The IRS issued new interim guidance for the corporate alternative minimum tax (CAMT) enacted nearly three years ago in the Inflation Reduction Act that temporarily offers a simpler calculation and set of definitions in response to feedback that pending regs are too complex. (Notice 2025-27, 6/2/2025)
In Notice 2025-27, the IRS provided taxpayers an interim, “simplified” method for determining whether they are an applicable corporation subject to the CAMT, also known as the “book minimum tax.”
The method is optional, and the IRS is waiving additional tax under Code Sec. 6655 relating to a taxpayer’s Code Sec. 55 liability for tax year 2025. The additional tax typically applies when a corporation fails to make a sufficient and timely estimated income tax payment.
CAMT background. The CAMT under the IRA generally serves to ensure corporations with high annual profits pay a minimum amount of tax. The tax is based on an applicable corporation’s adjusted financial statement income (AFSI). It equals the excess of the “tentative minimum tax” for the year over the sum of the “regular tax” under Code Sec. 55(c) and Code Sec. 59A liability, the IRS explained.
The tentative minimum tax is the excess of 15% of AFSI (determined by Code Sec. 56A) over the CAMT foreign tax credit for the applicable tax year (determined by Code Sec. 59(l)). When a corporation is not an applicable corporation, the tentative minimum tax for the year is $0.
Under current law, any corporation that meets either of the two average annual AFSI tests (Code Sec. 59(k)(1)(B)) for one or more tax years after December 31, 2021, is an applicable corporation. This does not apply to S corporations, regulated investment companies, nor real estate investment trusts.
The first test, the general AFSI test, is met when a corporation’s average annual AFSI for a three-year period ending with the relevant tax year exceeds $1 billion. The second test is specific to members of a foreign-parented multinational group (FPMG).
New guidance. The IRS explained it issued the new notice to “reduce compliance burdens and costs for certain corporations” based on taxpayer comments on proposed CAMT regs issued in September incorporating two years of preliminary rules.
To achieve this, the Trump administration’s Treasury Department and IRS provided an interim simplified method, which substitutes the general and FPMG test thresholds with $800 million and $80 million, respectively. The simpler method disregards Code Sec. 56A(c) and (d) adjustments. These include amounts from eligible credit transfers, changes to income from eligible credit utilization, and Code Sec. 48D(d)(2) elections.
The IRS clarified that if a corporation’s AFSI “exceeds the relevant interim simplified method thresholds, then the corporation will be an applicable corporation for such taxable year only if it is determined to be an applicable corporation” pursuant to Code Sec. 59(k)(1) or if it follows the September proposed regs.
Furthermore, a “corporation’s use of the interim simplified method to determine that it is not an applicable corporation for a taxable year will not cause the corporation to become subject to, or to violate, the reliance rules” of the proposed regs.
The IRS intends to propose new regs with the simplified method and to update affected tax forms. These are: the instructions to Form 4626, Alternative Minimum Tax – Corporations, Schedule K of Form 1120, U.S. Corporation Income Tax Return, and Form 2220, Underpayment of Estimated Tax by Corporations.
For more on adjusted financial statement income for corporate alternative minimum tax purposes, see Checkpoint’s Federal Tax Coordinator ¶A-8930.
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