Congress Passes AMT Relief Congress prepares to send President Bush legislation that would prevent more than 20 million taxpayers from receiving a $2,000 bill this year as a result of the alternative minimum tax.
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Congress Passes AMT Relief

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Congress passed legislation that would keep more than 20 million taxpayers from a $2,000 bill this year as a result of the alternative minimum tax.

In one of its last acts of the year, Congress passed the bill providing a one-year stay on growth of the AMT.

The last-minute nature of the vote on the AMT fix resulted from a fundamental difference between the House and Senate. House Democrats had insisted that the $50 billion in tax relief resulting from the one-year fix must be paid for by an equivalent amount of revenue elsewhere, mainly by closing a loophole on offshore tax havens.

Senate Republicans, however, have blocked the Senate from taking up legislation that includes a tax increase, and Bush threatened to veto any bill that raised taxes.

"Let me be clear: There is no disagreement between Republicans and Democrats over protecting the middle class from the AMT," House Majority Leader Steny Hoyer (D-MD) said. "The question is, will we do so responsibly or charge tens of billions of dollars to our grandchildren?"

Rep. Eric Cantor of Virginia, the Republicans' chief deputy whip, said the Wednesday vote was "a huge victory for us." The GOP position, he said, "has been consistent down the line. We don't believe we ought to raise taxes to correct the mistake of AMT."

The AMT was created in 1969 to make sure that a small group of very rich people did not totally avoid paying taxes. But the tax, which applies more stringent rules for using deductions in calculating tax obligations, was never adjusted for inflation, and every year more middle- and upper-middle-level income people are hit by the tax.

Congress has responded by passing annual fixes, or patches, to keep the AMT from affecting more people. Without a fix, taxpayers subject to the tax could grow from 4 million in 2006 to 25 million this year.

Even with House passage of an unpaid-for bill, the consequences of the congressional dispute could be felt by millions.

The Internal Revenue Service has said that it will take seven weeks from the time the bill is signed into law to reprogram and test forms, going well past the planned mid-January start of the 2008 filing season.

The IRS said Tuesday that it has yet to decide whether certain delays in processing returns and sending out refunds will affect AMT taxpayers or all taxpayers.

From NPR reports and The Associated Press