).
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(8), inserted “for a substantial nontax purpose” after “an income statement”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(9), substituted “this subsection” for “paragraph (3)(A)” in penultimate sentence.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(10), inserted at end “If the taxpayer has 2 or more statements described in the clause (or subclause) with the lowest number designation, the applicable financial statement shall be the one of such statements specified in regulations.”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(17), added cls. (vi) and (vii).
1988 Pub. L. 100-647 Pub. L. 100–647, § 6079(a)(1), amended last sentence generally, inserting “which is” after “any annuity contract” and “or which is described in section 72(u)(3)(C)” after “in section 403(a)”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(12), inserted at end “The preceding sentence shall not apply to any annuity contract held under a plan described in section 403(a).”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(11)(B), substituted “clause (i)” for “clause (ii)(I)”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(18), added subpar. (I).
1987 Pub. L. 100-203 Pub. L. 100–203, § 10243(a), added subpar. (H) and redesignated former subpar. (H) as (I).

Cases: Snap-Drape v. Commissioner, 98 F.3d 194 (5th Cir. 1996); Doyon v. United States, 214 F.3d 1309 (Fed. Cir. 2000); Merlo v. Commissioner, 492 F.3d 618 (5th Cir. 2007)

Final rules 3

(a) Adjustments applicable to all taxpayers In determining the amount of the alternative minimum taxable income for any taxable year the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):

Amended 1988, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 403(a), redesignated pars. (7) and (8) as (6) and (7), respectively, and struck out former par. (6) which read as follows:
1997 “(6) Installment sales of certain property.—In the case of any disposition after March 1, 1986, of any property described in section 1221(1), income from such disposition shall be determined without regard to the installment method under section 453. This paragraph shall not apply to any disposition with respect to which an election is in effect under section 453(l)(2)(B).”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(19), added par. (8).

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(1) Depreciation

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(A) In general

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(i) Property other than certain personal property Except as provided in clause (ii), the depreciation deduction allowable under section 167 with respect to any tangible property placed in service after December 31, 1986, shall be determined under the alternative system of section 168(g). In the case of property placed in service after December 31, 1998, the preceding sentence shall not apply but clause (ii) shall continue to apply.

Amended 1988, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 402(a), inserted at end “In the case of property placed in service after December 31, 1998, the preceding sentence shall not apply but clause (ii) shall continue to apply.”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(15), substituted “personal” for “real” in heading.

(ii) 150-percent declining balance method for certain property The method of depreciation used shall be—

Amended 2000, 2002

2002 Pub. L. 107-147 Pub. L. 107–147, § 417(5), substituted “such section 1250” for “such 1250” in concluding provisions.
2000 Pub. L. 106-554 Pub. L. 106–554 inserted “(and the straight line method shall be used for such 1250 property)” before “or to any other property” in concluding provisions.

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(I) the 150 percent declining balance method,

(II) switching to the straight line method for the 1st taxable year for which using the straight line method with respect to the adjusted basis as of the beginning of the year will yield a higher allowance.

The preceding sentence shall not apply to any section 1250 property (as defined in section 1250(c)) (and the straight line method shall be used for such section 1250 property) or to any other property if the depreciation deduction determined under section 168 with respect to such other property for purposes of the regular tax is determined by using the straight line method.

(B) Exception for certain property This paragraph shall not apply to property described in paragraph (1), (2), (3), or (4) of section 168(f), or in section 168(e)(3)(C)(iv).

Amended 2005

2005 Pub. L. 109-58 Pub. L. 109–58 inserted “, or in section 168(e)(3)(C)(iv)” before period at end.

(i) In general This paragraph shall not apply to property placed in service after December 31, 1986, to which the amendments made by section 201 of the Tax Reform Act of 1986 do not apply by reason of section 203, 204, or 251(d) of such Act.

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1002(a)(12), inserted “by reason of section 203, 204, or 251(d) of such Act” after “do not apply”.

(ii) Treatment of certain property placed in service before 1987 This paragraph shall apply to any property to which the amendments made by section 201 of the Tax Reform Act of 1986 apply by reason of an election under section 203(a)(1)(B) of such Act without regard to the requirement of subparagraph (A) that the property be placed in service after December 31, 1986.

(D) Normalization rules With respect to public utility property described in section 168(i)(10), the Secretary shall prescribe the requirements of a normalization method of accounting for this section.

Amended 1990

1990 Pub. L. 101-508 Pub. L. 101–508, § 11812(b)(4), substituted “section 168(i)(10)” for “section 167(l)(3)(A)”.

(2) Mining exploration and development costs

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(A) In general With respect to each mine or other natural deposit (other than an oil, gas, or geothermal well) of the taxpayer, the amount allowable as a deduction under section 616(a) or 617(a) (determined without regard to section 291(b)) in computing the regular tax for costs paid or incurred after December 31, 1986, shall be capitalized and amortized ratably over the 10-year period beginning with the taxable year in which the expenditures were made.

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(B) Loss allowed If a loss is sustained with respect to any property described in subparagraph (A), a deduction shall be allowed for the expenditures described in subparagraph (A) for the taxable year in which such loss is sustained in an amount equal to the lesser of—

(i) the amount allowable under section 165(a) for the expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not previously been amortized under subparagraph (A).

(3) Treatment of certain long-term contracts In the case of any long-term contract entered into by the taxpayer on or after March 1, 1986, the taxable income from such contract shall be determined under the percentage of completion method of accounting (as modified by section 460(b)). For purposes of the preceding sentence, in the case of a contract described in section 460(e)(1), the percentage of the contract completed shall be determined under section 460(b)(1) by using the simplified procedures for allocation of costs prescribed under section 460(b)(3). The first sentence of this paragraph shall not apply to any residential construction contract (as defined in section 460(e)(4)).

Amended 1988, 1989, 1998, 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70430(b), substituted “any residential construction contract (as defined in section 460(e)(4))” for “any home construction contract (as defined in section 460(e)(6))”.
1998 Pub. L. 105-277 Pub. L. 105–277 substituted “section 460(b)(1)” for “section 460(b)(2)” and “section 460(b)(3)” for “section 460(b)(4)”.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7815(e)(2)(B), substituted “The first sentence of this paragraph shall not” for “The preceding sentence shall not”.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7815(e)(2)(A), made clarifying amendment to directory language of Pub. L. 100–647, § 5041(b)(4), see 1988 Amendment note below.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7612(c)(1), struck out “with respect to which the requirements of clauses (i) and (ii) of section 460(e)(1)(B) are met” after “section 460(e)(6))”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 5041(b)(4), as amended by Pub. L. 101–239, § 7815(e)(2)(A), inserted at end “The preceding sentence shall not apply to any home construction contract (as defined in section 460(e)(6)) with respect to which the requirements of clauses (i) and (ii) of section 460(e)(1)(B) are met.”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(1), inserted at end “For purposes of the preceding sentence, in the case of a contract described in section 460(e)(1), the percentage of the contract completed shall be determined under section 460(b)(2) by using the simplified procedures for allocation of costs prescribed under section 460(b)(4).”

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(4) Alternative tax net operating loss deduction The alternative tax net operating loss deduction shall be allowed in lieu of the net operating loss deduction allowed under section 172.

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(5) Pollution control facilities In the case of any certified pollution control facility placed in service after December 31, 1986, the deduction allowable under section 169 (without regard to section 291) shall be determined under the alternative system of section 168(g). In the case of such a facility placed in service after December 31, 1998, such deduction shall be determined under section 168 using the straight line method.

Amended 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 402(b), inserted at end “In the case of such a facility placed in service after December 31, 1998, such deduction shall be determined under section 168 using the straight line method.”

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(6) Adjusted basis The adjusted basis of any property to which paragraph (1) or (5) applies (or with respect to which there are any expenditures to which paragraph (2) or subsection (b)(2) applies) shall be determined on the basis of the treatment prescribed in paragraph (1), (2), or (5), or subsection (b)(2), whichever applies.

Amended 1987, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 403(a), redesignated pars. (7) and (8) as (6) and (7), respectively, and struck out former par. (6) which read as follows:
1997 “(6) Installment sales of certain property.—In the case of any disposition after March 1, 1986, of any property described in section 1221(1), income from such disposition shall be determined without regard to the installment method under section 453. This paragraph shall not apply to any disposition with respect to which an election is in effect under section 453(l)(2)(B).”
1987 Pub. L. 100-203 Pub. L. 100–203, § 10202(d), amended par. (6) generally. Prior to amendment, par. (6) read as follows: “In the case of any—
“(A) disposition after March 1, 1986, of property described in section 1221(1), or
“(B) other disposition if an obligation arising from such disposition would be an applicable installment obligation (as defined in section 453C(e)) to which section 453C applies,
income from such disposition shall be determined without regard to the installment method under section 453 or 453A and all payments to be received for the disposition shall be deemed received in the taxable year of the disposition. This paragraph shall not apply to any disposition with respect to which an election is in effect under section 453C(e)(4).”

(7) Section 87 not applicable Section 87 (relating to alcohol fuel credit) shall not apply.

Amended 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 403(a), redesignated pars. (7) and (8) as (6) and (7), respectively, and struck out former par. (6) which read as follows:
1997 “(6) Installment sales of certain property.—In the case of any disposition after March 1, 1986, of any property described in section 1221(1), income from such disposition shall be determined without regard to the installment method under section 453. This paragraph shall not apply to any disposition with respect to which an election is in effect under section 453(l)(2)(B).”

(b) Adjustments applicable to individuals In determining the amount of the alternative minimum taxable income of any taxpayer (other than a corporation), the following treatment shall apply (in lieu of the treatment applicable for purposes of computing the regular tax):

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(1) Limitation on deductions

Amended 1988, 1990, 2019

2019 Pub. L. 116-94 Pub. L. 116–94 redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: “In determining the amount allowable as a deduction under section 213, subsection (a) of section 213 shall be applied without regard to subsection (f) of such section. This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11103(b), added subpar. (F).
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(16), struck out “itemized” after “Limitation on” in heading.

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(A) In general No deduction shall be allowed—

(i) for any miscellaneous itemized deduction (as defined in section 67(b)), or

(ii) for any taxes described in paragraph (1), (2), or (3) of section 164(a) or clause (ii) of section 164(b)(5)(A).

Amended 2005

2005 Pub. L. 109-135 Pub. L. 109–135, § 403(r)(2), inserted “or clause (ii) of section 164(b)(5)(A)” before period at end.

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Clause (ii) shall not apply to any amount allowable in computing adjusted gross income.

(B) Interest In determining the amount allowable as a deduction for interest, subsections (d) and (h) of section 163 shall apply, except that—

Amended 2010, 2017, 2019

2019 Pub. L. 116-94 Pub. L. 116–94 redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: “In determining the amount allowable as a deduction under section 213, subsection (a) of section 213 shall be applied without regard to subsection (f) of such section. This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019”.
2017 Pub. L. 115-97 Pub. L. 115–97, § 11027(b), inserted at end “This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019”.
2010 Pub. L. 111-148 Pub. L. 111–148 substituted “without regard to subsection (f) of such section” for “by substituting ‘10 percent’ for ‘7.5 percent’ ”.

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(i) in lieu of the exception under section 163(h)(2)(D), the term “personal interest” shall not include any qualified housing interest (as defined in subsection (e)),

(ii) interest on any specified private activity bond (and any amount treated as interest on a specified private activity bond under section 57(a)(5)(B)), and any deduction referred to in section 57(a)(5)(A), shall be treated as includible in gross income (or as deductible) for purposes of applying section 163(d),

(iii) in lieu of the exception under section 163(d)(3)(B)(i), the term “investment interest” shall not include any qualified housing interest (as defined in subsection (e)), and

(iv) the adjustments of this section and sections 57 and 58 shall apply in determining net investment income under section 163(d).

(C) Treatment of certain recoveries No recovery of any tax to which subparagraph (A)(ii) applied shall be included in gross income for purposes of determining alternative minimum taxable income.

Amended 1988, 2014, 2019

2019 Pub. L. 116-94 Pub. L. 116–94 redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: “In determining the amount allowable as a deduction under section 213, subsection (a) of section 213 shall be applied without regard to subsection (f) of such section. This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019”.
2014 Pub. L. 113-295 Pub. L. 113–295, § 221(a)(25)(B), redesignated cls. (iii) to (v) as (ii) to (iv), respectively, and struck out former cl. (ii) which read as follows: “sections 163(d)(6) and 163(h)(5) (relating to phase-ins) shall not apply,”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 2004(b)(2), substituted “163(h)(5)” for “163(h)(6)”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(4), substituted “specified private activity bond” for “specified activity bond” before “under”, and “57(a)(5)(B)” for “56(a)(5)(B)”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(3), added cls. (iv) and (v).

(D) Standard deduction and deduction for personal exemptions not allowed The standard deduction under section 63(c), the deduction for personal exemptions under section 151, and the deduction under section 642(b) shall not be allowed.

Amended 2019

2019 Pub. L. 116-94 Pub. L. 116–94 redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: “In determining the amount allowable as a deduction under section 213, subsection (a) of section 213 shall be applied without regard to subsection (f) of such section. This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019”.

(E) Section 68 not applicable Section 68 shall not apply.

Amended 1988, 2008, 2009, 2018, 2019

2019 Pub. L. 116-94 Pub. L. 116–94 redesignated subpars. (C) to (F) as (B) to (E), respectively, and struck out former subpar. (B). Prior to amendment, text of subpar. (B) read as follows: “In determining the amount allowable as a deduction under section 213, subsection (a) of section 213 shall be applied without regard to subsection (f) of such section. This subparagraph shall not apply to taxable years beginning after December 31, 2016, and ending before January 1, 2019”.
2018 Pub. L. 115-141 Pub. L. 115–141, § 401(b)(7), struck out at end “The preceding sentence shall not apply to so much of the standard deduction as is determined under subparagraphs (D) and (E) of section 63(c)(1).”
2009 Pub. L. 111-5 Pub. L. 111–5, § 1008(d), substituted “subparagraphs (D) and (E) of section 63(c)(1)” for “section 63(c)(1)(D)”.
2008 Pub. L. 110-343 Pub. L. 110–343, § 706(b)(3), inserted at end “The preceding sentence shall not apply to so much of the standard deduction as is determined under section 63(c)(1)(D).”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(2), substituted “and deduction for personal exemptions not allowed” for “not allowed” in heading and amended text generally. Prior to amendment, text read as follows: “The standard deduction provided in section 63(c) shall not be allowed.”

(2) Circulation and research and experimental expenditures

Amended 1989, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 12001(b)(7), redesignated subpar. (D) as (C) and struck out former subpar. (C). Prior to amendment, text of subpar. (C) read as follows: “In the case of circulation expenditures described in section 173, the adjustments provided in this paragraph shall apply also to a personal holding company (as defined in section 542).”
1989 Pub. L. 101-239 Pub. L. 101–239, § 7612(d)(1), added subpar. (D).

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(A) In general The amount allowable as a deduction under section 173, 174(a), or 174A(a) in computing the regular tax for amounts paid or incurred after December 31, 1986, shall be capitalized and—

Amended 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70302(b)(3)(A)(i), substituted “, 174(a), or 174A(a)” for “or 174(a)” in introductory provisions.

Cited by 2

(i) in the case of circulation expenditures described in section 173, shall be amortized ratably over the 3-year period beginning with the taxable year in which the expenditures were made, or

(ii) in the case of foreign research or experimental expenditures described in section 174(a) and domestic research or experimental expenditures in section 174A(a), shall be amortized ratably over the 10-year period beginning with the taxable year in which the expenditures were made.

Amended 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70302(b)(3)(A)(ii), substituted “foreign research or experimental expenditures described in section 174(a) and domestic research or experimental expenditures in section 174A(a)” for “research and experimental expenditures described in section 174(a)”.

(i) the amount allowable under section 165(a) for the expenditures if they had remained capitalized, or

(ii) the amount of such expenditures which have not previously been amortized under subparagraph (A).

(C) Exception for certain research and experimental expenditures If the taxpayer materially participates (within the meaning of section 469(h)) in an activity, this paragraph shall not apply to any amount allowable as a deduction under section 174(a) or 174A(a) for expenditures paid or incurred in connection with such activity.

Amended 2017, 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70302(b)(3)(B), inserted “or 174A(a)” after “174(a)”.
2017 Pub. L. 115-97 Pub. L. 115–97, § 12001(b)(7), redesignated subpar. (D) as (C) and struck out former subpar. (C). Prior to amendment, text of subpar. (C) read as follows: “In the case of circulation expenditures described in section 173, the adjustments provided in this paragraph shall apply also to a personal holding company (as defined in section 542).”

(3) Treatment of incentive stock options Section 421 shall not apply to the transfer of stock acquired pursuant to the exercise of an incentive stock option (as defined in section 422). Section 422(c)(2) shall apply in any case where the disposition and the inclusion for purposes of this part are within the same taxable year and such section shall not apply in any other case. The adjusted basis of any stock so acquired shall be determined on the basis of the treatment prescribed by this paragraph.

Amended 1988, 1989, 1990, 1996

1996 Pub. L. 104-188 Pub. L. 104–188, § 1702(h)(12), provided that the amendment made by section 11801(c)(9)(G)(ii) of Pub. L. 101–508 shall be applied as if it struck “Section 422A(c)(2)” and inserted “Section 422(c)(2)”. See 1990 Amendment note below.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(9)(G)(i), substituted “section 422” for “section 422A”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(9)(G)(ii), which directed the substitution of “section 422(c)(2)” for “section 422A(c)(2)”, was executed by substituting “Section 422(c)(2)” for “Section 422A(c)(2)”. See 1996 Amendment note above.
1989 Pub. L. 101-239 Pub. L. 101–239, § 7811(d)(3), inserted after first sentence “Section 422A(c)(2) shall apply in any case where the disposition and the inclusion for purposes of this part are within the same taxable year and such section shall not apply in any other case.” and substituted “this paragraph” for “the preceding sentence” in last sentence.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(14)(A), added par. (3).

[(c) Repealed. Pub. L. 115–97, title I, § 12001(b)(8)(A), Dec. 22, 2017, 131 Stat. 2093]

Amended 1988, 1990, 2006, 2017

2017 Pub. L. 115-97 Pub. L. 115–97, § 12001(b)(8)(A), struck out subsec. (c) which related to adjustments applicable to corporations.
2006 Pub. L. 109-304 Pub. L. 109–304, in introductory provisions, substituted “chapter 535 of title 46, United States Code” for “section 607 of the Merchant Marine Act, 1936 (46 U.S.C. 1177)”, and, in subpars. (A) and (B), substituted “such chapter 535” for “such section 607”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11801(c)(2)(A), substituted heading for one which read: “Adjustment for book income or adjusted current earnings” and amended text generally. Prior to amendment, text read as follows:
1990 “(A) Book income adjustment.—For taxable years beginning in 1987, 1988, and 1989, alternative minimum taxable income shall be adjusted as provided under subsection (f).
1990 “(B) Adjusted current earnings.—For taxable years beginning after 1989, alternative minimum taxable income shall be adjusted as provided under subsection (g).”
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(13)(A), substituted “adjusted current earnings” for “adjusted earnings and profits” in heading.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(13)(B), substituted “Adjusted current earnings” for “Adjusted earnings and profits” in heading.

Cited by 1

(d) Alternative tax net operating loss deduction defined

Amended 2008, 2014

2014 Pub. L. 113-295 Pub. L. 113–295, § 221(a)(30)(C), struck out par. (3). Text read as follows: “In the case of a taxpayer which has a qualified disaster loss (as defined by section 172(b)(1)(J)) for the taxable year, paragraph (1) shall be applied by increasing the amount determined under subparagraph (A)(ii)(I) thereof by the sum of the carrybacks and carryovers of such loss.”
2008 Pub. L. 110-343 Pub. L. 110–343, § 708(c), added par. (3).

Cited by 1

(1) In general For purposes of subsection (a)(4), the term “alternative tax net operating loss deduction” means the net operating loss deduction allowable for the taxable year under section 172, except that—

(A) the amount of such deduction shall not exceed the sum of—

Amended 1990, 1992, 2002

2002 Pub. L. 107-147 Pub. L. 107–147, § 102(c)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “the amount of such deduction shall not exceed 90 percent of alternate minimum taxable income determined without regard to such deduction, and”.
1992 Pub. L. 102-486 Pub. L. 102–486, § 1915(c)(2), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “the amount of such deduction shall not exceed the excess (if any) of—
“(i) 90 percent of alternative minimum taxable income determined without regard to such deduction and the deduction under subsection (h), over
“(ii) the deduction under subsection (h), and”.
1990 Pub. L. 101-508 Pub. L. 101–508, § 11531(b)(1), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “the amount of such deduction shall not exceed 90 percent of alternative minimum taxable income determined without regard to such deduction, and”.

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(i) the lesser of—

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(I) the amount of such deduction attributable to net operating losses (other than the deduction described in clause (ii)(I)), or

Amended 2004

2004 Pub. L. 108-311 Pub. L. 108–311, § 403(b)(4)(A), struck out “attributable to carryovers” after “other than the deduction”.

(II) 90 percent of alternative minimum taxable income determined without regard to such deduction and the deduction under section 199, [OLRC note: See References in Text note below.] plus

Amended 2005

2005 Pub. L. 109-135 Pub. L. 109–135, § 403(a)(14), substituted “such deduction and the deduction under section 199” for “such deduction”.

(ii) the lesser of—

(I) the amount of such deduction attributable to an applicable net operating loss with respect to which an election is made under section 172(b)(1)(H) (as in effect before its repeal by the Tax Increase Prevention Act of 2014), or

Amended 2004, 2009, 2018

2018 Pub. L. 115-141 Pub. L. 115–141, § 401(b)(8), inserted “(as in effect before its repeal by the Tax Increase Prevention Act of 2014)” after “section 172(b)(1)(H)”.
2009 Pub. L. 111-92 Pub. L. 111–92 amended subcl. (I) generally. Prior to amendment, subcl. (I) read as follows: “the amount of such deduction attributable to the sum of carrybacks of net operating losses from taxable years ending during 2001 or 2002 and carryovers of net operating losses to taxable years ending during 2001 and 2002, or”.
2004 Pub. L. 108-311 Pub. L. 108–311, § 403(b)(4)(B), substituted “from taxable years” for “for taxable years” and “carryovers” for “carryforwards”.

Cited by 1

(II) alternative minimum taxable income determined without regard to such deduction and the deduction under section 199 1 reduced by the amount determined under clause (i), and

Amended 2005

2005 Pub. L. 109-135 Pub. L. 109–135, § 403(a)(14), substituted “such deduction and the deduction under section 199” for “such deduction”.

(B) in determining the amount of such deduction—

(i) the net operating loss (within the meaning of section 172(c)) for any loss year shall be adjusted as provided in paragraph (2), and

(ii) appropriate adjustments in the application of section 172(b)(2) shall be made to take into account the limitation of subparagraph (A).

Amended 1996

1996 Pub. L. 101-508 Pub. L. 101–508, § 1702(e)(1)(A), amended cl. (ii) generally. Prior to amendment, cl. (ii) read as follows: “in the case of taxable years beginning after December 31, 1986, section 172(b)(2) shall be applied by substituting ‘90 percent of alternative minimum taxable income determined without regard to the alternative tax net operating loss deduction’ for ‘taxable income’ each place it appears.”

(2) Adjustments to net operating loss computation

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(A) Post-1986 loss years In the case of a loss year beginning after December 31, 1986, the net operating loss for such year under section 172(c) shall—

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(5), struck out “(other than subsection (a)(6) thereof)” after “for such year” in cl. (ii) and inserted sentence at end providing that an item of tax preference shall be taken into account under clause (ii).

(i) be determined with the adjustments provided in this section and section 58, and

(ii) be reduced by the items of tax preference determined under section 57 for such year.

Cited by 1

An item of tax preference shall be taken into account under clause (ii) only to the extent such item increased the amount of the net operating loss for the taxable year under section 172(c).

(B) Pre-1987 years In the case of loss years beginning before January 1, 1987, the amount of the net operating loss which may be carried over to taxable years beginning after December 31, 1986, for purposes of paragraph (2), shall be equal to the amount which may be carried from the loss year to the first taxable year of the taxpayer beginning after December 31, 1986.

(e) Qualified housing interest For purposes of this part—

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(1) In general The term “qualified housing interest” means interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued during the taxable year on indebtedness which is incurred in acquiring, constructing, or substantially improving any property which—

“interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued” Opening words

“during the taxable year on indebtedness which is incurred in acquiring, constructing, or substantially improving any property which—” Opening words

“Substantially” implies facts and circumstances. No regulation cites this provision (eCFR, Oct 19, 2026)

Textual readingANY OF= qualified housing interest, acquisition indebtedness

(A) is the principal residence (within the meaning of section 121) of the taxpayer at the time such interest accrues, or

Amended 1988, 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 312(d)(1), substituted “section 121” for “section 1034”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 2004(b)(3)(B), struck out “or is paid” after “accrues”.

(B) is a qualified dwelling which is a qualified residence (within the meaning of section 163(h)(5)).

Amended 1988, 2025

2025 Pub. L. 119-21 Pub. L. 119–21, § 70203(d)(1), substituted “section 163(h)(5)” for “section 163(h)(4)”.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(6)(A)(ii), substituted “section 163(h)(4)” for “section 163(h)(3)”.

Such term also includes interest on any indebtedness resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence; but only to the extent that the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness immediately before the refinancing.

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 2004(b)(3)(A), substituted “improving” for “rehabilitating” in introductory text.
1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(6)(A)(i), inserted “qualified residence interest (as defined in section 163(h)(3)) and is” after “interest which is” in introductory text.

(2) Qualified dwelling The term “qualified dwelling” means any—

(A) house,

(B) apartment,

(D) mobile home not used on a transient basis (within the meaning of section 7701(a)(19)(C)(v)),

including all structures or other property appurtenant thereto.

(3) Special rule for indebtedness incurred before July 1, 1982 The term “qualified housing interest” includes interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued on indebtedness which—

“interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued on indebtedness which—” Opening words

Textual readingALL OF= qualified housing interest

(A) was incurred by the taxpayer before July 1, 1982, and

(B) is secured by property which, at the time such indebtedness was incurred, was—

(i) the principal residence (within the meaning of section 121) of the taxpayer, or

Amended 1997

1997 Pub. L. 105-34 Pub. L. 105–34, § 312(d)(1), substituted “section 121” for “section 1034”.

(ii) a qualified dwelling used by the taxpayer (or any member of his family (within the meaning of section 267(c)(4))).

Amended 1988

1988 Pub. L. 100-647 Pub. L. 100–647, § 1007(b)(6)(B), substituted “interest which is qualified residence interest (as defined in section 163(h)(3)) and is paid or accrued” for “interest paid or accrued”.