AMT Reduction At a Glance By the Manufacturers Association of Central New York


Director of Communications


Reduce the Alternative Minimum Tax (AMT) rate applied to corporations from 3.5% to 1.75% of income. The AMT limits a company's ability to utilize all of the Investment Tax Credits (ITC) it would otherwise earn through investment in plant, equipment and job growth.


Jobs. The AMT retards investment in New York State by manufacturers. Without investment by manufacturers, there will be no growth ­ or even stability ­ in manufacturing employment. A 1997 study by the Department of Tax and Finance found that elimination or reduction of the AMT would ". . . encourage increased investment in the state and enhance the State's business climate." A recent survey found that a significant majority of site location consultants and corporate tax managers believe New York's ITC encourages investment. The AMT retards the effectiveness of the ITC, which is one of New York's best economic development tools.

Will It Work?

The AMT was reduced from 5% to 3.5% over a two-year period ending in January of 1997. Was it a coincidence that 1997 marked its first twelve-month period with net growth in manufacturing jobs in more than ten years? There's a connection. If you want manufacturing jobs, you must encourage manufacturing investment. A further reduction in the AMT will help spur investment in new equipment and capacity, creating more jobs and sending a strong signal to the most important employers in the state.

What Will It Cost?

An argument could be made that a reduction in the AMT, which bolsters economic activity, won't cost anything. The NYS Dept. of Tax & Finance notes that a hard estimate of resulting lost income is difficult to establish. Changes in one part of the corporate tax structure can cause revenue changes ­ up or down ­ in other parts as well. In fact, corporate tax revenues of all kinds have increased since the last AMT cut. The Senate Finance Committee estimates that a cut in the AMT from the current 3.5% down to 2.5% would result in $80 million in savings for business tax payers.


Reduction in the Alternative Minimum Tax rate is a budget issue and cuts in this and other business taxes must almost certainly be made in the context of an overall budget agreement. Making such a reduction in a year when there is a significant budget surplus makes sense.

Credit Where Credit Is Due

The time is right to further reduce the Alternative Minimum Tax, in order to restore the value of credits earned by manufacturers who invest in New York State.

In an effort to attract and retain jobs, the State has established a number of worthwhile programs to encourage employers who are considering relocating to, or investing in, New York.

These programs range from fairly simple grants for companies moving large numbers of jobs into the Empire State, to complicated low-cost loan programs applicable to only specific kinds of projects.

The Investment Tax Credit, a feature of the state's corporate tax structure, is an especially attractive and efficient incentive mechanism for encouraging investment in plants, equipment and jobs at New York's manufacturing firms.

It's simple . . . and it works

Under the investment tax credit, manufacturers who invest in plant and equipment are permitted a credit on state corporate income taxes equal to five percent (5%) of that investment (in most cases). This tax incentive is a great motivator and reward for employers who do what everyone wants them to do ­ invest in new capacity and employment in New York State.

Since the ITC benefit is derived directly from the tax returns of eligible firms, there is no cumbersome bureaucracy required. No boards must oversee applications and complicated forms are unnecessary. If the investment in manufacturing capacity and jobs fits the definition in the tax law, the credit is granted. Simple.

Existing New York firms ­ the best hope for job growth in this state ­ may benefit as much as those choosing to relocate to the Empire State.

A significant majority of site location specialists around the country believe New York's ITC encourages investment.

The AMT: Limiting the value of a great program

The ITC is highly desirable, easy to administer and effective. Unfortunately, it became less valuable as an incentive to manufacturing investment after 1987.

The value of the Investment Tax Credit became limited when the state imposed the Alternative Minimum Tax (AMT) in 1987.

The AMT places a limit on the value of the credits earned under the ITC. Put simply, the AMT states that no matter how many credits you've earned, your tax obligation will never go below a certain point.

in 1987, New York State ranked second in the nation in the number of manufacturing jobs. During the years that the AMT rate was highest, New Yorkers saw manufacturing jobs and plants depart for other locales and witnessed an aging of existing manufacturing capacity. New York dropped to below one million manufacturing jobs for the first time in nearly a hundred years.

Beginning to restore the value of the ITC

In 1994, after intense lobbying by the state's employer community, the tax rate imposed under the AMT was cut from 5% to 3.5% ­ a major step in the right direction! The arguments for AMT reduction made in 1994 ring even truer in '98 . . . We need to give manufacturers every possible reason to invest in their present and future capacity in the Empire State. The ITC provides a crucial incentive . . . the AMT unnecessarily limits it.

The most compelling reason to reduce the AMT further is the apparent impact of the last reduction. Since the minimum tax rate was lowered, the state has not only stopped losing manufacturing jobs, but actually added some. 1997, the first full year in which the AMT was 3.5%, marked the first twelve-month period in a decade that New York did not suffer a net loss of manufacturing jobs. In fact, we added industrial jobs!

If a 30% drop in the Alternative Minimum Tax spurred reinvestment and modest job growth by New York's manufacturers, another drop could lead to substantial growth in jobs and greater commitment to the Empire State among industrial companies.

What does the state's manufacturing community want?

In order to restore the value of the Investment Tax Credit as the state's most valuable tool for growing manufacturing jobs, we urge the Legislature to cut the Alternative Minimum Tax rate in half, from 3.5% to 1.75%.

Senate Majority Leader Joseph Bruno has recently proposed reducing the AMT rate to 2.5% over three years. Some members of the Assembly ­ on both sides of the aisle ­ are supporting a similar proposal. We applaud this initiative, which is estimated to save New York's businesses more than $80 million per year.

Our message: Use the state's strong fiscal position in 1998 to reduce the Alternative Minimum Tax as much as possible . . . as quickly as possible.