Sec. 70107. Extension of increased alternative minimum tax exemption amounts and modification of phaseout thresholds | Impact

One Big (not so) Beautiful Bill over the U.S. Capitol

Legislative and Policy Analysis

Section 70107: Extension of increased alternative minimum tax exemption amounts and modification of phaseout thresholds

Executive Summary

Section 70107 permanently extends the higher individual alternative minimum tax exemption structure created by the Tax Cuts and Jobs Act, while also tightening the income range over which that exemption phases out for higher-income taxpayers.[1] The section applies to taxable years beginning after December 31, 2025.[2]

The practical effect is two-sided. Compared with a world in which the TCJA AMT changes expired after 2025, Section 70107 prevents a much broader return of the AMT for upper-middle-income and high-income households. Compared with a simple permanent extension of the 2025 TCJA-indexed rules, however, it lowers the phaseout thresholds beginning in 2026 and doubles the phaseout rate from 25 percent to 50 percent, making the AMT more likely to apply to taxpayers above the new thresholds.[3]

For tax year 2026, the IRS lists AMT exemption amounts of $90,100 for single filers, phasing out at $500,000, and $140,200 for married couples filing jointly, phasing out at $1,000,000.[4] The Joint Committee on Taxation estimated the Senate-passed Title VII version of this provision would reduce revenues by about $1.363 trillion over fiscal years 2025 through 2034 relative to the present-law baseline, because present law assumed expiration of the increased AMT exemptions after 2025.[5] Relative to a current-policy baseline that assumed extension of the expiring TCJA AMT framework, the phaseout modifications were estimated to raise about $12.2 billion over the same budget window.[6]

What Section 70107 Actually Does

Section 70107 amends Internal Revenue Code section 55(d)(4), the provision governing the increased AMT exemption amounts and phaseout thresholds for individuals.[1] It removes language that would have limited the increased exemption structure to years before 2026, thereby making the increased AMT exemption amounts permanent.[1]

It also modifies the inflation adjustment and phaseout structure. For the $1,000,000 joint-filer phaseout threshold, Section 70107 resets the inflation-adjustment base so that the threshold begins at the 2026 level and is indexed after that.[2] It also changes the exemption reduction rate by substituting 50 percent for 25 percent, meaning the exemption is reduced by 50 cents for each dollar of alternative minimum taxable income above the applicable threshold.[2]

Filing status or item	Amount or rule	What it supports or changes
Single filer AMT exemption, tax year 2026	$90,100	Amount shielded from AMT calculation before phaseout begins.[4]
Married filing jointly AMT exemption, tax year 2026	$140,200	Amount shielded from AMT calculation before phaseout begins.[4]
Single filer phaseout threshold, tax year 2026	$500,000	AMT exemption begins phasing out once AMTI exceeds this level.[4]
Married filing jointly phaseout threshold, tax year 2026	$1,000,000	AMT exemption begins phasing out once AMTI exceeds this level.[4]
Phaseout rate	50 percent	Exemption phases out twice as fast as under the prior 25 percent phaseout rule.[2]
Effective date	Taxable years beginning after December 31, 2025	Applies beginning with 2026 tax years.[2]
Present-law revenue effect, FY2025-FY2034	$1.363 trillion revenue reduction	Reflects permanent extension of increased AMT exemptions relative to expiration under present law.[5]
Current-policy revenue effect, FY2025-FY2034	$12.2 billion revenue gain	Reflects tighter phaseout thresholds and faster phaseout relative to a continued TCJA-policy baseline.[6]

The AMT is a parallel income tax calculation. Taxpayers compute tax under the regular income tax system and under the AMT system, then generally pay the higher amount.[7] AMT rules disallow or modify certain tax preferences and deductions, so the exemption amount and phaseout threshold are central to determining how many taxpayers owe AMT and how much they owe.[7]

Legislative Mechanism

Section 70107 operates entirely through amendments to the Internal Revenue Code. It does not create a new spending program, grant account, or agency office. Instead, it changes the tax base and tax-liability calculation for individual taxpayers subject to the AMT.

The mechanism has three parts:

It removes the scheduled expiration of the increased AMT exemption amounts after 2025.[1]
It adjusts the inflation indexing rules for phaseout thresholds, including the $1,000,000 joint-filer threshold.[2]
It doubles the rate at which the exemption phases out above the applicable income threshold from 25 percent to 50 percent.[2]

Because this is a tax provision, the fiscal effect occurs through changes in receipts rather than direct outlays. The IRS administers the provision through forms, instructions, filing-season programming, taxpayer guidance, return processing, compliance systems, and audit selection. Treasury, JCT, CBO, and IRS data systems then reflect the revenue effects at different levels of aggregation.

Expenditure Tracking and Reporting Protocol

Section 70107 involves a federal financial flow because it changes federal tax liabilities and therefore federal receipts. It is not tracked like an appropriation, grant, contract, or direct payment. The relevant tracking pathway is tax administration and revenue estimation.

The principal public tracking sources are likely to be:

IRS forms, instructions, and filing-season guidance, especially Form 6251 and related individual income tax instructions;
IRS Statistics of Income tables showing AMT liability, income ranges, and taxpayer counts, usually with a lag;
Treasury tax expenditure and receipts reporting, where AMT-related estimates may be aggregated within broader individual income tax baselines;
Joint Committee on Taxation revenue estimates for the enacted or proposed provision;
Congressional Budget Office baseline and budget-effect estimates;
Treasury and IRS administrative data that are not fully public at a section-specific level.

Public visibility is likely to be delayed and aggregated. Taxpayers and preparers will see the rule directly on returns, forms, and software. Congress and budget analysts will see estimates in JCT and CBO materials. The public may see AMT outcomes in IRS Statistics of Income data, but not always in a way that isolates Section 70107 separately from other individual income tax changes.

flowchart TD
    A[Section 70107] --> B[Internal Revenue Code section 55]
    B --> C[IRS forms and systems]
    C --> D[Taxpayer AMT calculation]
    D --> E[Federal receipts]
    C --> F[Return processing]
    C --> G[Compliance review]
    E --> H[Treasury reporting]
    E --> I[JCT estimates]
    E --> J[CBO estimates]
    F --> K[Statistics of Income]
    G --> L[Inspector General and GAO oversight]
    H --> M[Public data limited]
    I --> M
    J --> M
    K --> M
    L --> M

Section-specific revenue effects may be difficult to isolate after enactment because AMT liability is affected by multiple interacting provisions, including regular tax rates, deductions, credits, capital gains, incentive stock options, state and local tax deductions, and other AMT preference items.

Day-to-Day Government Process Changes

For the IRS, the main operational change is implementation of a permanent post-2025 AMT framework. IRS tax forms, filing instructions, worksheets, e-file schemas, taxpayer-facing publications, and compliance systems must reflect the 2026 exemption amounts, the $500,000 and $1,000,000 phaseout thresholds, and the 50 percent phaseout rate.[4]

For Treasury and IRS guidance staff, the section reduces the need to plan for expiration of the TCJA AMT exemption structure. However, it adds a more specific post-2025 phaseout rule that must be incorporated into annual inflation adjustments and public-facing guidance.

For tax administration, the provision may increase AMT relevance for taxpayers above the new phaseout thresholds compared with a simple extension of 2025-indexed TCJA rules. That may affect tax software logic, paid preparer workflows, IRS notices, taxpayer withholding planning, estimated tax payments, and audit analytics.

For congressional budget staff, Section 70107 requires baseline-sensitive interpretation. Under a present-law baseline, the extension of increased AMT exemptions is a large revenue loss because it prevents scheduled expiration. Under a current-policy comparison, the lower phaseout thresholds and faster phaseout raise revenue relative to a cleaner extension of the expiring TCJA policy.[5][6]

Effects on Consumers

The consumer impact is concentrated among higher-income individual taxpayers. Most lower- and middle-income taxpayers are unlikely to be directly affected because their income is below the AMT exemption phaseout thresholds and because the AMT generally applies to taxpayers with higher alternative minimum taxable income.[7]

For taxpayers who otherwise would have faced the post-2025 expiration of the TCJA AMT changes, Section 70107 is generally favorable. It keeps a higher exemption structure in place and prevents the AMT from expanding back toward pre-TCJA reach.[5] The Tax Policy Center has described the TCJA’s higher AMT exemptions and higher phaseout thresholds as changes that sharply reduced the number of taxpayers affected by the AMT.[8]

For taxpayers with AMTI above $500,000 for single filers or $1,000,000 for joint filers, the effect is less favorable than a full continuation of the 2025 TCJA-indexed phaseout structure. The exemption begins phasing out at lower thresholds than the 2025 inflation-adjusted levels and phases out faster.[3] These taxpayers may face higher marginal tax effects within the phaseout range because each additional dollar of AMTI can both be taxed and reduce the exemption.

Taxpayers most likely to notice the change include high-income households with large state and local taxes, incentive stock option exercises, private-activity bond interest, large capital gains, or other AMT-sensitive items. The provision may also affect estimated tax planning, year-end income timing, and decisions about exercising incentive stock options.

Effects on Businesses

Section 70107 is primarily an individual tax provision, but it can affect businesses indirectly.

Pass-through business owners, partners, S corporation shareholders, founders, executives, and investors may face AMT exposure depending on their personal income, deductions, preferences, and timing of income. The provision can therefore influence owner-level tax planning, especially for high-income households whose business income flows through individual returns.

Employers may also see indirect effects in equity compensation planning. Incentive stock options are a common AMT-sensitive item, because the spread on exercise can create AMT income even before shares are sold.[7] For executives, startup employees, and high-income workers with stock options, the lower phaseout thresholds and faster phaseout may increase the need for tax modeling before exercise.

Tax preparers, payroll advisors, wealth managers, and tax software companies will need to update systems and planning materials for the permanent AMT exemption structure, the new phaseout thresholds, and the doubled phaseout rate. The business impact is therefore less about entity-level tax liability and more about advisory, compliance, and owner-level planning.

Environmental and Climate Impact

The environmental and climate impact is minimal and indirect. Section 70107 changes individual AMT liability; it does not directly authorize fossil-fuel extraction, infrastructure construction, permitting changes, environmental rescissions, conservation spending, pollution-control funding, or clean-energy deployment.

The immediate legal effect is a tax-computation change. The reasonably foreseeable implementation effect is a change in after-tax income for affected high-income taxpayers, especially those who would otherwise have been subject to a broader AMT after 2025 or those who now face a faster exemption phaseout above the new thresholds. Any environmental effect would depend on how affected taxpayers change investment, consumption, charitable giving, or business decisions after the tax change.

Existing environmental safeguards are not directly changed. NEPA, Clean Air Act, Clean Water Act, Endangered Species Act, public-land, energy, and environmental justice safeguards are neither expanded nor weakened by this section itself. The section does not create an environmental review shortcut or remove an environmental reporting requirement.

The main environmental justice relevance is distributional rather than regulatory. Because the AMT primarily affects higher-income taxpayers, the direct benefits of permanently higher exemptions accrue to taxpayers with higher incomes, while broader fiscal tradeoffs may affect future federal capacity if offset elsewhere in the budget. That indirect fiscal pathway is real but not specific enough to label this section as a direct environmental rollback.

Impact Summary

Section 70107 permanently preserves the increased AMT exemption structure created by the TCJA, preventing a broader post-2025 expansion of the AMT under the present-law expiration baseline. At the same time, it makes the AMT more relevant for some high-income taxpayers than a straight extension would have done, because it resets phaseout thresholds to $500,000 for single filers and $1,000,000 for joint filers in 2026 and doubles the phaseout rate to 50 percent.[2][4]

The largest fiscal effect is the revenue reduction from extending the increased AMT exemptions relative to present law: JCT estimated a $1.363 trillion revenue loss over fiscal years 2025 through 2034.[5] Relative to a current-policy baseline, however, the tighter phaseout structure was estimated to raise $12.2 billion over the same period.[6]

Consumers most affected are higher-income taxpayers, especially those with AMT-sensitive income or deductions. Businesses are affected mainly through owners, executives, investors, equity compensation planning, and tax-preparation systems. The environmental and climate effect is minimal and indirect because the section changes individual tax calculations rather than environmental programs, permitting, pollution controls, clean-energy incentives, or resource development.

Key References and Sourcing

Source	Relevance
Public Law 119-21	Primary enacted statutory text for Section 70107 and its amendments to Internal Revenue Code section 55.
IRS, One, Big, Beautiful Bill provisions – Individuals and workers	IRS implementation summary showing 2026 AMT exemption amounts and phaseout thresholds.
Joint Committee on Taxation, JCX-35-25	Present-law baseline revenue estimate for the Title VII tax provisions, including Section 70107.
Joint Committee on Taxation, JCX-34-25	Current-policy baseline estimate showing the revenue gain from the AMT phaseout modifications relative to continued TCJA policy.
Tax Policy Center, “What is the AMT?”	Background explanation of the AMT as a parallel tax calculation.
Tax Policy Center, “How did the TCJA change the AMT?”	Background on how the TCJA increased AMT exemptions and phaseout thresholds and reduced AMT reach.
Iowa State University Center for Agricultural Law and Taxation, OBBBA tax package summary	Secondary tax analysis summarizing Section 70107’s permanent extension, threshold reset, and faster phaseout.

[1] Public Law 119-21, “Sec. 70107. Extension of increased alternative minimum tax exemption amounts and modification of phaseout thresholds,” https://www.govinfo.gov/link/plaw/119/public/21.

[2] Public Law 119-21, Section 70107(b)-(d), amendments to inflation adjustment, phaseout amount, and effective date, https://www.govinfo.gov/link/plaw/119/public/21.

[3] Iowa State University Center for Agricultural Law and Taxation, “One Big Beautiful Bill Act Implements Significant Tax Package,” discussion of Alternative Minimum Tax Section 70107, https://www.calt.iastate.edu/post/one-big-beautiful-bill-act-implements-significant-tax-package.

[4] Internal Revenue Service, “One, Big, Beautiful Bill provisions – Individuals and workers,” tax inflation adjustments for Sections 70101, 70102, 70106, 70107, and 70401, https://www.irs.gov/newsroom/one-big-beautiful-bill-provisions-individuals-and-workers.

[5] Joint Committee on Taxation, JCX-35-25, “Estimated Revenue Effects Relative To The Present Law Baseline Of The Tax Provisions In Title VII – Finance,” July 1, 2025, https://www.jct.gov/publications/2025/jcx-35-25/.

[6] Joint Committee on Taxation, JCX-34-25, “Estimated Revenue Effects Relative To A Current Policy Baseline Of The Tax Provisions In Title VII – Finance,” July 1, 2025, https://www.jct.gov/getattachment/8207b8cc-23dd-4b44-adba-772ac34dcfc1/x-34-25.pdf.

[7] Tax Policy Center, “What is the AMT?”, https://taxpolicycenter.org/briefing-book/what-amt.

[8] Tax Policy Center, “How did the TCJA change the AMT?”, https://taxpolicycenter.org/briefing-book/how-did-tcja-change-amt.