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In interim guidance issued on Sept. 30, the IRS indicated it would withdraw select prior guidance on the corporate alternative minimum tax (CAMT) created by the 2022 Inflation Reduction Act and implement new interim guidance around three adjustments to the calculation of the 15% tax on adjusted financial statement income (AFSI). Corporations with $1 billion or more in AFSI are responsible for the tax, which became effective for tax years after Dec. 31, 2022.
The notice (Notice 2025-46) provided interim guidance with respect to three issues related to adjustments to determine AFSI: (i) adjustments related to domestic corporate transactions; (ii) adjustments to troubled companies; and (iii) adjustments related to tax consolidated groups.
The notice also stated that Treasury and IRS intend to propose regulations to revise the existing Propose Regulations Section 1.56A-23 to determine the amount of financial statement net operating losses (FSNOLs) that are available to reduce AFSI but can be reduced by a deduction for financial statement net operating loss.
Taxpayers may generally rely on the interim guidance in the notice for taxable years beginning before the date proposed regulations are published in the Federal Register. The notice also provides that reliance on such guidance will not cause a corporation to violate consistency requirements in the preamble of the CAMT proposed regulations.
Domestic corporate transactions
The notice provides interim guidance for the adjustments to AFSI with respect to: (i) stock of a domestic corporation that is not a member of a tax consolidated group with the CAMT entity; (ii) domestic covered asset transactions as defined in the notice; and (iii) Section 336(e) transactions or Section 338 transactions.
The notice also provides guidance for determining basis for CAMT purposes with respect to domestic covered asset transactions, Section 336(e) transactions, and Section 338 transactions.
In addition, the notice provides that purchase accounting and pushdown accounting adjustments with respect to the acquisition of stock of a domestic corporation are generally disregarded for determining the CAMT basis in the domestic corporation’s assets and the CAMT entity’s AFSI.
Troubled companies
The notice provides interim guidance intended to provide additional relief to troubled companies and increase taxpayer certainty regarding the application of the proposed rules for troubled companies.
Specifically, the notice provides guidance related to: (i) when to apply financial accounting standards or regular tax rules to troubled companies; (ii) attribute reduction in connection with a discharge of indebtedness; and (iii) the application of the interim guidance to members of tax-consolidated groups.
During his trip to Asia Trump also met with leaders of Japan, South Korea, Malaysia, Cambodia and Vietnam to reiterate prior trade frameworks announced by the administration over the summer, which include purchase agreements for aircraft and other U.S. exports. Timing and enforcement of those purchases were not laid out in the fresh wave of announcements released by the White House.
The Trump administration also issued memorandums of understanding on technology cooperation with South Korea and Japan, including around critical mineral supply chains — one of the leverage points China used in its negotiations with the U.S.
Notably, announcements with Malaysia and Cambodia included commitments from those countries not to implement digital services taxes or similar measures seen by the administration as disproportionately targeting U.S. companies. Announcements for Japan, South Korea, and Vietnam did not. (See our story on France’s DST elsewhere in this issue.)
Tax consolidated groups
The IRS also provided interim guidance on tax-consolidated groups that will be reflected in forthcoming proposed regulations. Specifically, the notice generally applies the consolidated return regulations under Section 1502 in determining the AFSI of a tax-consolidated group. However, in calculating AFSI, CAMT inputs should be substituted as follows:
- AFSI in place of taxable income;
- CAMT basis in place of adjusted basis; and
- FSNOLs in place of regular net operating loss.
The notice also provides that the following consolidated return regulation provisions do not apply in determining the AFSI of a tax-consolidated group:
- the separate return limitation year (SRLY) rules of Treasury Regulation Sections 1.1502-15 and 1.1502-21(c);
- the rules related to Section 382 under Treasury Regulation Section 1.1502-90 through 1.1502-99; and
- any rule that is inapplicable under Section 56A (e.g., the rule for capital gain and loss in Treasury Regulation Section 1.1502-22).
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