Adjusted Financials Statement Income | Corporate AMT | ON IH KY

Additional Reporting Compliance for US Taxpayers

Published on by Cole Dant in International Business, Tax Services

Additional Reporting Compliance for US Taxpayers
  Reading time 2 minutes

While the new Corporate Alternative Minimum Tax (CAMT) may not apply to certain taxpayers, it may still generate additional reporting requirements. Here’s what you need to know.

The Backstory

The CAMT, created by the Inflation Reduction Act, imposes a 15% minimum tax on the Adjusted Financials Statement Income (AFSI) of large corporations for taxable years that begin after December 31, 2022 – which means they’re in play for the 2023 tax year.

The CAMT rules generally apply to large groups of corporations under common control with an average AFSI of $1 billion or more over a three-year period. For multinational groups where the parent company is based outside the US, there’s an additional test of average domestic U.S. entity income and effectively connected income (ECI). If it’s $100 million or more, it’s subject to CAMT.

There are some exceptions: Real estate investment trusts (REITs), regulated investment companies, private equity funds, and S corporations are exempt from the CAMT.

Simplified safe harbor method

On December 27, 2022, the Treasury Department and the IRS issued Notice 2023-7 (the “Notice”) to address the application of CAMT.

For the first tax year beginning after December 31, 2022, there’s a simplified safe harbor method taxpayers may apply if they fall under the “applicable corporation” status – it allows corporations to compute a simplified version of AFSI. If they qualify under this simplified method, there are no additional reporting requirements.

A US corporation without a foreign parent would qualify under the simplified method if the control group has an average AFSI under $500M.

A US corporation with a foreign parent would qualify under the simplified method if:

  • The control group has an average AFSI under $500M, and
  • Domestic U.S. entity income and ECI have an average AFSI under $50M.

Not qualifying for the simplified method doesn’t mean a corporation will be subject to the CAMT, but it will be subject to disclosure requirements.

Talk to us

If you have any questions on the impact of CAMT, or questions about international tax and how to optimize your tax position, the Barnes Dennig team of top international tax pros is here to help. Contact us today.


Categories

Related Services

More Insights

Apply Now