In a letter submitted to the U.S. Department of the Treasury and the Internal Revenue Service (IRS), the American Institute of CPAs (AICPA) provided comments to recently proposed regulations of the application of the Corporate Alternative Minimum Tax (CAMT). The proposed regulations expand on interim guidance by providing rules and examples on computing an entity’s adjusted financial statement income, identifying applicable corporations that are subject to CAMT and other rules for controlled foreign corporations, foreign-parented multinational groups and partnerships with corporate partners.
The AICPA’s comments focus on various aspects of the proposed regulations, including general concepts and methods and periods, international tax, passthrough, and mergers and acquisitions issues. The comments follow previously submitted letters to Congress in 2021 and 2022 requesting immediate guidance on the CAMT rules as well as letters submitted to Treasury and the IRS on interim guidance issued on CAMT in 2023 and 2024.
In particular, the Treasury Department’s press release announcing the issuance of the proposed CAMT regulations indicates that approximately 100 companies are anticipated to pay the CAMT annually, with an average effective federal tax rate of 2.6 percent. The AICPA is recommending Treasury and the IRS to solicit feedback regarding potential approaches to reduce the compliance burden while maintaining the necessary level of precision in the determination of the CAMT liability for the targeted taxpayers (i.e., taxpayers with low effective federal tax rates).
Examples from the AICPA letter include:
- Increasing the $500 million safe harbor for purposes of determining applicable corporation status.
- A simplified methodology available to non-applicable corporations and/or applicable corporations with high effective federal tax rates.
- An irrevocable election to use pretax book income as adjusted applicable financial statement income (AFSI) for CAMT liability purposes.
“The proposed regulations impose a massive compliance burden on all U.S. taxpayers that do not meet the $500 million AFSI safe harbor while only a small group, approximately 100 of those taxpayers, will pay the CAMT liability,” says Reema Patel, Senior Manager, AICPA Tax Advocacy & Policy. “The AICPA’s comment letter provides a non-exhaustive list of items in the proposed regulations with a high compliance burden for the taxpayers.”
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