- The CAMT imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of large corporations and is effective for taxable years beginning on or after January 1, 2023.
- For these purposes, a large corporation is one with an average AFSI (as adjusted by the CAMT rules) of $1 billion over the three-year period ending before the year at issue.
- CAMT also applies to foreign parented multinational groups (FPMGs) that meet the $1 billion requirement and have U.S. operations with $100 million of average AFSI for the three-year period ending before the year at issue.
The Bottom Line
On September 12, the IRS issued proposed regulations providing guidance on the corporate alternative minimum tax (CAMT).
The proposed regulations took an expansive approach to the application of CAMT to FPMGs. The proposed regulations do not require the FPMG or any foreign or domestic entity to be part of a U.S. consolidated return. The FPMG rules apply when (i) the group has at least one foreign entity and one domestic entity, (ii) the same applicable financial statement includes the entities, and (iii) a foreign entity is a FPMG common parent.
In short, a FPMG common parent is an ultimate parent that is a foreign corporation. However, the rules are complex and can result in a partnership (domestic or foreign) being treated as a FPMG common parent. By including a partnership as a deemed foreign corporation, the reach of CAMT rules can potentially apply to private equity structures, domestic or foreign.
Action Items and Important Dates
The previously issued IRS interim guidance related to the CAMT in Notice 2023-7, Notice 2023-20, Notice 2023-64, and Notice 2024-10 did not include these changes. Taxpayers may rely on the Notices for taxable years ending on or before September 12, 2024. As the proposed regulations will apply to taxable years ending after this date, Taxpayers need start the process of determining if the FPMG rules will apply to them. This process requires a review and analysis of a significant amount of information and could have impact on financial statement tax provisions and preparations for next year’s tax return.
Also on this topic, see our FORsight here. If you have questions or need assistance, please contact a professional at Forvis Mazars.