Corporate AMT (Alternative Minimum Tax) under the Inflation Reduction Act (2022 onwards)

A new 15 percent book-income minimum resets the floor for large corporations that might otherwise pay little U.S. tax after credits and deductions.

Applicability hinges on adjusted financial statement income and group size.

A corporation, together with its controlled group and certain foreign affiliates, is “applicable” when three-year average adjusted financial statement income (AFSI) exceeds $1 billion and, for foreign-parented groups, U.S. AFSI exceeds $100 million.

AFSI starts with net income from an applicable financial statement (usually audited GAAP or IFRS), then adjusts for tax-favored items such as accelerated depreciation, LIFO conformity differences, and certain pension costs. Merger adjustments aggregate predecessor financials to prevent post-deal “year-zero” escapes. Proposed regulations issued September 2024 detail the aggregation rules and anti-abuse provisions.

Tentative minimum tax equals 15 percent of AFSI minus the CAMT foreign tax credit.

If the tentative minimum tax exceeds regular tax (including BEAT), the excess is payable as CAMT; otherwise CAMT is zero. Credits other than the CAMT foreign tax credit cannot offset the minimum.

The CAMT foreign tax credit equals 15 percent of creditable foreign income taxes paid or accrued, limited to 15 percent of foreign AFSI. Excess credits carry forward up to five years, but no carryback is permitted.

Illustrative computation — calendar 2025.

• AFSI (group) $7.4 billion

• CAMT foreign tax credit $300 million

• Tentative minimum tax 15 % × $7.4 b – $0.3 b = $810 million

• Regular tax $650 million

• BEAT $40 million

CAMT payable

• Tentative minimum tax $810 m

• Less (regular $650 m + BEAT $40 m) = $120 million

Journal entry — year-end CAMT

Dr Income Tax Expense $120 000 000

Cr CAMT Payable $120 000 000

Deferred-tax assets arising from excess CAMT carryforwards are evaluated under ASC 740; a valuation allowance applies if future relief is uncertain.

Interim guidance offers safe harbors during the transition.

Notice 2025-27 allows a simplified status test based on consolidated financial statements when controlled-group reporting systems are still adapting, and grants estimated-tax relief for corporations awaiting final regulations.

Safe-harbor taxpayers may treat tentative minimum tax as zero if their financial statement effective tax rate already exceeds 15 percent, provided specific disclosure statements are attached to the return.

Interaction with BEAT, GILTI, and Pillar Two complicates planning.

Regular tax continues to include § 59A BEAT; if BEAT plus regular tax exceeds tentative CAMT, no CAMT applies, but BEAT still drains credits. GILTI remains in regular taxable income, yet its foreign-tax credits do not relieve CAMT. Pillar Two top-up taxes are creditable against CAMT only when treated as income taxes under GAAP—pending additional guidance.

Groups must layer models that rank-order potential minimum taxes: CAMT, BEAT, and Pillar Two, each on different income bases with distinct credit mechanics.

Compliance centers on Form 4626-CAMT and extensive statement attachments.

The revived form reconciles AFSI to book income, itemizes adjustments, and calculates credit limitations. Late or incomplete filing risks a $25 000 penalty, increasing to $50 000 for large-corporate negligence. Internal systems need new chart-of-accounts tags to capture book-tax differences that never mattered before.

Treasury’s proposed regulations demand electronic filing of a consolidated XML schedule detailing AFSI adjustments by legal entity, adding to IT-budget pressure for 2025 year-end close.

Financial-statement impact extends beyond the tax line.

Because CAMT uses book income, any post-close restatement retroactively alters AFSI and may trigger revised tax accruals. Audit committees now ask management to stress-test business combinations, pension remeasurements, and impairment charges for downstream CAMT effects.

Planning levers focus on credit mix, legal-entity rationalization, and timing of book deductions.

Increasing R&D and clean-energy credits still lowers regular tax but widens the CAMT gap; capitalizing expenditures for GAAP while deducting them for tax narrows the gap. Moving highly taxed CFC profits into the U.S. raises regular tax and boosts CAMT FTC capacity, sometimes neutralizing the minimum. Treasury’s anti-abuse rules challenge artificial acceleration of revenue or deferral of expenses solely to dodge AFSI thresholds.

Continuous monitoring of AFSI, disciplined data tagging, and scenario modelling of credit usage remain critical to managing the corporate AMT from 2025 onward.

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