Publish Date

Sep 29, 2023

Treasury Releases New Revenue-Raising CAMT Guidance

Industry Insights

On September 12, 2023, Treasury and the IRS released Notice 2023-64 (the Notice) to provide additional interim guidance for implementing the new corporate alternative minimum tax (CAMT). The Notice addresses several items while still leaving many significant questions unanswered. Congress purportedly enacted the CAMT to prevent large corporations from paying relatively little or no income tax while reporting significant profits, as well as to raise revenue. In that regard, the Notice appears heavily weighted toward revenue-raising. Along with previously released notices (together, the Interim Guidance), the new rules are expected to be packaged into proposed regulations that would be effective for taxable years beginning on or after January 1, 2024. Pending proposed regulations, taxpayers can rely on the Interim Guidance.

To briefly recap, CAMT imposes a 15% minimum tax on a corporation (other than an S corporation, regulated investment company (RIC), or real estate investment trust (REIT)) if its average annual adjusted financial statement income (AFSI) exceeds $1 billion over a three-year period, after applying certain aggregation rules. For a corporation that is part of a foreign-parented multinational group (FPMG), the CAMT applies if, in addition to satisfying the same $1 billion threshold on a group basis, the U.S. corporation has a three-year average annual AFSI of at least $100 million for the same period.

This alert discusses selected items in the Notice, including which financial statement companies should use; the starting point and certain adjustments for determining AFSI; how to apply the aggregation rules for determining whether a corporation is subject to CAMT; and the treatment of foreign income and tax credits.


A taxpayer’s AFSI begins with the net income or loss reported on its applicable financial statement (AFS), which under the notice is, in priority order, its: (1) certified statement prepared under generally accepted account principles (GAAP), (2) certified statement prepared under international financial reporting standards (IFRS), (3) other government and regulatory statements, (4) unaudited external statement, or (5) federal income tax return or information return.

For a corporation whose financial results are reported on a consolidated AFS, the consolidated AFS is the corporation’s AFS unless its financial results are also separately reported on an AFS of equal or higher priority to the consolidated AFS and that corporation is not a member of a tax consolidated group. Similarly, a taxpayer that is a member of a FPMG (which prepares a consolidated AFS) would use the group’s consolidated AFS, regardless of whether the taxpayer reports results on a separate AFS of equal or higher priority.

A&M Insight: By expanding the definition of AFS, the Notice prevents taxpayers from arguing that they are not subject to CAMT because they have only unaudited financial statements or do not prepare any external financial statements. For a corporation using its federal income tax return as its AFS, the 15% minimum tax would apply to its taxable income, which in essence would result in CAMT converting regular income tax credits into minimum tax credits. The Interim Guidance does not prescribe special rules that would apply when using taxable income as AFSI.


Solely for the purposes of determining whether a corporation is subject to CAMT, taxpayers must apply the “single employer” aggregation rule. This means the corporation includes the AFSI of all members of a modified controlled group of corporations that are treated in aggregate as a single employer with that corporation, under established tax rules that apply for various purposes. Corporations that could be considered part of a controlled group and businesses under common control include those within a parent-subsidiary group, a brother-sister group, or a combined group if certain conditions are met. In addition, any group of trades or businesses (including those operated by partnerships or proprietorships) under common control are members of a controlled group that is treated as a single employer.

The Notice confirms that under the statute, S corporations, REITs, and RICs, which themselves are exempt from CAMT, may be considered members of a controlled group that is treated as a single employer for purposes of the AFSI threshold test. A foreign partnership or trust may also be a member of a controlled group under the single employer rule. The Notice further provides that for members of a FPMG (included in the same AFS), the foreign-parented and single employer aggregation rules would apply for purposes of the $1 billion threshold, resulting in the corporation’s AFSI including the AFSI of the members of the group and the non-members that are treated as a single employer with the group. Thus, the FPMG rules in the Notice arguably would broaden the scope of taxpayers that satisfy the $1 billion AFSI threshold. No specific guidance is provided regarding the $100 million threshold for a member of a FPMG, as to which some uncertainty exists regarding the entities that are included in the AFSI threshold calculation.


A taxpayer’s AFSI is its financial statement income (FSI) as adjusted by the statute and applicable guidance. The Notice defines FSI to include all items of income, expense, gain, and loss, including nonrecurring items and net income or loss from discontinued items reported on a taxpayer’s AFS. FSI would include gains or losses reported on the income statement but not recognized for tax purposes (e.g., gain on a section 1031 exchange that qualifies for non-recognition treatment). The Notice clarifies that FSI would exclude non-income statement items such as retained earnings and other comprehensive income, which may include income, gain, or loss not yet realized.

For a taxpayer whose AFS is included in a consolidated AFS, the taxpayer’s FSI would generally be its portion of the consolidated FSI (supported by separate books and records), and likely equal to the FSI that it would have reported on a separate AFS. The Notice provides that:

  • Losses of one taxpayer within the same consolidated AFS group may not be netted against the income of another group member in determining FSI of either taxpayer, assuming that both taxpayers are not part of the same consolidated group for federal income tax purposes;
  • A taxpayer’s FSI is determined without regard to AFS consolidation entries unless the eliminating entries involve a disregarded entity of the taxpayer; and
  • Certain consolidation entries (e.g., for shared expenses) must be allocated to each taxpayer to which the entry applies and included in each taxpayer’s FSI.

A&M Insight: Treasury and the IRS make clear in the Notice that they view CAMT predominantly as a revenue raiser with little to no regard to the suggested policy motive of preventing large corporations from monetizing large financial statement income tax-free. This is most evident in the expected inclusion in FSI of nonrecurring items and income or loss from discontinued operations — items generally not relevant to the company’s shareholders, investors, or creditors. The inclusion of these items in FSI could trigger CAMT even though the items do not reflect income from continuing business operations.

Another seemingly incongruous result from applying the Notice is that a taxpayer whose FSI is determined from a consolidated AFS is unable to net the losses of another member of the AFS consolidated group against its income for purposes of determining that member’s FSI (applies for determining the taxpayer’s CAMT liability as opposed to determining whether it is subject to the tax). Additionally, the Notice requires taxpayers to back out AFS consolidated group consolidating adjustments, which would create yet another set of books to maintain, and as required by the Notice, reconcile. Neither of these rules override the general rule that a consolidated tax group is treated as a single taxpayer for CAMT purposes.


The statute provides for some adjustments in computing AFSI, including replacing book depreciation with tax deductions for certain depreciable property (section 168 property). The Notice modifies and clarifies prior guidance (Notice 2023-7) on depreciation adjustments, with several significant changes. If taxpayers elect to rely on Notice 2023-7 on or after September 12, 2023, they must apply the guidance as modified by the new Notice. Under the recent guidance, the following new rules would apply to section 168 property:

  • If a loss on disposition is taken for financial statement purposes in a taxable year before the year in which the loss is recognized for tax purposes, the loss would be deferred for CAMT purposes. However, a gain recognized for financial statement purposes in an earlier year would not be deferred (thereby likely subjecting such gain to tax under the CAMT);
  • For dispositions with gain deferred for tax purposes (e.g., installment sales and like-kind exchanges), the full amount of the gain would be included in AFSI in the year of disposition;
  • Capitalized depreciation subject to the CAMT rules would be expanded (beyond depreciation capitalized to inventory under section 263A and recovered as part of costs of goods sold) to include any tax depreciation with respect to section 168 property that is capitalized and subsequently allowed as a deduction, even if that deduction is not for depreciation (not a section 167 deduction); and
  • If a taxpayer changes its method of accounting for depreciation of section 168 property, its AFSI depreciation adjustments would include section 481(a) adjustments.

A&M Insight: The modified depreciation rules provide meaningful clarifications. Some rules could result in adjustments that increase a taxpayer’s AFSI. The Notice could also add complexity to an already complicated tax regime. For example, a taxpayer that must capitalize and amortize tax depreciation of section 168 property under the section 174 rules for research expenditures, would have to adjust its AFSI by replacing the financial statement depreciation of those amounts with the section 174 amortization deductions.


For a U.S. shareholder of a controlled foreign corporation (CFC), AFSI would include (1) dividends received and (2) certain items of foreign income determined on an aggregate basis. Thus, the long-standing double-counting issue regarding CFC income has yet to be resolved, while the ability to aggregate CFC income is nevertheless helpful (making a single adjustment for the U.S shareholder’s pro rata share of adjusted net income or loss for all its CFCs, except that, as provided by the statute, a negative adjustment is not taken into account for the taxable year). The Notice clarifies that for purposes of computing AFSI from effectively connected income, tax treaty provisions would apply in determining the foreign corporation’s AFSI. In other positive news, in determining the CAMT foreign tax credit, a partner’s share of partnership foreign income taxes paid or accrued would be taken into account, and as provided in the statute, the credit for directly paid taxes (section 901 credits) would not be subject to a foreign tax credit limitation.


Just when you thought you might not be subject to CAMT, check again. The new rules in Notice 2023-64 could affect whether a corporation exceeds the AFSI $1 billion threshold. The Notice rules could also add complexity to determining CAMT applicability and tax liability. Additionally, while the Notice touches upon several items, many questions remain, which hopefully will be addressed in forthcoming proposed regulations. If you would like to discuss how the new CAMT guidance could affect your business and tax planning and operations, please feel free to reach out to Kevin M. Jacobs of our National Tax Office or a member of your A&M engagement team.