Corporate Alternative Minimum Tax Applicable After 2022

DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Part 1</CFR> <DEPDOC>[REG-112129-23]</DEPDOC> <RIN>RIN 1545-BQ84</RIN> <SUBJECT>Corporate Alternative Minimum Tax Applicable After 2022</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking and notice of public hearing. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This notice of proposed rulemaking provides proposed regulations that would address the application of the corporate alternative minimum tax, which is imposed on the adjusted financial statement income of certain corporations based on their applicable financial statements for applicable taxable years beginning after 2022. The proposed regulations would affect taxpayers that are applicable corporations, certain taxpayers that own interests in applicable corporations, and certain entities in which applicable corporations hold interests. This document also provides notice of a public hearing on the proposed regulations. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Written or electronic comments on this proposed rule must be received by December 12, 2024. A public hearing on these proposed regulations is scheduled to be held on January 16, 2025, at 10 a.m. Eastern Time (ET). Requests to speak and outlines of topics to be discussed at the public hearing must be received by December 12, 2024. If no outlines are received by December 12, 2024, the public hearing will be cancelled. Requests to attend the public hearing must be received by 5 p.m. ET on January 14, 2025. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are strongly encouraged to submit public comments electronically via the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov</E> (indicate IRS and REG-112129-23) by following the online instructions for submitting comments. Requests for a public hearing must be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments submitted to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-112129-23), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Concerning proposed §§ 1.56A-1, 1.56A-9, and 1.56A-23, except for paragraphs (e) and (f), Madeline Padner at (202) 317-7006, concerning proposed §§ 1.56A-2 and 1.56A-3, Frank Dunham III at (202) 317-7009, concerning proposed §§ 1.56A-11, 1.56A-12, and 1.59-2, except for paragraphs (e), (f) and (h), John Aramburu at (202) 317-7006, concerning proposed § 1.56A-17, James Yu at (202) 317-4718, and concerning proposed §§ 1.56A-15 and 1.56A-16, except for issues related to partnerships, C. Dylan Durham at (202) 317-7005, each of the Office of Associate Chief Counsel (Income Tax and Accounting), and for issues related to partnerships, Yosef Koppel, Elizabeth Zanet, or Brian Barrett of the Office of Associate Chief Counsel (Passthroughs and Special Industries), at (202) 317-6850; concerning proposed § 1.56A-4, Daren J. Gottlieb at (202) 317-6938, concerning proposed § 1.56A-6, Dylan J. Steiner at (202) 317-6934, concerning proposed § 1.56A-7, Ryan Connery at (202) 317-6933, concerning proposed §§ 1.56A-8 and 1.59-4, John J. Lee at (202) 317-6936, concerning proposed § 1.56A-26(d), Michelle L. Ng at (202) 317-6939, concerning proposed § 1.56A-27, Joel Deuth at (202) 317-6938, and concerning proposed § 1.59-3, Karen Walny at (202) 317-6938, each of the Office of Associate Chief Counsel (International); concerning proposed §§ 1.56A-18, 1.56A-19, 1.56A-21, 1.56A-26, 1.1502-2, 1.1502-3, 1.1502-53, 1.1502-55, and 1.1502-56A, Jeremy Aron-Dine, William W. Burhop, or John Lovelace, concerning proposed §§ 1.56A-23(e) and (f) and 1.59-2(f) and (h), Jeremy Aron-Dine and William W. Burhop, each of the Office of Associate Chief Counsel (Corporate) at (202) 317-3181; concerning proposed § 1.56A-13, Diane Bloom at 202-317-6301, concerning proposed § 1.56A-14, Seth Groman at 202-317-5640, and concerning proposed § 1.59-2(e), Chris Dellana at 202-317-4726, each of the Office of Associate Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes); concerning proposed §§ 1.56A-5, 1.56A-10, and 1.56A-20, Yosef Koppel, Elizabeth Zanet, or Brian Barrett, each of the Office of Associate Chief Counsel (Passthroughs and Special Industries) at (202) 317-6850; concerning proposed § 1.56A-22, Ian Follansbee at (202) 317-6995, concerning proposed §§ 1.56A-24 and 1.56A-25, Vanessa Mekpong at (202) 317-6842, each of the Office of Associate Chief Counsel (Financial Institutions and Products); concerning submissions of comments or the public hearing, the Publications and Regulations Section, (202) 317-6901 (not toll-free numbers) or by email at <E T="03">publichearings@irs.gov</E> (preferred). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This document contains proposed additions and amendments to 26 CFR part 1 (Income Tax Regulations) addressing the application of the corporate alternative minimum tax (CAMT) imposed by section 55 of the Internal Revenue Code (Code), as amended by the enactment of section 10101 of Public Law 117-169, 136 Stat. 1818, 1818-1828 (August 16, 2022), commonly known as the Inflation Reduction Act of 2022 (IRA). The proposed additions and amendments are issued under section 56A, as added to the Code by the IRA, section 59 of the Code, as amended by the IRA, and section 1502 of the Code (proposed regulations), pursuant to the express delegations of authority provided under those sections. The express delegations relied upon are referenced in the parts of the Explanation of Provisions section of this preamble describing the individual sections of the proposed regulations. The proposed regulations are also issued under the express delegation of authority under section 7805 of the Code. <HD SOURCE="HD1">Background</HD> <HD SOURCE="HD2">I. Overview</HD> As amended by section 10101 of the IRA, section 55 imposes the CAMT based on the adjusted financial statement income, as determined under section 56A (AFSI), of an applicable corporation, as determined under section 59, for taxable years beginning after December 31, 2022. In general, under section 59(k), a corporation is an applicable corporation subject to the CAMT for a taxable year if it meets an average annual AFSI test for one or more taxable years that (i) are before that taxable year, and (ii) end after December 31, 2021. Section 55(a) provides that, for the taxable year of an applicable corporation, the amount of CAMT equals the excess (if any) of (i) the tentative minimum tax for the taxable year, over (ii) the sum of the regular tax, as defined in section 55(c), for the taxable year plus the tax imposed under section 59A (commonly referred to as the base erosion and anti-abuse tax, or BEAT). Section 55(b)(2)(A) provides that, in the case of an applicable corporation, the tentative minimum tax for the taxable year is the excess of (i) 15 percent of AFSI for the taxable year, over (ii) the CAMT foreign tax credit, as determined under section 59(l), for the taxable year. In the case of any corporation that is not an applicable corporation, section 55(b)(2)(B) provides that the tentative minimum tax for the taxable year is zero. <HD SOURCE="HD2">II. AFSI Under Section 56A</HD> <HD SOURCE="HD3">A. Adjusted Financial Statement Income; Applicable Financial Statement</HD> Section 56A(a) provides that, for purposes of sections 55 through 59 of the Code, the term “AFSI” means, with respect to any corporation for any taxable year, the net income or loss of the taxpayer set forth on the taxpayer's applicable financial statement (AFS) for that taxable year, adjusted as provided in section 56A. For purposes of section 56A, section 56A(b) provides that the term “AFS” means, with respect to any taxable year, an AFS, as defined in section 451(b)(3) of the Code or as specified by the Secretary in regulations or other guidance, that covers that taxable year. <HD SOURCE="HD3">B. Adjustments to AFSI</HD> Section 56A(c) provides general adjustments to be made to AFSI. Section 56A(c)(1) provides that appropriate adjustments are to be made to AFSI in any case in which an AFS covers a period other than the taxable year. Section 56A(c)(2) provides special rules for related entities. Section 56A(c)(2)(A) provides that, if the financial results of a taxpayer are reported on the AFS for a group of entities (financial statement group), rules similar to the rules of section 451(b)(5) apply. Section 451(b)(5) provides that, in such a situation, the consolidated financial statement of the financial statement group is treated as the AFS of the taxpayer. However, for purposes of section 451(b)(5), if the taxpayer's financial results are also reported on a separate financial statement that is of equal or higher priority to the consolidated financial statement, then the taxpayer's AFS is the separate financial statement. <E T="03">See</E> § 1.451-3(h)(1)(i). Section 1.451-3(h)(2) and (3) provide rules under section 451(b)(5) for determining the extent to which income reflected on the consolidated financial statement and the underlying source documents is allocable to the taxpayer for purposes of applying the rules under section 451(b). Section 56A(c)(2)(B) provides a general rule that, if the taxpayer is part of an affiliated group of corporations that join in filing (or that are required to join in filing) a consolidated return for Federal income tax purposes (tax consolidated group) for any taxable year, AFSI ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 1405k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━