What is the purpose of the alternative minimum tax (AMT) for corporations?

The alternative minimum tax (AMT) for corporations is designed primarily to ensure that corporations pay at least a minimum level of tax, regardless of deductions, credits, or other tax preferences that could significantly reduce their tax liability. This tax system addresses situations in which high-income corporations might use various loopholes and incentives to drastically lower their taxes, sometimes to zero.

By implementing the AMT, the tax code sets a baseline tax obligation, which applies if a corporation's regular tax liability falls below a certain threshold due to allowable deductions. The AMT calculation is intended to prevent corporations from entirely escaping tax liabilities through aggressive tax planning strategies.

The other options do not reflect the function of the AMT. AMT does not specifically allow corporations to avoid state taxes and it does not provide additional tax credits or apply a flat tax rate to all corporations. Instead, its primary goal is to uphold the principle of contributing a fair amount of taxes to the federal treasury, thus reinforcing a basic level of tax accountability among corporations.