Proposed Regulations Regarding the Corporate Alternative Minimum Tax

Summary

SIFMA ¹ provided comments to the U.S. Department of the Treasury (DOT) and the Internal Revenue Service (IRS) in response to the September 2024 proposed regulations that implement the corporate alternative minimum tax (CAMT) that was enacted as part of the Inflation Reduction Act and the five CAMT notices ² that were issued subsequent to the 2024 Proposed Regulations (the CAMT Notices).

Excerpt

I. Executive Summary
First and foremost, SIFMA thanks Treasury and the IRS for their recent efforts in developing and issuing the CAMT Notices, which are responsive to concerns raised by several stakeholders regarding the exceedingly complex nature of the Proposed Regulations. Consistent with the CAMT Notices, the policy objectives stated in Executive Order 14192 (regarding burden reduction), and Treasury’s public statements regarding efforts to reduce CAMT compliance burdens, SIFMA recommends that the Proposed Regulations be further modified to improve the administrability of CAMT as follows –

• The Forthcoming Proposed Regulations should provide that all adjusted financial statement income (“AFSI”) adjustments that are not required by statute (for example, AFSI adjustments provided under Section 56A(c)(15) authority) are optional.
• The Forthcoming Proposed Regulations should eliminate (or minimize) the need for taxpayers to maintain a so-called “third set of books.” The need for a third set of books arises when an AFSI adjustment causes a CAMT attribute (such as basis) to differ from the corresponding financial reporting attribute or regular tax attribute. In circumstances in which an AFSI adjustment results in a CAMT attribute that deviates from the corresponding financial reporting attribute, the Forthcoming Proposed Regulations should make the CAMT attribute equal to its corresponding regular tax attribute (to prevent a unique CAMT attribute), unless the statute expressly requires otherwise.
• The Forthcoming Proposed Regulations should further simplify and clarify the approaches set forth in Notice 2025-28 regarding the computation of a partner’s distributive share of a partnership’s AFSI under Section 56A(c)(2)(D)(i).
• The Forthcoming Proposed Regulations should eliminate the rules in Prop. Reg. Sections 1.56A-1(c)(3)(iv) (the “top-down” reconciliation requirement) and 1.56A-2(g)(2)(v) (the foreign-parented multinational group (“FPMG”) AFS priority rule) for purposes of determining the CAMT liability of U.S. subsidiaries and branches of a foreign entity and instead permit those subsidiaries and branches to determine their separate financial statement income (“FSI”) by reference to the amount in Part I, line 11 of the Schedule M-3. In this regard, SIFMA endorses the recommendations in the comment letters that were submitted by the Institute of International Bankers (“IIB”) on January 15, 2025, and October 16, 2023, regarding the determination of the AFS and FSI of U.S. subsidiaries and branches of a FPMG (the “IIB Letters”).
• The Forthcoming Proposed Regulations should clarify the rule in Prop. Reg. Section 1.56A-24(e)(3) to prevent prior “mark to market” adjustments relating to a net investment hedge (“NIH”) from being reversed through AFSI in a situation in which the taxpayer sells or terminates a net investment hedge (“NIH”) but the underlying hedged item itself is not yet sold or liquidated (e.g., the relevant controlled foreign corporation (“CFC”) is still owned by the taxpayer).