August 1989 Alternative minimum tax and foreign corporations. Foreign corporations not previously liable to federal tax may be subject to the AMT due to NOL carryovers or large book income. Proper tax planning can reduce or eliminate the AMT through the use of current earnings and profits for book income adjustment. By not treating income as effectively connected, income will not be treated as book income. AMTI is determined by starting with taxable income before NOLs and then adding or subtracting certain preferences and adjustments.
Adjustments can be positive or negative.
An example of an adjustment would be depreciation recomputed under a method different from the method used for regular tax purposes for post-1986 tangible personal property. Generally, AMT attributable to temporary differences between taxable income and AMTI may be carried forward as a credit to offset future regular tax liability. Perhaps the most significant adjustment required for the AMT is the excess book income adjustment. The book income adjustment is an important concern for foreign corporations. Book income is adjusted to disregard any federal income taxes and foreign taxes for which a foreign tax credit has been taken.