August 29,2008

Grassley, Colleagues Secure IRS Commitment to Suspend Collection of ISO AMT Liabilities

WASHINGTON – Sen. Chuck Grassley, with colleagues, has secured a commitment from
the Internal Revenue Service (IRS) to suspend the collection of Alterative Minimum Tax (AMT)
liabilities, including interest and penalties, that arose from employees’ exercising of incentive stock
options. The suspension gives Congress time to enact legislation that would ease these burdens on
affected taxpayers.

“Taxpayers in this situation faced a lot of income tax on very little income,” Grassley said.
“There’s bipartisan consensus to fix the problem. By holding off on collections, the IRS is giving
Congress time to act without making things worse for the affected families.”

Grassley is ranking member and former chairman of the Committee on Finance, with
exclusive Senate jurisdiction over tax policy. On July 3, Grassley and Senate and House colleagues
wrote to IRS Commissioner Doug Shulman, asking for a suspension of liability and penalty
collections in incentive stock option AMT cases. This week, the IRS commissioner wrote Grassley
to notify him that the agency is offering the suspension. The text of the Grassley et al. letter follows
here. The text of the Shulman letter to Grassley is attached.

July 3, 2008

The Honorable Douglas Shulman
Internal Revenue Service
1111 Constitution Ave., NW
Washington, DC 20224

Dear Commissioner Shulman:

We are writing to request your assistance in protecting taxpayers from the unintended consequences
of a well-intentioned but misguided tax policy. Many families around the country have been caught
by what is referred to as the Incentive Stock Option (ISO) Alternative Minimum Tax (AMT).
Because of the way stock options are treated by the AMT, many families are struggling under the
weight of massive tax liabilities based on income they did not collect and never will collect. Many
of these families have lived in the shadow of their tax liabilities for many years, and are waiting for
Congress to take action.

We are currently working to help these ISO AMT families through the enactment of H.R. 3861, the
AMT Credit Fairness and Relief Act of 2007 and its companion bill S. 2389. These bills work off
of earlier legislation contained in the Tax Relief and Health Care Act of 2006 to increase the AMT
refundable credit amount for families and individuals with long-term unused credits for prior year
minimum tax liability. This reflects the true tragedy for the ISO AMT families. Under current law
they are entitled to use refundable credits into the future to compensate for what they owe now.
However, they are being pressed to pay their current liabilities immediately, without regard for the
refundable credits. These families are facing the garnishments of wages, foreclosures of homes,
seizures of retirement accounts, and all the other tools available to the IRS to settle uncollected tax

There is now a very broad bipartisan consensus to abate all interest and penalties attributable to ISO
AMT liabilities and permit taxpayers to apply the full amount of their future refundable credits
towards the entirety of their current ISO AMT liabilities. Moreover, there is now a strong bicameral
commitment to enact legislation that accomplishes these goals in the near term this year. In light
of that commitment, we are writing to ask that you use the discretion provided the IRS by its
effective tax administration authority to suspend efforts to collect ISO AMT liabilities while
Congress acts to fix this situation and to take Congress’ determination to act in this matter into
consideration when allocating limited collection resources this year.

We are committed to protecting these families from the burdens of a tax policy that was never meant
to have taxed them so much on so little actual income. We would be grateful if we could count on
your assistance with this issue.


Charles Grassley John F. Kerry
United States Senator United States Senator

Maria Cantwell Barbara Boxer
United States Senator United States Senator

Chris Van Hollen Sam Johnson
Member of Congress Member of Congress

Richard E. Neal Jim Ramstad
Member of Congress Member of Congress

David Loebsack Jim McDermott
Member of Congress Member of Congress

Zoe Lofgren Tim Walberg
Member of Congress Member of Congress

Jon C. Porter Melissa L. Bean
Member of Congress Member of Congress

Patrick J. Kennedy Anna G. Eshoo
Member of Congress Member of Congress

Michael M. Honda Shelley Berkley
Member of Congress Member of Congress

Wally Herger Leonard L. Boswell
Member of Congress Member of Congress

Doris O. Matsui Tom Latham
Member of Congress Member of Congress

Pete Sessions Elijah E. Cummings
Member of Congress Member of Congress

David E. Price John T. Doolittle
Member of Congress Member of Congress

Tom Davis
Member of Congress