IRS Notice provides additional interim CAMT guidance

In brief

The Inflation Reduction Act, enacted in 2022, imposes a corporate alternative minimum tax (CAMT) based on adjusted financial statement income (AFSI) of an ‘applicable corporation’ for tax years beginning after December 31, 2022. Treasury and the IRS on September 12 released Notice 2023-64 (Notice) in another round of substantive guidance on the CAMT.

The Notice provides interim guidance on several important issues. These include the identification of a taxpayer’s applicable financial statement (AFS) and the computation of AFSI and related adjustments, such as those required for depreciation and amortization, as well as others necessary to prevent duplications and omissions, including treatment of financial accounting adjustments and changes in financial accounting principles. Additionally, the guidance clarifies how taxpayers should determine the applicable corporation that is subject to the CAMT, treat financial statement net operating losses (FSNOLs), and compute CAMT foreign tax credits (FTCs).

Notice 2023-64 states that taxpayers may rely on the guidance provided in the Notice for tax years ending on or before the publication of forthcoming proposed regulations in the Federal Register, which are expected to be applicable for tax years beginning on or after January 1, 2024. A taxpayer also may rely on the interim guidance described in the Notice for any tax year that begins before January 1, 2024.

The takeaway: As the CAMT is effective for tax years beginning after December 31, 2022, taxpayers potentially subject to the CAMT should consider how guidance in the Notice may impact previous positions taken based on a reasonable interpretation of the statute and prior interim guidance. Issuance of the Notice comes as calendar-year corporations are finalizing their federal income tax returns for the 2022 tax year and ahead of the due date of the third quarterly installment of estimated federal income taxes for the 2023 calendar tax year. In this regard, Notice 2023-42 waived the addition to tax under Section 6655(a) relating to the CAMT for a tax year that begins after December 31, 2022, and before January 1, 2024.

PwC professionals will discuss recently issued guidance, including this Notice, on a Tax Readiness webcast on October 9, 2023, at 2:00 PM ET. Please register here.