On Thursday, the U.S. Department of the Treasury and the IRS released long-awaited rules outlining the 15% corporate alternative minimum tax (CAMT) for companies with reported profits of $1 billion or more. This tax, a key provision of President Joe Biden’s 2022 Inflation Reduction Act, aims to ensure that large corporations pay a minimum tax rate, even if their traditional tax liabilities fall below that threshold.
Corp Minimum Tax Rules : CAMT Overview
The corporate minimum tax applies to companies with over $1 billion in global adjusted financial statement income, averaged over three years, if they pay less than 15% in taxes. This tax, outlined under Internal Revenue Code Section 55, went into effect in 2023 but had limited guidance until now. Treasury expects the tax to generate $250 billion over 10 years.
Key Provisions of the Rules
The new rules clarify which companies are subject to the CAMT and provide methods for calculating the tax. The 600-page proposal includes definitions to help companies determine their financial statement income and addresses specific concerns like:
- How to apply the tax to foreign multinational corporations.
- Calculating foreign tax credits under the CAMT.
- The tax’s application to companies filing consolidated returns.
Treasury Secretary Janet Yellen praised the rules, saying they would help prevent corporate tax avoidance. “These rules ensure the largest and most profitable corporations cannot pay little to no taxes,” she said.
Corp Minimum Tax Rules : Penalty Waivers and Exceptions
The Treasury also extended a waiver through the end of the year on penalties for incorrectly estimating taxes due to the CAMT. This waiver had previously been available for taxes due by August 5. Limited exceptions to the tax are included for companies emerging from bankruptcy.
Comments and Next Steps
Treasury will accept comments on the proposed rules until December 12, with a public hearing scheduled for January 25, 2025.
