IRS releases interim guidance on 15% corporate alternative minimum tax

The Nugget

The IRS has released interim guidance on the 15% corporate alternative minimum tax, providing clarity on various issues for taxpayers until proposed regulations are issued later in the year.

Key quotes

"The IRS said it will be releasing further interim guidance before the proposed regulations are issued..."
"The CAMT applies to any corporation whose average annual AFSI exceeds $1 billion for any three consecutive tax years..."
"The Notice clarifies that the partnership distributive share adjustment does not apply in all circumstances when determining applicable corporation status."
"The Notice provides taxpayers guidance they may follow in determining their AFSI for purposes of determining applicable corporation status and calculating the CAMT..."
"Notice 2023-7 states that taxpayers 'may' rely on the notice. Thus, it seems that taxpayers may choose whether to implement the guidance."

The CAMT is applicable to certain corporations with average annual Adjusted Financial Statement Income (AFSI) exceeding $1 billion for three consecutive years, imposing a 15% minimum tax.
The guidance addresses the determination of "applicable corporation" status and the calculation of CAMT based on AFSI.

The IRS provides a simplified method for corporations to determine their "applicable corporation" status for the first tax year after December 31, 2022, reducing dollar thresholds and streamlining AFSI adjustments.

The guidance clarifies how applicable corporation status is affected by ownership changes and M&A transactions, ensuring historical AFSI is accounted for in these scenarios.

Certain adjustments are detailed in the guidance, such as the exclusion of partnership distributive share adjustments, treatment of tax-free transactions for AFSI purposes, and considerations for consolidated groups.

Specific details are provided on the depreciation adjustment for MACRS property under IRC Section 168 and the exclusion of proceeds from certain credits when calculating AFSI.
Companies must track and adjust AFSI for depreciation, disposal of Section 168 Property, and proceeds from specified credits to accurately compute CAMT liabilities.

💡 The CAMT applies to corporations with average annual AFSI exceeding $1 billion for three consecutive years, imposing a 15% minimum tax.
🧮 The IRS offers a safe harbor method for corporations to determine their "applicable corporation" status, simplifying the process for the first tax year after 2022.
🔄 Adjustments for AFSI calculations include excluding partnership distributive share adjustments and considering tax-free transactions' impact on financial statement gain.
💰 Detailed guidance on depreciation adjustments and exclusions for certain credits helps companies accurately compute their CAMT liabilities.

This summary contains AI-generated information and may have important inaccuracies or omissions.