Both of the Tax Panel's recommended options for reform include axing the AMT, and there is an AMT patch for 2006 in legislation currently before Congress. But it is far from certain that Congress will enact even the short term AMT patch this year given budget pressures and the President's political difficulties.

Meanwhile, more and more US taxpayers are falling foul of a provision in AMT legislation that applies income tax to gains on exercise of ISO's (Incentive Stock Options) - and the tax remains due whatever the eventual value of the exercised options. Many people received and exercised options during the high-tech boom before 2001, and are now being pursued by the IRS for tax even though the underlying shares may have lost all or most of their value. Horror stories abound of families being forced into bankruptcy as a result.

Rep. Sam Johnson (R-TX), co-sponsor Richard Neal (D-MA), and more than 40 other bipartisan co-sponsors introduced H.R. 3385 which is start to help those who have faced AMT on ISOs, essentially by obliging the IRS to refund tax paid on ISO exercise gains over a period of 5 years. Further, the bill also corrects a reporting loophole by requiring companies to report the purchase of ISO stock to the IRS.

“Many taxpayers across the nation have floated the government an interest-free loan for years because of the interaction of tax rules on the Alternative Minimum Tax (AMT) and Incentive Stock Options (ISOs),” stated Congressman Sam Johnson (R-TX). “AMT was never meant to be a system that forced families to prepay taxes with little expectation of ever being able to use their accumulated credits. With the relief from this bill, families who have put second mortgages on their homes, cashed out retirement savings, sold assets, and struggled to work out payment plans with the IRS can get their money back and get on with their lives.”

“Congressman Sam Johnson has taken a critically important step in addressing the unintended and unjust effects on hardworking Americans caused by the current ISO AMT tax provisions,” stated Tim Carlson, President of the Coalition for Tax Fairness. “CTF applauds Congressman Johnson and the numerous original co-sponsors of the AMT Credit Fairness Act for the introduction of this landmark bill. We are confident that as more people learn about the unintended effects of the tax code that are causing this injustice, this important bill will gain speedy support throughout Congress.”