The US House of Representatives yesterday passed, for a second time, the Alternative Minimum Tax relief legislation that included revenue raising measures intended to target companies and hedge fund managers that shelter money offshore. The AMT was enacted in 1969 to ensure that the very wealthy had to pay some taxes, but because of the effects of inflation, the tax now threatens to ensnare millions of middle-income families. If Congress fails to act before the end of the year, around 20 million US taxpayers who otherwise would escape the tax, may end up owing the AMT when they file their 2007 tax return. For years Congress has passed bills granting relief from the AMT on a temporary basis. The White House responded with a veto threat. "The administration does not believe the appropriate way to protect 21 million additional taxpayers from 2007 AMT liability is to impose a tax increase on other taxpayers," the White House said in a policy statement. The Senate's top Republican also said the House approach to fixing the AMT was unacceptable. "The Senate will not pass a short-term fix for some, if it includes a permanent massive tax hike for others," said Senator Mitch McConnell. But House Speaker Nancy Pelosi said it was a clear choice when millions of families get tax relief while 5,000 to 10,000 wealthy people pay the tab. Republicans, she said, would "increase the national debt in order to give comfort to people who are evading their taxes by going offshore to the tune of billions of dollars." The House last month passed legislation providing one-year relief but also extending other tax breaks and including $80 billion in new tax revenues, affecting investment fund managers and others. The Senate responded last week by passing a bill that included no revenue-raising measures to make up for the roughly $50 billion loss to the federal treasury from extending AMT relief through this year. House Ways and Means Committee Chairman Charles Rangel therefore altered the first House bill with tax revenue sources he said might be more palatable to Republicans. The first bill imposed higher taxes on the "carried interest" of investment managers, venture capitalists and some real estate investors, which critics said could impede investment initiatives. The new bill has two main sources of new revenue. Current law allows companies and individuals to defer taxes on compensation paid by offshore entities in tax haven countries until that compensation is received. The bill would require the timely paying of taxes on deferred compensation in these circumstances. Hedge fund managers and others use this deferred compensation provision to lower their tax burden. The bill also delays for eight years the planned 2009 implementation of a law allowing multinational corporations greater freedom in allocating interest expenses between US and foreign sources for purposes of determining foreign tax credits. Mr Rangel said the bill would close a loophole that allows rich hedge fund managers to shelter income offshore, which called "indecent and immoral". The impasse increases the possibility that the tax will take effect. Both parties say that cannot be allowed to happen.