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Today, the Treasury Department issued additional interim guidance (Notice 2024-10) on applying the corporate alternative minimum tax (CAMT) to shareholders of controlled foreign corporations (CFCs) with respect to covered CFC distributions. The Notice also modifies and clarifies prior guidance on determining the applicable financial statement (AFS) of an affiliated group of corporations filing a consolidated return for any tax year. In the Notice, Treasury reiterated its intent to issue proposed regulations that will align with the guidance in the Notice, as well as previously published interim guidance.

Highlights of Notice 2024-10 include the following:

• The Notice defines covered CFC distributions as distributions received with respect to stock of a CFC to the extent the distributions are dividends (determined without taking IRC Section 959(d) into account).
• For covered CFC distributions received by a US shareholder of a CFC, the US shareholder determines its applicable financial statement income (AFSI) by:
• Disregarding items that are reported on the US shareholder's AFS and result from the receipt of the covered CFC distribution
• Including in AFSI the US shareholder's items of income and deduction under IRC chapter 1 (taking into account IRS Section 959(d) but excluding IRC Sections 56A and 78) resulting from the receipt of the covered CFC distribution
• For covered CFC distributions received by a CFC from another CFC, a recipient CFC determines its Adjusted Net Income or Loss by:
• Disregarding any items that are reported on the recipient CFC's AFS and result from the receipt of the covered CFC distribution
• Including in Adjusted Net Income or Loss the recipient CFC's items of income under chapter 1 resulting from the receipt of the covered CFC distribution, reduced for certain distributions that are excluded from the recipient CFC's subpart F income and GILTI (e.g., due to IRC Sections 954(c)(6) or 959(b))

Additionally, the Notice modifies and clarifies prior guidance in Notice 2023-64 on the AFS that an affiliated group of corporations must use when filing a consolidated return. The Notice also clarifies AFS prioritization for a taxpayer that is a member of a foreign-parented multinational group.

Taxpayers may rely on the interim guidance in the Notice for covered CFC distributions received on or before the date forthcoming proposed regulations are published. Similarly, taxpayers may rely on the interim guidance in the Notice for determining the required AFS for tax years ending before the date forthcoming proposed regulations are published. The Notice indicates, however, that taxpayers may rely on the guidance in the Notice, regardless of when the forthcoming proposed regulations are published, for (1) covered CFC distributions received before January 1, 2024, and (2) AFS determinations for tax years beginning before January 1, 2024.

A detailed Tax Alert is forthcoming.

Published by NTD’s Tax Technical Knowledge Services group; Maureen Sanelli, legal editor