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)
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)
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
- Identify applicable corporation status: not every business is subject to CAMT—size, revenue, AFSI thresholds apply.
- Review financial statements alongside tax books: determine differences affecting AFSI (e.g., depreciation, R&D costs, intangibles).
- Document everything: reconciliations between regular tax income and AFSI, with clear backup.
- Attach required statements to the return for any AFSI adjustments made under Notice 2026-7.
- 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.