The IRS has issued Notice 2023-64 to provide interim guidance designed to help corporations determine whether the new corporate alternative minimum tax (CAMT) applies to them and how to compute the tax. Notice 2023-64 clarifies and supplements Notice 2023-7 and Notice 2023-20, which were issued earlier this year.
The Inflation Reduction Act created the CAMT, which imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of large corporations for taxable years beginning after December 31, 2022. In general, the CAMT applies to large corporations with average annual financial statement income exceeding $1 billion.
Considering the challenges of determining CAMT liability, the IRS will waive the penalty for a corporation’s estimated income tax with respect to its CAMT for a taxable year that begins after December 31, 2022 and before January 1, 2024.
Among other things, the 72-page document provides a list of financial statements that meet the definition of an applicable financial statement (AFS), as well as priority rules for identifying a taxpayer’s AFS. The guidance provides general rules for determining a taxpayer's financial statement income and AFSI, including when the taxpayer's financial results are reported on a consolidated financial statement. The recent guidance not only clarifies how corporations are subject to the tax but also when corporations are subject to CAMT. Clarification is added for the treatment of certain taxes, foreign corporation and CAMT foreign tax credits, Section 168 depreciable property, and wireless spectrum. Guidance is provided on financial statement net operating losses and applicable status. The notice addresses certain factors relevant for multinational groups that may operate under different accounting standards in various jurisdictions. It confirms the adjustment for taxes may consider deferred taxes and taxes related to equity method investees.
Finally, significant insight is provided for partners in a partnership generating CAMT foreign tax credits when the partnership pays foreign taxes. In addition, Notice 2023-64 provides guidance on:
- Financial statement restatements
- Different financial accounting and taxable years
- Discontinued operations
- Changes in accounting principles
Treasury and the IRS intend to introduce regulations that align with the interim guidance for tax years starting on or after January 1, 2024.
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