Background
IRS’ Notice 2026-7 (the notice) provides additional interim guidance regarding the application of the corporate alternative minimum tax (CAMT) under section 55, 56A, and 59 of the Internal Revenue Code (IRC) and modifies certain previously issued interim guidance. Certain parts of this interim guidance are designed to align closely with forthcoming proposed regulations anticipated to be issued by the Internal Revenue Service (IRS) and the Treasury Department.
The CAMT is a 15% federal minimum tax imposed on certain large corporations to ensure they pay a minimum level of tax, regardless of the deductions, credits, or other tax benefits they may otherwise use to reduce their regular tax liability. The CAMT is imposed on the adjusted financial statement income (AFSI) of an applicable corporation which is generally the net income (loss) of the corporation as reported on its applicable financial statement (AFS) with certain adjustments.
Key AFSI Adjustments
In response to taxpayer comments on the CAMT Proposed Regulations and prior notices, the notice addresses several areas where book-to-tax differences could create unintended CAMT liability and provides adjustments to AFSI to align the tax treatment more closely with regular tax principles.
- Domestic Research Amortization – To address the transition period created by the Tax Cuts and Jobs Act (TCJA) and One Big Beautiful Bill Act (OB3), for taxable years beginning in 2025, companies will deduct current-year domestic R&E under § 174A while continuing to amortize prior-year domestic R&E capitalized under TCJA § 174. This creates a dual layer of recovery for tax but not for book.
- Tax Repair Deductions – To address the book-tax different for repair and maintenance costs on § 168 property that are deducted for regular tax purposes but are capitalized and depreciated for AFS purposes. This modifies guidance in Notice 2025-49 and is intended to reduce the compliance burdens of bifurcating the AFS basis of a single asset into its repair and non-repair components.
- Eligible Intangibles – To expand upon guidance in Notice 2025-49, which provided an adjustment for goodwill amortization; this extends similar treatment to other § 197 intangibles that are amortized for tax but not for book.
- Qualified Production Costs under § 181 – To resolve the compliance burden for the entertainment industry where costs are expensed for tax under § 181 but capitalized and depreciated for book.
- Eligible Materials and Supplies – To provide relief for industries where low-cost tangible property, treated as deductible materials and supplies for tax purposes, is capitalized and depreciated for book purposes.
Action Items
Taxpayers may rely on the rules of this notice for taxable years beginning before the date that forthcoming proposed regulations are published in the Federal Register. If a taxpayer relies on one of the sections for a taxable year, it must continue to apply the adjustment in all subsequent years until final regulations are issued or the underlying assets are disposed of.
Forvis Mazars can help with determining the potential CAMT liability of your business. If you have any questions or need assistance, please reach out to one of our professionals.