On September 12, the IRS issued proposed regulations providing guidance on the corporate alternative minimum tax (CAMT).
The CAMT imposes a 15% minimum tax on large corporations’ adjusted financial statement income (AFSI) and is effective for taxable years beginning on or after January 1, 2023. For these purposes, a large corporation is one with an average AFSI (as adjusted by the CAMT rules) of $1 billion over a three-year period. This includes foreign parented multinational groups having U.S. operations with $100 million of AFSI.
The IRS predicts the CAMT should impact approximately 100 large corporations. In addition, many smaller C corporations and partnerships with direct or indirect corporate partners may feel the sting of meeting required reporting requirements. The proposed regulations do not address interactions with Pillar 2. Note that CAMT is not treated as a qualified domestic minimum top-up tax (QDMTT) for Pillar 2 purposes.
These proposed regulations provide general rules for determining AFSI. Other items addressed in the proposed regulations include:
- Clarifications of various statutory and regulatory adjustments to AFSI
- How to determine if a corporation is subject to the CAMT, including safe harbor rules
- Guidance for U.S. companies with a foreign parented multinational group
- Guidance on AFSI adjustments with respect to controlled foreign corporations
- CAMT foreign tax credit determination
- When a company subject to CAMT ceases to be subject to CAMT
The previously issued IRS interim guidance related to the CAMT in Notice 2023-7, Notice 2023-20, Notice 2023-64, and Notice 2024-10 was incorporated into the CAMT proposed regulations. Taxpayers may rely on the Notices for taxable years ending on or before September 12, 2024. In general, taxpayers may rely on the proposed regulations for the 2023 tax year provided the taxpayer “consistently follow[s] all of the specified regulations in their entirety.”
In connection with the release of the CAMT proposed regulations, the IRS also issued Notice 2024-66, which waives the penalty for a corporation’s failure to pay estimated tax with respect to its CAMT for a taxable year that begins after December 31, 2023 and before January 1, 2025. Public comments on the proposed regulations are due on December 12, 2024.
If you have questions or need assistance, please contact a professional at Forvis Mazars.