While taxpayers are still awaiting proposed regulations relating to the corporate alternative minimum tax (CAMT),1听which went into effect for tax years beginning after 2022, taxpayers were provided three pieces of 鈥済uidance鈥� relating to CAMT in December 2023:
- 听[PDF 177 KB], released on December 15, 2023
- 鲍辫诲补迟别诲听听[PDF 715 KB], and updated听听[PDF 627 KB], both dated December 20, 2023
- 罢丑别听听[PDF 2.4 MB] for the 117th听Congress, released by the staff of the Joint Committee on Taxation on December 21, 2023.
Below is a summary of the notable provisions in each of the above documents and 乐鱼（Leyu）体育官网 observations on each key issue addressed and raised. Overall, the guidance issued to date continues to foretell a significant compliance burden on a wide array of taxpayers, despite an apparent congressional intent to restrict the impact of CAMT to a small group of taxpayers.2
Background
CAMT generally imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of large corporations whose three-year average annual AFSI exceeds $1 billion (鈥渁pplicable corporations鈥�).
The new guidance follows听听[PDF 332 KB] ,听听[PDF 89 KB],听听[PDF 112 KB] , and听听[PDF 248 KB]. 乐鱼（Leyu）体育官网 has published various reports and articles on such guidance to date.3听Further background information on CAMT (and the 鈥淚nflation Reduction Act of 2022鈥� (IRA)) is available on a dedicated听.
Key takeaways
Notice 2024-10
- Relief provided for most controlled foreign corporation (CFC) double counting issues.听The notice provides rules that attempt to mitigate the potential double counting of CFC income in AFSI. It is important to note that while the notice鈥檚 rules do听not听cover all CFC dividends (e.g., hybrid dividends and section 1248 dividends), the rules appear to provide relief in most instances, including with respect to CFC-to-CFC dividends and dividends attributable to pre-CAMT earnings and profits (E&P). However, Notice 2024-10 does not appear to address CFC distributions received by partnerships that have U.S. shareholder or CFC partners. The notice is retroactive to prior tax year CAMT determinations.
- Rules for determining the applicable financial statement (AFS) for a tax consolidated group (TCG) expanded.听The notice modifies and clarifies previously issued guidance regarding which financial statement is the 鈥渃orrect鈥� financial statement (i.e., the 鈥渁pplicable financial statement鈥� or AFS). These revised rules cover situations in which a taxpayer who is a member of a TCG reports its financial results in a separate AFS but also reports its financial results in a consolidated AFS. Of note, the notice appears to foreclose the use of a taxpayer鈥檚 tax return as its AFS in certain instances where taxpayers may have thought the tax return was the appropriate AFS under prior guidance.
Draft instructions to Draft 2023 Form 4626
- All corporations must file with limited exception; filers will be required to show their work to prove they are not applicable corporations.听The instructions confirm that corporations who meet the safe harbor under Notice 2023-7 do not have to file Form 4626 for the first tax year beginning after 2022.4听All other corporations, other than regulated investment companies (RICs), real estate investment trusts (REITs), and S Corporations, must file Form 4626 whether or not they owe CAMT. It appears that the Scope AFSI computation included in Part 1 of Form 4626 (and performance of supporting calculations) is mandatory for all taxpayers unless they indicate that they are an applicable corporation. This will seemingly require a granular AFSI computation exercise for taxpayers who are certain they are not subject to CAMT but nevertheless do not qualify for the Notice 2023-7 safe harbor.
- Notice guidance is optional. Taxpayers are instructed to complete Form 4626 in a manner that reflects the interim rules they have chosen to rely on, but the instructions confirm that taxpayers are not required to apply any of the notices issued to date.
- Detailed information for section 52 single employer groups and foreign parented multinational groups (FMPGs) is required.听The draft instructions indicate that a list of section 52 single employer group and/or FPMG members and information by member is required. The instructions caution that 鈥淸i]ncomplete or nonspecific responses, including phrases such as 鈥榓vailable upon request鈥� are not sufficient response.鈥�
- Granular and extensive reporting required for CFCs.听Reporting requirements are generally granular and extensive with respect to CFCs but guidance to date only appears to require high-level reporting with respect to certain other CAMT calculations (e.g., distributive share of partnership AFSI, depreciation, and covered transactions). Future guidance could require granular reporting in other areas.
Bluebook鈥檚 explanation of CAMT
- Partnership inclusion for scope purposes clarified.听With respect to the scope determination, the distributive share of AFSI is intended to be the amount included in AFSI with respect to a partnership听unless听the partnership and tested corporation are part of the same section 52 single employer group (in such case, 100% of partnership AFSI is included). This conflicts with guidance in Notice 2023-64 (providing amounts with respect to a partnership may be the FSI amount as reflected on the corporate partner鈥檚 financial statements).听
- Mark-to-market amounts are included in AFSI.听The Bluebook provides that mark-to-market amounts are generally included in AFSI (which is consistent with the CAMT notice guidance). However, the Bluebook indicates mark-to-market amounts from derivatives may be a special circumstance and the Secretary should write special rules for derivative contracts. Treasury guidance has not provided a special rule for derivative contracts to date.
- Transitional timing differences do not give rise to an AFSI adjustment.听Consistent with prior notices, the Bluebook indicates that timing differences that arise when a taxpayer transitions into CAMT do not implicate the regulatory grant with respect to omissions and duplications.听
Conclusion
This recent guidance provides some welcome clarification to a handful of CAMT issues that were outstanding from the prior notices and other guidance issued to date but also raises additional uncertainties and complexities. There are still a large number of remaining questions that taxpayers are hoping to see addressed in the forthcoming proposed regulations.听听
Furthermore, the December releases, consistent with prior notices, indicate that the CAMT regime will be complex and even taxpayers who do not expect to owe CAMT are going to be required to prepare potentially complex Scope AFSI or Liability AFSI computations in order to file their 2023 returns. Taxpayers may need to consider the time, resources, and processes necessary to gather the required information and perform the necessary calculations for the 2023 tax compliance season. Taxpayers may also note that CAMT has been added to the Large Business and International (鈥淟B&I鈥�) Active Campaigns list, with the IRS noting that the goal of this campaign is to focus resources on the highest risk CAMT issues 鈥渧ia a consistent and thorough risk assessment, and ensure consistent development and resolution of CAMT issues,鈥� indicating that the IRS intends to devote resources to this complex regime.5
Contact us
For more information, contact a tax professional in 乐鱼（Leyu）体育官网 Washington National Tax:
Jessica Theilken | jblair@kpmg.com
Natalie Tucker | natalietucker@kpmg.com
Ronald Dabrowski | rdabrowski@kpmg.com
Monisha Santamaria | monishasantamaria@kpmg.com