The IRS has issued additional interim guidance on the corporate alternative minimum tax (CAMT) that provides several new or modified adjustments to adjusted financial statement income (AFSI) for certain capitalized costs, troubled companies, and corporate transactions. (Notice 2026-7, 2/18/2026)
CAMT Background and Guidance Timeline
The CAMT, enacted as part of the Inflation Reduction Act (P.L. 117-169), imposes a 15% minimum tax on the AFSI of certain large corporations. Since its enactment, the Treasury Department and the IRS have been working to clarify the complex rules, issuing comprehensive proposed regs (REG-112129-23) in September 2024.
Following feedback on the complexity of those proposed rules, the IRS has issued a series of notices providing interim guidance. Notice 2025-27 introduced an optional simplified method for determining applicable corporation status, allowing many corporations to more easily determine if they are subject to the CAMT.
Guidance in Notice 2025-28 aimed to simplify the rules for partnerships, providing new elective methods for partners to calculate their distributive share of a partnership’s AFSI, including a “top-down” election and a taxable-income election for partners with small interests.
Notice 2025-46 addressed the application of the CAMT to domestic corporate transactions, troubled companies, and tax consolidated groups. It largely abandoned the complex “cliff effect” from the proposed regulations for corporate transactions and relaxed limitations on the use of acquired financial statement net operating losses.
Finally, Notice 2025-49 provided several new elective AFSI adjustments, including options for taxpayers to disregard certain unrealized gains and losses for items measured at fair value and an election to adjust for the amortization of certain goodwill acquired before the CAMT was enacted.
Latest Interim Guidance
New AFSI Adjustments for Capitalized Costs
Notice 2026-7 introduces several AFSI adjustments intended to better align the tax treatment of certain costs with their financial statement accounting. For tax repairs on IRC § 168 property that are deducted for regular tax but capitalized for financial reporting, the guidance now allows an AFSI adjustment to reduce AFSI by the deductible repair amount and disregard the corresponding book depreciation.
The guidance also expands on rules for intangibles, providing an adjustment for amortization under IRC § 197 for eligible intangibles beyond just goodwill.
A new transitional adjustment is provided for domestic research and experimental expenditures. This adjustment accounts for the dual layers of cost recovery under both the old rules of the Tax Cuts and Jobs Act and the new rules under IRC § 174A.
The notice also provides adjustments for qualified production costs under IRC § 181, as well as for certain low-cost tangible property treated as materials and supplies, to better synchronize AFSI with regular tax treatment.
Clarifications for Troubled Companies
For financially troubled companies, the notice clarifies the attribute reduction rules, confirming that the rules of Treasury Reg. § 1.1502-28 apply for determining attribute reduction within a consolidated group.
It also modifies the guidance for fresh start accounting when a company emerges from bankruptcy. The new rules state that a company will disregard any resulting gain or loss that is reflected in its financial statement income and determine the CAMT basis of its assets by disregarding any adjustment to the AFS basis of those assets that results from the bankruptcy emergence.
Revisions to Corporate Transaction Anti-Abuse Rule
The guidance addresses concerns about a potential “cliff effect” in the anti-abuse rule for certain corporate transactions found in the proposed regulations. The prior version of the rule could automatically trigger an AFSI adjustment if the basis of a foreign corporation’s stock, received in a covered asset transaction, was taken into account within two years.
The new notice modifies this by changing the two-year rule into a rebuttable presumption. A taxpayer can now present facts and circumstances to rebut the presumption of a principal avoidance purpose, providing more flexibility. To do so, the taxpayer must attach a statement to its Form 4626, Alternative Minimum Tax – Corporations.
Intangible Transfers
To prevent potential double taxation, the new guidance provides an AFSI adjustment for transactions involving intangible property subject to IRC § 367(d).
When a U.S. transferor must include a deemed royalty in gross income for regular tax purposes, the notice allows the foreign transferee corporation to reduce its adjusted net income or loss by the amount of the deemed payment. This adjustment is permitted only to the extent that the deemed royalty increases the AFSI of the U.S. transferor.
Applicability and Reliance
The guidance in the notice is effective on February 18, 2026. However, taxpayers may rely on the interim guidance provided in this notice for all taxable years beginning before the date that final regulations addressing these issues are published.
The notice also provides specific transition rules that allow taxpayers to rely on the original versions of Notice 2025-49 for taxable years beginning before February 18, 2026, and the modified versions for years thereafter. Relying on this notice will not cause a taxpayer to violate the consistency requirements detailed in the proposed regulations.
Policy Battle Over Rules Continues
Treasury Secretary and acting IRS Commissioner Scott Bessent lambasted the CAMT’s origins, as the policy was enacted when Democrats controlled the White House and both chambers of Congress in 2022. In a press release Wednesday announcing the newest guidance, Bessent said the so-called book minimum tax “disrupted productive business activities and added undue costs, while failing to deliver on promised tax revenues.”
The same release went on to claim the Trump administration intends to “reduce uncertainty around CAMT rules and avoid any unnecessary impediments to U.S. innovation, investment, and job creation.”
But Senate Democrats, in an effort led by Finance Committee Ranking Member Ron Wyden (D-OR), have resisted the Trump administration’s changes to the CAMT. Earlier in February, the Senate struck down a joint motion of disapproval (S.J. Res. 95) that would have overturned Notice 2025-28 by a vote of 47-51. Wyden, who introduced the resolution, said the notice goes against the intent of the statute by granting overly favorable tax treatment to partners of large corporations and private equity firms.
In a statement, Tax Law Center Deputy Director Michael Kaercher said Trump’s Treasury Department has made an effort to shield U.S. MNEs from CAMT exposure. “The guidance dismantles CAMT rather than making appropriate adjustments consistent with regulatory authority,” said Kaercher. “The guidance is also inconsistent with the objectives and structure of a minimum tax and thus violates the spirit of the recent Side-by-Side agreement. Only Congress can repeal CAMT and yet it would be surprising if this guidance leaves any meaningful CAMT revenue to collect.”
For more on the calculation of adjusted financial statement income for corporate alternative minimum tax purposes, see Checkpoint’s Federal Tax Coordinator 2d ¶ A-8931.
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