Simplified method to determine corporate AMT applicable status issued

The IRS has issued interim guidance regarding the application of the Sec. 55 corporate alternative minimum tax (AMT). The guidance in Notice 2025-27 provides an optional simplified method for determining applicable corporation status under Sec. 59(k).  

The corporate AMT was added by the Inflation Reduction Act of 2022, P.L. 117-169. 

The interim simplified method to determine applicable corporate status applies thresholds of $800 million for the general adjusted financial statement income (AFSI) test and $80 million for the second prong of the foreign-parented multinational group AFSI test and calculates AFSI by using the AFSI adjustments described in Prop. Regs. Sec. 1.56A-12 as well as other AFSI adjustments. According to the IRS, the purpose of the interim simplified method is “to reduce compliance burdens and costs for certain corporations.” 

Also, because of uncertainty caused by corporate AMT proposed regulations and in the interest of sound tax administration, the IRS said in the notice that it will waive the addition to tax for an applicable corporation’s underpayment of estimated tax under Sec. 6655 with respect to a corporation’s alternative minimum tax liability under Sec. 55 for tax years beginning after Dec. 31, 2024, and before Jan. 1, 2026. 

In September, the IRS issued proposed regulations (REG-112129-23) addressing the application of the corporate AMT. Before that, the IRS had issued Notice 2023-7, Notice 2023-20, Notice 2023-64, and Notice 2024-10 to provide interim guidance on the corporate AMT’s application. The proposed regulations issued in September included rules incorporating and expanding on the interim guidance. 

The corporate AMT originally imposed a 15% minimum tax based on book income rather than taxable income on corporations with AFSI of over $1 billion beginning after Dec. 31, 2022. Treasury estimated that about 100 of the largest U.S. corporations would pay the corporate AMT annually. 

Before the IRS issues final corporate AMT regulations, it will issue a notice of proposed rulemaking that revises the proposed regulations described in Section 2.02(2) of this notice to include a method for determining applicable corporation status similar to the interim simplified method as well as other revisions. 

Source: Journal of Accountancy