Treasury publishes long-awaited proposed regulations for an alternative minimum tax for businesses

On September 12, 2024, the Department of the Treasury (“Treasury”) and the Internal Revenue Service (“IRS”) issued the long-awaited proposed regulations (89 FR 75062) (the “Proposed Regulations”) regarding the application of the corporate alternative minimum tax (“CAMT”), which was enacted two years ago as part of the Inflation Reduction Act (“IRA”). Generally, the CAMT imposes a 15% corporate alternative minimum tax on the adjusted financial statement income (“AFSI”) of certain large corporations for taxable years beginning after December 31, 2022.

Congress has granted the Treasury and the IRS a significant amount of regulatory authority over CAMT in IRAs. This comprehensive package of proposed regulations contains nearly 200 pages of rules for implementing the extremely complex CAMT regime and expands and modifies guidance previously issued under Announcement 2023-07, Announcement 2023-20, Announcement 2023-64AND Announcement 2024-10. The proposed regulations include guidance on AFSI adjustments for taxable year differences, foreign corporations, partnerships, effectively connected income, foreign income taxes, certain income tax credits, depreciation, corporate reorganizations, net operating losses, and distressed firms. Our earlier discussion of CAMT can be found Hereour previous coverage of the IRA can be found Here AND Hereand further information and details can be found Here.

Generally, some sections of the Proposed Regulations apply to tax years ending after September 13, 2024, while other sections of the Proposed Regulations apply to tax years ending after the date the Proposed Regulations are finalized. As a result, while taxpayers generally should not be required to amend their 2023 tax returns, some portions of the Proposed Regulations will retroactively apply to 2024 transactions that occurred before the issuance of the Proposed Regulations. Taxpayers generally may rely on the Proposed Regulations for tax years ending before the date the Proposed Regulations are finalized, provided certain consistency and other requirements are met. Treasury has requested comments on the Proposed Regulations by December 12, 2024, and a hearing is scheduled for January 16, 2025. The IRS has also issued Announcement 2024-66 in connection with proposed regulations that provide penalty relief for corporations that fail to pay estimated taxes with respect to CAMT liabilities for taxable years beginning after December 31, 2023, and before January 1, 2025.

While the proposed regulations provide taxpayers with much-needed guidance, interpreting and analyzing these extremely complex regulations will certainly present challenges as taxpayers begin to apply these proposed regulations to their specific facts and circumstances. Stay tuned for additional analysis and insights regarding CAMT in light of the issuance of these proposed regulations.