Compliance
Compliance Alert: Corporate AMT & AFSI Adjustments under OBBB
Large corporations face new interim rules on Corporate AMT and AFSI under OBBB—understanding these now can prevent costly errors.
By NomadicTax Research Team • 5-8 min read • March 29, 2026
## What is the Corporate Alternative Minimum Tax (CAMT)?
Under the **One, Big, Beautiful Bill**, large corporations with substantial **Adjusted Financial Statement Income (AFSI)** are subject to the Corporate Alternative Minimum Tax. It operates like this:
- If your AFSI is high enough, you compute a tentative minimum tax—often 15%—on that amount, then subtract your regular tax and any applicable foreign tax credits.
- Certain deductions and expenses allowed under regular income tax rules must be **adjusted or added back** when computing AFSI. These include amortization of research & experimental expenditures, intangible property under section 367(d), and low-cost tangible property treated as materials and supplies. ([irs.gov](https://www.irs.gov/forms-pubs/updates-to-2025-instructions-for-form-4626-to-include-additional-interim-guidance-regarding-the-application-of-the-corporate-alternative-minimum-tax?utm_source=openai))
## Key Interim Guidance: Notice 2026-7 & Exhibits
The IRS has issued **Notice 2026-7**, which provides interim guidance for the 2025 tax year, covering:
- How to adjust AFSI for acquisitions of intangible property and certain production costs.
- How to handle **financially troubled companies** differently.
- Amortization rules and anti-abuse provisions for certain covered transactions.
- Instructions on statements that CAMT entities must **attach to federal returns** when making specific adjustments. ([irs.gov](https://www.irs.gov/forms-pubs/updates-to-2025-instructions-for-form-4626-to-include-additional-interim-guidance-regarding-the-application-of-the-corporate-alternative-minimum-tax?utm_source=openai))
## Examples to Help Corporations Comply
| Situation | AFSI-Adjustment Required? | How to Prepare |
|---|---|---|
| A film production with domestic production costs that were capitalized under regular tax rules | **Yes**: production costs may need add-back to AFSI | Maintain separate schedules showing each cost, classification, and adjustments per Notice 2026-7 |
| A merger or purchase of IP from abroad falling under § 367(d) | **Yes**: special AFSI adjustments and potential anti-abuse rules apply. | Keep detailed acquisition docs and consider international tax advice. |
## Action Plan for Corporations & Accounting Teams
1. **Identify applicable corporation status**: not every business is subject to CAMT—size, revenue, AFSI thresholds apply.
2. **Review financial statements alongside tax books**: determine differences affecting AFSI (e.g., depreciation, R&D costs, intangibles).
3. **Document everything**: reconciliations between regular tax income and AFSI, with clear backup.
4. **Attach required statements** to the return for any AFSI adjustments made under Notice 2026-7.
5. **Monitor proposed and final regulations**: as guidance evolves, rules may clarify anti-abuse provisions and modify thresholds.
## Penalties & Risks of Non-Compliance
- Failure to properly adjust AFSI or attach required statements may lead to **tax underpayments, interest, and penalties**.
- Misapplication of rules—for instance, treating ineligible purchases as deductible production costs—can trigger IRS audits.
- Corporations with international dealings (e.g., IP transfers) have significant exposure to anti-avoidance rules.
## Timeline & What to Watch For
| Period | What to Do |
|---|---|
| Now through Summer 2026 | Review 2025 returns for any AFSI issues—prepare to rely on interim guidance (Notice 2026-7). |
| Fall 2026 | Incorporate final regulations when issued; adjust practices for 2026 tax planning. |
| FY 2027 & Beyond | Anticipate stricter enforcement and clearer rules on covered asset transactions. |
## Bottom Line
If your corporation has **significant financial statement income, owns intangible assets, or incurs capital-intensive costs**, you must take CAMT seriously now. The interim guidance helps, but it also brings in detailed compliance obligations—catching them early will save penalties and headaches.