2 October 2003 External T.I. 2003-0024955 - Logging Tax Credit and Minimum Tax

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CCRA.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ADRC.

Principal Issues: Does Form T691 calculate the correct amount of additional taxes paid for minimum tax carryover?

Position: Yes.

Reasons: Since section 127.531 restricts the tax credits that may be claimed in the computation of the AMT, certain tax credits, including the federal logging tax credit, are not used in the computation of the AMT. In addition, pursuant to subsection 120.2(3) of the Act, the amount of AMT available to be applied to other years is calculated without reference to the tax credits described in sections 126,127 and 127.2 through 127.4 of the Act.

2003-002495
XXXXXXXXXX Luisa A. Majerus
(613) 946-3558
October 2, 2003

Dear XXXXXXXXXX:

Federal Logging Tax Credit ("FLTC") and Alternative Minimum Tax ("AMT")

We are writing in response to your memorandum, dated June 9, 2003 to Mr. Joe MacDonald of the Summerside Tax Centre office of the Canada Customs and Revenue Agency, concerning the application of the FLTC where an individual is subject to AMT. Specifically, the concern is that Form T691 does not calculate the correct amount of additional taxes paid for minimum tax carryover.

Comments

If the amount of tax payable calculated under Division E.1 (AMT payable) exceeds the amount of tax payable under Division E (regular tax payable), the individual's tax payable under Part I for the year is determined under Division E.1 rather than Division E of the Income Tax Act (the "Act").

AMT essentially involves a recalculation of an individual's tax payable. The applicable tax rate is applied to income recalculated on the basis that certain tax deductions, exemptions and tax credits that would otherwise be available for regular tax purposes are not deductible or applicable. AMT is then reduced by the individual's basic minimum tax credit ("AMTC") as calculated in section 127.531 of the Act. AMTC is comprised of the non-refundable tax credits (amounts allowed under subsections 118(1) and (2), sections 118.1 and 118.2, subsection 118.3(1) and sections 118.5 to 118.7) and does not include the FLTC that is allowed under subsection 127(1) of the Act.

Where an individual is subject to AMT in a particular year, the amount of any additional tax paid as determined by subsection 120.2(3) of the Act, can be deducted from regular tax payable in any of the next 7 taxation years within the limits set out in subsection 120.2(1) of the Act. Pursuant to subsection 120.2(3) of the Act, the amount of additional tax available to be applied to other years is calculated without reference to the tax credits described in sections 126, 127 and 127.2 through 127.4 of the Act.

It is evident that the Department of Finance intended to exclude the tax credits allowed under sections 126, 127, and 127.2 through 127.4 of the Act in the computation of the AMT under Division E.1 of the Act. Consequently, we are of the view that form T691 correctly calculates the additional taxes paid for minimum tax carryover.

We trust this information meets your needs

Yours truly,

For Director
Reorganizations and Resources Division
Income Tax Rulings Directorate
Policy and Legislation Branch

cc: Mr. Joe MacDonald, Summerside Tax Centre

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