Abstract The article focuses on the impacts of alternative minimum tax policy on the financial reporting of companies in the United States. For many years the U.S. Congress has utilized the income tax system to affect the behavior of tax paying entities through the enactment of various tax incentives such as accelerated depreciation systems, special tax accounting rules, and various income tax credits. Recognizing the political unacceptability of situations arisen from the policy coupled with demands to raise additional revenue to decrease the budget deficit, Congress enacted the Tax Reform Act of 1986. It is interesting that Congress did not eliminate or restrict the tax incentives creating these situations, but instead chose to increase complexity by adding another layer of taxation known as the alternative minimum tax. The creation of the alternative minimum tax business untaxed reported profits adjustment creates the concept of linking the amount of federal income tax liability to the timing and amount of income recognized for financial reporting purposes. Therefore, decisions made by corporations for their financial reporting activities may be influenced by their desire to reduce the impact of the alternative minimum tax. Also an increase in accounting, auditing, and tax preparation fees can be anticipated because the corporation must have records for two income tax systems, the regular tax and the alternative.
Bazley et al. (Wed,) studied this question.