Tax News Update    Email this document    Print this document  

April 17, 2024
2024-0802

IRS issues last-minute waiver on penalty for failure to pay estimated CAMT installment due April 15, 2024

In Notice 2024-33, the IRS waived the penalty under IRC Section 6655 for a corporation's failure to pay estimated tax payments attributable to a portion of a corporation's alternative minimum tax (CAMT) due on or before April 15, 2024, or May 15, 2024 (for fiscal-year taxpayers whose tax year begins in February 2024).

This is the second time the IRS has waived the penalty. In June 2023, the IRS waived the penalty for the 2023 tax year (see Tax Alert 2023-1038).

The IRS gives the same reason as it did for the previous waiver, citing the challenges of 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.

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 the relevant period.

Implications

Notice 2024-33 is helpful to corporations that expected to make (or made) estimated tax payments for the first quarter by the April 15, 2024, due date and struggled with the complexities and ambiguities of determining whether they are an Applicable Corporation and their CAMT liability. Corporations that may have excluded amounts attributable to CAMT from their calculation of the required estimated payment or made significant judgements in areas for which guidance is still pending will not be penalized for doing so. While the Notice provides penalty relief, it does not clarify the application of the CAMT rules.

Although corporations will not be penalized under IRC Section 6655 (failure by corporation to pay estimated income tax) for failing to make estimated payments attributable to CAMT, other additions to tax could apply if a corporation fails to timely pay its CAMT liability when due. For example, penalties could apply under IRC Section 6651 (failure to file tax return or to pay tax) if the CAMT liability is not paid by the due date (excluding extensions) of the corporation's return. Additionally, taxpayers should also comply with forthcoming instructions to IRS Form 2220 to avoid a penalty under IRC Section 6655.

* * * * * * * * * *
Contact Information

For additional information concerning this Alert, please contact:

Ernst & Young LLP (United States), Global Compliance & Reporting

National Tax — Accounting Periods, Methods, and Credits

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement