ACE Book Overview

ACE and the ACE adjustment, which fall under the AMT rules, are no longer required. AMT is repealed for corporations under the Tax Cuts and Jobs Act of 2017 for tax years beginning January 1, 2018 and later.

If your business no longer needs to use the AMT Book or related ACE book, you can close these books (enter No in the Open Book field). The existing data in the books will remain and the books can be re-opened if desired. If you choose to use the AMT and ACE books for a different purpose and you wish to copy data from another book, the AMT and ACE books can be selected as a destination book for the Copy Book feature.

What is ACE depreciation?

The ACE book was used by C-corporations subject to the AMT rules for tax years 1990 through 2017. Under the AMT rules, an ACE calculation was required for depreciable property acquired through December 31, 1993. The ACE depreciation amount was an adjustment to the AMT calculation each year.

The Revenue Reconciliation Act of 1993 eliminated the ACE Depreciation Adjustment for property placed in service after December 31, 1993. Property placed-in-service prior to 1994 is depreciated as before. This means the calculated ACE Depreciation Adjustment (AMT Depreciation less ACE Depreciation) for post-1993 assets is zero.

Adjusted Current Earnings (ACE) is a provision of Alternative Minimum Tax rules that required a special income calculation under Code Section 56(g) for tax years after 1989 and prior to 1994. ACE, and the ACE depreciation adjustment for the assets put into service during this time period are no longer required since AMT is repealed for corporations under the Tax Cuts and Jobs Act of 2017 for tax years beginning January 1, 2018 and later.

For all MACRS assets placed in service (PIS) between 1990 and 1993 ADS straight-line MACRS depreciation (method AD) must be used.

The ACE Depreciation Adjustment doesn’t apply to assets placed in service after 1993, meaning there is no adjustment made to the Alternative Minimum Tax depreciation after that date.

The ACE book fiscal year must be the same as the Tax book fiscal year.

For ACRS assets PIS before 1990, the beginning ACE basis is the remaining Tax book depreciable basis as of the end of the last tax year before 1990. Remaining life is calculated using the ADS life less the number of years the asset was depreciated previously.

For MACRS assets PIS before 1990, the beginning ACE basis is the AMT remaining depreciable basis as of the end of the last tax year before 1990. Remaining life is calculated using the ADS life less the number of years the asset was depreciated previously.

ACE Depreciation Calculations

The ACE Depreciation Adjustment is calculated by subtracting an asset’s ACE depreciation amount from its AMT depreciation amount. Since, according to the Tax Act, the ACE Depreciation Adjustment is eliminated for post-1993 property, if you subtract a post-1993 asset’s ACE depreciation from its AMT depreciation, the ACE Depreciation Adjustment must be zero.

For MACRS assets placed in service before 1990 and ACRS assets, the system determines the asset's remaining depreciable basis (using the AMT book for MACRS property and the Tax book for ACRS property) as of the end of the last tax year that began before 1990. After that date, the asset's depreciation method changes to a remaining value over remaining ADS life calculation; however, the ACE book still shows the original depreciation method.

Because the system establishes the ACE book defaults, under these rules, from entries in the Tax book, you should not override the defaults unless you are thoroughly familiar with Code Section 56(g) and fully understand the impact of your changes.

Emulating the AMT Book

Whether you accept the default of NO in the Depreciation Method field of the ACE book or change the default to emulate the AMT book, the result is the same: a zero ACE Depreciation Adjustment amount for post-1993 property when you run the Corporate AMT Worksheet. These are simply two different approaches with the same end result.

If you have specified that you want the ACE book to emulate the AMT book, the Adjusted Current Earnings report includes the assets and displays any depreciation the system has calculated on them.

Special Exemption

The Taxpayer Relief Act of 1997 enacted an AMT exemption for certain "small business corporations". Defined as corporations with average gross receipts of less than $5 million for the previous three taxable years beginning for tax years after December 31, 1993.

If a corporation is exempt from AMT for the first year beginning after December 31, 1997 under the rules prescribed by the Taxpayer Relief Act of 1997, it is permanently exempt from ACE calculations. If a corporation qualifies for this exemption, it should close the ACE book and the AMT book for the first year beginning after December 31, 1997. To close a book, enter No in the Open Book field.