What is CAMT and Why Care About the Updates?
The Corporate Alternative Minimum Tax (CAMT) is a 15% minimum tax on the adjusted financial statement income (AFSI) of certain large corporations under sections 55, 56A, and 59 of the Internal Revenue Code. Because it treats financial statement income as a starting point, adjustments can lead to major tax liabilities when book income and tax rules diverge. (irs.gov)
On February 18, 2026, the Treasury and IRS issued Notice 2026-7, which adds and modifies several AFSI adjustments. The notice is interim guidance, meaning it'll apply until formal regulations are published. (irs.gov)
Key Changes Introduced by Notice 2026-7
| Area | What’s New | Practical Implications |
|---|---|---|
| AFSI adjustments expanded | Includes repairs, eligible intangibles, domestic research amortization, qualified production costs, materials/supplies (kpmg.com) | Corporations can reduce book–tax differences by mapping expenses carefully to align tax vs financial reporting. |
| Financially troubled companies | Clarifies CAMT treatment, including effects when emerging from bankruptcy. (bdo.com) | Companies restructuring should consider CAMT exposure during both the troubled and recovery phases. |
| International transactions | Converts some anti-avoidance triggers for foreign covered asset transactions into rebuttable presumptions; refines how § 367(d) transfers of intangibles fit into CAMT to avoid double counting. (irs.gov) | Multinationals need to revisit cross-border IP licensing or sales to ensure proper disclosures and statements. |
| Return statement requirements | New disclosure statements for certain adjustments, especially when invoking the rebuttable presumption. (kpmg.com) | Speak with your tax advisor about necessary statement attachments—noncompliance can lead to lost deductions or penalties. |
Effective Date & Reliance
- Notice 2026-7 is effective February 18, 2026. (irs.gov)
- Corporations may rely on its guidance for tax years beginning before the date when final CAMT regulations are published. (irs.gov)
- Once a taxpayer applies an adjustment (e.g., for eligible intangibles), consistency is required going forward until assets are disposed or new guidance changes rules. (kpmg.com)
Action Items & Planning Tips
- Audit your AFSI adjustments: Identify which book–tax differences (intangible amortization, production costs, etc.) may now be allowable.
- Review international transactions: Especially those involving foreign-owned or foreign-influenced entities, or where intangible property or IP transfers occurred.
- Prepare required disclosures: Make sure your 2026 returns include any statements required under Notice 2026-7 to document reliance or rebut presumption.
- Evaluate tax burden: Model CAMT liability under both old and new interim guidance to project cash flow and effective tax rate.
- Monitor forthcoming regulations: These interim rules likely to be mirrored or refined in proposed/final CAMT regs. Adjust early where possible.
Example Scenario
Company X publishes U.S. GAAP financials with significant domestic R&D expenses amortized over multiple years. Under pre-CAMT book vs tax differences, some of these R&D costs were excluded from AFSI. Now, under Notice 2026-7’s expanded adjustments, these expenses could be added back (or reduced) when computing CAMT exposure—lowering tax liability if carefully tracked.
Bottom Line
Notice 2026-7’s interim guidance provides meaningful relief and clarity for large corporations facing CAMT. While full regulations are still pending, the changes impact how book vs tax items are treated today—making it both an opportunity and a necessity for affected entities to act now.