What the new law does :

1. Removes all income (AGI) limitations (no more income phase-outs)



2. Refunds your AMT credits over 2 years



3. Abates all outstanding liabilities, interest, and penalties



4. Refunds all anything you have already paid (including penalties and interest) to the IRS associated with ISO-AMT liability

What the new law does NOT do :

1. Pay you interest on money the IRS has held over the years



2. Refund any interest/fees/cost associated with money you might have borrowed to pay the IRS



3. Change any law associated with Non-qualified stock options



4. Change the treatment of ISOs under the AMT moving forward



5. Affect state laws

Other details and interesting notes :

1. All refunds are paid 50% the first year and 50% the second year starting with Tax year 2008



2. The provision sunsets in Tax year 2012 (ie - beginning Tax year 2013, this provision is expired)



3. Your AMT credits must be at least 3 years old before you can get a refund



4. This provision only applies to AMT paid from Incentive Stock Options

Click here for IRS article on "AMT and ISO Emergency Economic Stabilization Act of 2008 Relief".

(A)50 percent of long-term unused minimum tax credit for such taxable year, or

(B)the amount (if any) of the AMT refundable credit amount determined under this paragraph for the taxpayer's preceding taxable year (determined without regard to subsection (f)(2)).

For a given tax year, you get either half of your AMT credits OR you get what you got last year, whichever is GREATER. But, you can never get more than the amount of AMT credits you have left. What this means is that you are guaranteed to get your full refund over 2 years - there is no nesting doll effect.

(b) Treatment of Certain Underpayments, Interest, and Penalties Attributable to the Treatment of Incentive Stock Options - Section 53 is amended by adding at the end of the following new subsection:

(1) Abatement - Any underpayment of tax outstanding on the date of the enactment of this subsection which is attributable to the application of section 56(b)(3) for any taxable year ending before January 1, 2008, and any interest or penalty with respect to such underpayment which is outstanding on such date of enactment, is hereby abated. The amount determined under subsection (b)(1) shall not include any tax abated under the precending sentence.

ALL liabilities associated to ISO-AMT from before January 1, 2008 are abated (ie - if you owe money from ISO-AMT that happened in tax year 2007 and before, you now owe nothing). Your AMT credits are reduced by the amount abated (note - you can't have negative credits! For example, if you owed $1000 and you had $700 credits, you now owe $0 and you have $0 credits, not -$300 credits).

(2) Increase in Credit for Certain Interest and Penalties Already Paid - the AMT refundable credit amount, and the minimum tax credit determined under subsection (b), for the taxpayer's first 2 taxable years beginning after December 31, 2007, shall be increased by 50 percent of the aggregate amount of the interest and penalties which were paid by the taxpayer before the date of the enactment of this subsection and which would (but for such payment) have been abated under paragraph (1).

Your refund gets increase by how much you have already paid, including penalties and interest. In 2008, your refund gets increased by 50% of how much you paid; then in 2009, your refund gets increased by 50% of how much you paid. ie - it takes 2 years for you to get a refund of what you have paid.

(c) Effective Date -