Proposed Corporate Alternative Minimum Tax (CAMT) Regulations
Summary
SIFMA 1 provided comments to the Treasury and IRS in response to the recently proposed tax regulations that implement the corporate alternative minimum tax (CAMT) rules that were enacted as part of the Inflation Reduction Act.
Excerpt
I. Executive Summary
In general, the Proposed Regulations should be modified to provide that the “adjusted financial income” (“AFSI”) of a taxpayer is equal to the “financial statement income” (“FSI”) of the taxpayer, subject only to the adjustments that are specifically required under the Code and other limited adjustments described below. In addition, SIFMA makes the following specific recommendations:
- The Proposed Regulations, when finalized (the “Final Regulations”), should generally allow a corporate partner in a non-consolidated partnership to elect out of the “bottom up” approach in the Proposed Regulations, and to instead compute its distributive share of AFSI from a partnership based on a “top-down” method. If made, this election should apply to all such partnership interests that are held by a corporate partner, and the decision to make (or not make) such an election should be irrevocable without the consent of the IRS.
- The need for such an election is particularly evident when considering the distortive results that would arise if the “bottom-up” approach outlined in the Proposed Regulations applies to investments accounted under the Proportional Amortization Method (“PAM”) or Hypothetical Liquidation at Book Value Method (“HLBV”).
- The government should issue interim guidance that would permit the use of the “top down” election prior to the issuance of Final Regulations.
- The Final Regulations should generally allow a corporate partner in a non-consolidated
partnership to elect out of the Section 721 and Section 731 “deferred sale” provisions that are set forth in the Proposed Regulations, in which case it would immediately recognize book gain or loss for CAMT purposes in respect of partnership contributions and distributions. If made, this election should apply to all such partnership interests that are held by a corporate partner, and the decision to make (or not make) such an election should be irrevocable without the consent of the IRS. - SIFMA endorses the recommendations in the letter that was submitted, or will be submitted, by the Institute of International Bankers (“IIB”) with respect to the Proposed Regulations.
- The Final Regulations should provide that a non-corporate investment fund that is not engaged in a trade or business is not treated as a “deemed corporation” that is a common parent of a “foreign-parented multinational group” (“FPMG”).
- SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy, affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).