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June 9, 2023

US IRS waives addition to tax for a corporation's failure to make estimated tax payments of its CAMT

In Notice 2023-42, the IRS has waived the addition to tax under IRC Section 6655 for a corporation's failure to make estimated tax payments of its corporate alternative minimum tax (CAMT) under IRC Section 55 for a tax year beginning after December 31, 2022, and before January 1, 2024 (covered CAMT year). For more on the CAMT, please see Tax Alert 2023-0091.

The IRS states that it is waiving the addition to tax under IRC Section 6655 only for the CAMT liability under IRC Section 55 and is doing so in light of challenges in determining whether a corporation is subject to CAMT (i.e., an "Applicable Corporation" under IRC Section 59(k)) and the amount of a corporation's CAMT liability under IRC Section 55. Although corporations will not be penalized under IRC Section 6655 for failing to make CAMT estimated payments, other additions to tax could be imposed if a corporation fails to timely pay its CAMT liability when due. For example, Notice 2023-42 states that additions to tax could be imposed under IRC Section 6651 if payment of the CAMT liability is not made by the due date (excluding extensions) of the corporation's return.

The IRS also will modify the instructions to Form 2220, "Underpayment of Estimated Tax by Corporations," to clarify it will not impose the addition to tax based on a corporation's failure to make estimated tax payments of its CAMT liability for a covered CAMT year. Corporations may exclude amounts attributable to CAMT from their calculation of the required annual payment.

Notice 2023-42 clarifies that corporations must file Form 2220 with their federal income tax return, regardless of whether they have an estimated tax penalty liability. Corporations must complete Form 2220 without including the CAMT liability from the Form 1120, "US Corporation Income Tax Return," and must include an estimated tax penalty amount on line 34 of Form 1120 (or other line of the income tax return in the Form 1120 series), even if the penalty amount is zero. Corporations failing to follow the instructions set out in Notice 2023-42 may receive a penalty notice requiring them to file an abatement request to apply the estimated payment waiver relief in Notice 2023-42.


Notice 2023-42 likely will be helpful to corporations that are expecting to make estimated tax payments for the second quarter by the June 15, 2023 due date and struggling with the complexities and ambiguities of determining (i) whether they are an Applicable Corporation, and (ii) their tentative minimum tax and CAMT liability. Though the Notice provides penalty relief, it does not clarify the application of the CAMT rules.

Although the Notice will not impose penalties for failing to include the CAMT liability in a corporation's quarterly estimated income tax payments, the corporation still must include the CAMT liability in its payment due by the tax return due date (not including extensions). This means that a calendar-year taxpayer may find relief in making its 2023 quarterly estimated payments but will need to include the CAMT liability either on its tax return or extension payment by April 15, 2024. Additionally, taxpayers should also comply with the IRS Form 2220 requirements set forth in Notice 2023-42 to avoid the imposition of a penalty under IRC Section 6655.


Contact Information
For additional information concerning this Alert, please contact:
Ernst & Young LLP (United States), Global Compliance & Reporting
   • Christina Bowers (
   • Carl Barkson (
Ernst & Young LLP (United States), International Tax and Transaction Services
   • Craig Hillier, Boston, MA (
   • Colleen O’Neill, Washington, DC (
   • Jeshua Wright, Washington, DC (
National Tax – Accounting Periods, Methods, and Credits
   • Scott Mackay (
   • Ken Beck (
   • Rayth Myers (
   • Dan Penrith (

Published by NTD’s Tax Technical Knowledge Services group; Jennifer A Brittenham, legal editor