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Today, the Treasury Department issued over 600 pages of long-awaited proposed regulations (REG-112129-23) on the application of the 15% corporate alternative minimum tax (CAMT) on the adjusted financial statement income (AFSI) of large corporations. Treasury also issued penalty relief (Notice 2024-66) for corporations that fail to pay estimated taxes with respect to CAMT liabilities for tax years that begin after December 31, 2023, and before January 1, 2025 (Covered CAMT Year).

The proposed regulations propose comprehensive rules for determining AFSI, whether a corporation is an applicable corporation, including rules for foreign-parented multinational groups, and the CAMT foreign tax credit. The proposed regulations generally incorporate interim guidance previously issued by Treasury and the IRS in notices over the past two years (see Tax Alerts 2023-2105, 2023-0091, 2023-0384 and 2023-1570). However, the proposed regulations also differ from the prior guidance in some notable respects. For example, the proposed regulations would make permanent the safe harbor for determining applicable corporation status and take a different approach regarding the treatment of financial statement income reported with respect to contributions of property to partnerships and distributions of property by partnerships.

Additionally, the proposed regulations provide guidance on items not previously addressed in prior interim guidance, including:

• A CAMT entity's distributive share of AFSI with respect to a partnership investment, including in a tiered partnership structure
• The AFSI adjustments for a financial statement period differing from the tax year
• The treatment of mark-to-market gains and losses in certain hedging transactions
• The determination of AFSI resulting from certain corporate transactions
• The application of the CAMT to affiliated corporations filing a consolidated income tax return
• The application of regular tax rules to certain items resulting from ownership of stock of a foreign corporation, regardless of whether the foreign corporation is a controlled foreign corporation
• An anti-abuse rule for CAMT avoidance transactions

Certain sections of the proposed regulations are proposed to apply to tax years ending after the date the proposed regulations are published in the Federal Register, while other sections of the proposed regulations are proposed to apply to tax years ending after the date the final regulations are published in the Federal Register. Taxpayers may choose to rely on the proposed regulations for tax years ending before these dates, provided certain requirements are met.

In the accompanying notice, Treasury and the IRS establish a waiver for the addition to tax under IRC Section 6655 with respect to a corporation's CAMT liability for any Covered CAMT Year. Under the waiver, a corporation's required installments of estimated tax need not include amounts attributable to its CAMT liability to prevent the imposition of an addition to tax. However, failure to timely pay a CAMT liability when due may result in other penalties being imposed.

A public hearing on the proposed regulations is scheduled for January 16, 2025. Written or electronic comments on the proposed regulations must be received by 90 days after the date of publication in the Federal Register.

Tax Alerts on the proposed regulations and the Notice are forthcoming.