AICPA wants bigger safe harbor for CAMT

The American Institute of CPAs is asking the Treasury Department and the Internal Revenue Service to increase the safe harbor for companies to avoid determining whether the corporate alternative minimum tax would apply to them.

In a comment letter to the Treasury and the IRS on their proposed regulations, the AICPA asked them to increase the $500 million safe harbor for purposes of determining applicable corporation status. The AICPA also requested a simplified methodology that would be available to non-applicable corporations and/or applicable corporations with high effective federal tax rates. The Institute also suggested an irrevocable election to use pretax book income as adjusted applicable financial statement income for CAMT liability purposes.

The Inflation Reduction Act of 2022 created the CAMT, which imposes a 15% minimum tax on the adjusted financial statement income, or AFSI, of large corporations for tax years starting after Dec. 31, 2022. The CAMT generally applies to large corporations with average annual financial statement income exceeding $1 billion. However, the proposed regulations require far smaller companies to determine whether the tax applies to them, and the AICPA pointed out this could be burdensome to them. The IRS and the Treasury released the proposed regulations last September.

“The proposed regulations impose a massive compliance burden on all U.S. taxpayers that do not meet the $500 million AFSI safe harbor while only a small group, approximately 100 of those taxpayers, will pay the CAMT liability,” said Reema Patel, senior manager of AICPA tax advocacy and policy, in a statement Thursday. “The AICPA’s comment letter provides a non-exhaustive list of items in the proposed regulations with a high compliance burden for the taxpayers.”

The AICPA’s comments also discuss other aspects of the proposed regulations, including general concepts and methods and periods, international tax, passthrough, and mergers and acquisitions issues. The latest comments from the AICPA come after previously submitted letters to Congress in 2021 and 2022 asking for immediate guidance on the CAMT rules along with letters submitted to the Treasury and the IRS on interim guidance issued on CAMT in 2023 and 2024.