On January 14, the IRS announced via its website that refunds of alternative minimum tax credits (MTCs) as provided under the 2017 tax reform act (the Act) are not subject to sequester under the provisions of federal budget legislation. The announcement reverses the prior Office of Management and Budget (OMB) decision to sequester all MTC refunds, as communicated by the IRS last March.
Taxpayers now may expect full payment of MTC refund claims filed under the provisions of Section 53(e) as enacted under the Act. At the same time, the IRS announcement makes clear that the government intends to continue the sequestration of MTC refund claims made pursuant to Section 168(k)(4).
Based on the previously announced OMB position, companies may have recorded valuation allowances against deferred tax assets related to MTC carryforwards. Companies should re-evaluate the need for such valuation allowances based on the revised position announced by the IRS.