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June 13, 2024
2024-1179

IRS extends penalty relief for failure to pay estimated CAMT to installment due August 15, 2024

In Notice 2024-47, the IRS waived the penalty under IRC Section 6655 for a corporation's failure to pay estimated tax payments attributable to a portion of the corporation's alternative minimum tax (CAMT) due on or before August 15, 2024, for a tax year beginning in 2024.

This is the third 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). In April 2024, the IRS waived the penalty for the installment due on April 15, 2024, for a tax year beginning in 2024 (and May 15, 2024, for a fiscal-year taxpayer with a tax year beginning in February 2024) (see Tax Alert 2024-0802).

The IRS gives the same reason as it did for the previous waivers, 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 2024-47 is helpful to corporations that expected to make (or made) estimated tax payments for the second quarter by the June 17, 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 the latest instructions to IRS Form 2220 to avoid a penalty under IRC Section 6655.

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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

National Tax — International Tax & Transactional Services

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