IRS releases substantial guidance for corporate AMT

The IRS released a robust set of proposed regulations for the corporate alternative minimum tax (CAMT) on Sept. 12 (REG-112129-23).  Prior to the proposed regulations, the IRS had issued limited guidance related to the CAMT in Notices 2023-7, 2023-20, 2023-64, and 2024-10.

The CAMT was created by the Inflation Reduction Act of 2022 to impose a 15% minimum tax on the “adjusted financial statement income” (AFSI) of an “Applicable Corporation” that meets an average annual AFSI test exceeding $1 billion. A different test applies to domestic members of a foreign-parented multinational group (FPMG). The CAMT is effective for taxable years beginning after Dec. 31, 2022.

The proposed regulations provide key definitions and operating rules related to the scope and computation of the CAMT and largely incorporate the rules provided in the Notices. The proposed regulations also provide additional new detailed rules that can be very complex. While only Applicable Corporations will be potentially subject to CAMT liability, the proposed regulations provide reporting and compliance requirements that can impact a broader group of taxpayers, including partnerships.

The IRS also released Notice 2024-66 to extend previous relief from estimated tax penalties related to CAMT through the rest of 2024. 

The proposed regulations include many notable rules, including:

• A simplified method with lower thresholds for determining Applicable Corporation status
• Required reporting for corporations with AFSI exceeding the Simplified Method threshold on Form 4626
• Required reporting of CAMT information for partnerships with potential penalties
• Detailed rules and considerations for adjustments to financial statement income in determining AFSI
• Special rules for the aggregation of entities treated as a single employer under Section 52(a) or (b)
• New rules when there is a termination of Applicable Corporation status
• Complex rules that adopt special treatment over financial statement treatment for certain transactions related to corporations and partnerships
• Rules on AFSI adjustments for financial statement net operating losses (FSNOLs) and other attributes

A significant portion of the regulations (the “specified regulations”) are proposed to apply to taxable years ending after Sept. 13, 2024. Certain other rules are proposed to be effective for taxable years ending after the publication date of final regulations, including most rules pertaining to partnerships, as well as the rules for AFSI adjustments to Section 168 property, corporate reorganizations, Subchapter K principles, troubled companies, and FSNOL and other attributes. Special rules pertaining to consolidated returns are proposed to apply to consolidated return years for which the income tax return is due after the publication of final regulations.

Taxpayers may rely on the specified regulations for any taxable year ending on or before Sept. 13, 2024, provided that the taxpayer and each member of its test group meet a consistency requirement to consistently apply the specified regulations in their entirety to the taxable year and each subsequent taxable year until the first year that final regulations are applicable.

Taxpayers may rely on one or more of the other sections for any taxable year ending before the publication of final regulations so long as the consistency requirement is met with respect to such proposed regulations and the specified regulations.

Certain rules that apply to transfers may be applied to transfers on or before Sept. 13, 2024, provided the taxpayer and each member of its test group consistently follow such rules for transfers on or before Sept. 13, 2024. If such transfers occur in taxable years ending on or before Sept. 13, 2024, the taxpayer must rely on the specified regulations for such taxable years.