What is the corporate alternative minimum tax?

The corporate alternative minimum tax (CAMT) is a 15% minimum tax on adjusted financial statement income (AFSI) that targets large corporations whose book income far exceeds their taxable income. Enacted under the Inflation Reduction Act of 2022, CAMT ensures these corporations pay at least 15% on their financial statement profits, regardless of the deductions, credits, or deferrals claimed on their regular tax return.

Since the 2023 tax year, CAMT has affected thousands of large US and foreign-parented corporations. Recent IRS guidance reveals broader implications than many finance leaders initially expected, including for private equity funds and partnership structures. The new regime requires new calculations, expanded reporting, and careful coordination between tax and accounting teams to support proper expense management across all financial processes.

What is the corporate alternative minimum tax?

CAMT prevents large corporations from paying little or no federal income tax by using book income as the tax base instead of taxable income. It compares a corporation's tentative minimum tax to its regular tax liability, and the corporation pays the greater of the two amounts.

• CAMT stands for: Corporate Alternative Minimum Tax
• Tax rate: 15% on adjusted financial statement income (AFSI)
• Enacted: Inflation Reduction Act of 2022
• Purpose: Ensure large profitable corporations pay a minimum level of federal income tax

Who is subject to the corporate AMT?

CAMT applies to C corporations that qualify as "applicable corporations" based on their average annual AFSI. It doesn't apply directly to S corporations or partnerships, though income from those entities may flow into a C corporation's AFSI calculation.

The CAMT threshold for applicable corporations

A corporation becomes an applicable corporation when its average annual AFSI crosses specific income thresholds:

• US corporation: $1 billion average AFSI over 3 years
• Foreign-owned US subsidiary: $100 million average AFSI over 3 years, if the overall group exceeds $1 billion

Once you cross the threshold, you remain subject to CAMT until you fall below it for 5 consecutive years or undergo a qualifying ownership change. The IRS may also deem certain non-corporate entities as corporations for CAMT purposes, which can bring entire fund structures into scope.

The 3-year average AFSI test

The IRS measures your average AFSI by looking at the 3 most recent tax years, including the current year. If your corporation hasn't existed for the full 3-year period, the IRS uses only the years available.

Aggregation rules apply if you're part of a larger group. Related entities under common control must combine their AFSI when testing against the threshold. This means a subsidiary that falls well below $1 billion on its own could still be subject to CAMT if its parent group exceeds the threshold in aggregate.

How to calculate adjusted financial statement income

Adjusted financial statement income (AFSI) is the tax base for CAMT. It starts with book income rather than taxable income, which is why CAMT can produce a higher tax liability than the regular corporate tax system for companies with large book-to-tax differences.

Starting with applicable financial statement income

Your AFSI calculation begins with net income from your applicable financial statement. The IRS follows a hierarchy: Audited financial statements prepared under GAAP come first, followed by IFRS statements, then other financial reporting filed with a federal agency.

You start with the net income figure on those statements before making any CAMT-specific adjustments. This is a key distinction from regular tax, where you start with taxable income and work from there.

Common book-to-tax adjustments for AFSI

Several adjustments convert your financial statement income into AFSI. These align book income with CAMT's tax policy goals:

• Depreciation adjustments: Modify book depreciation to align with tax depreciation methods allowed under CAMT
• Pension and deferred compensation: Adjust for timing differences between when you expense these items on your books versus when they're deductible for tax
• Covered transactions: Remove certain intercompany items and related-party adjustments
• Tax-exempt income: Exclude specific categories of income that aren't subject to CAMT

AFSI calculations also account for distributive share rules in partnerships. If you're a CAMT entity partner, you must use a bottoms-up approach to determine your share of AFSI from each partnership.

Depreciation and amortization adjustments

Depreciation is one of the largest sources of book-to-tax differences under CAMT. Your financial statements may use straight-line depreciation over an asset's useful life, while your tax return uses accelerated methods such as bonus depreciation or modified accelerated cost recovery system (MACRS).

Under CAMT, you generally adjust book depreciation to reflect tax depreciation methods. The proposed regulations provide election options that let you choose how to handle these adjustments, which can meaningfully affect your AFSI. Work with your tax advisor to evaluate which depreciation method produces the most favorable CAMT outcome for your asset mix.

How CAMT interacts with regular corporate tax liability

CAMT is an add-on tax, not a replacement. You calculate your tentative minimum tax (15% of AFSI, minus allowable credits), then compare it to your regular federal income tax liability, including any base erosion and anti-abuse tax (BEAT). You pay the greater of the 2 amounts.

Here's how the math works in practice:

1. Calculate your AFSI
2. Multiply AFSI by 15% to determine your tentative minimum tax
3. Subtract any allowable CAMT credits (foreign tax credits, clean energy credits)
4. Compare the result to your regular federal income tax liability (plus BEAT)
5. Pay the greater of the 2 amounts

For example, ABC Manufacturing, a US company, prepares its financials under generally accepted accounting principles (GAAP). Over the last 3 years, it reports an average AFSI of $1.05 billion. After adjusting for tax-exempt income and depreciation differences, its CAMT base remains the same. ABC calculates:

• AFSI: $1.05 billion
• Tentative minimum tax: $157.5 million (15%)
• Foreign tax credit available: $5 million
• Regular federal income tax: $140 million

Since $157.5 million minus $5 million equals $152.5 million, and this exceeds the regular tax of $140 million, ABC owes $152.5 million in total. CAMT increases its tax bill by $12.5 million.

The alternative minimum tax credit

If you pay CAMT in 1 year, you're not necessarily out that money forever. When your regular tax liability exceeds your tentative minimum tax in a future year, you can claim an alternative minimum tax credit against that excess. This credit carries forward and helps offset your regular tax in later periods, effectively treating the CAMT overpayment as a prepayment of future taxes.

What is the CAMT safe harbor?

The CAMT safe harbor is a simplified method that lets you avoid detailed CAMT calculations when your regular tax already approximates what you'd owe under CAMT. It provides relief for corporations that are unlikely to owe additional tax under the minimum tax rules.

Safe harbor qualification requirements

The IRS introduced safe harbor thresholds in Notice 2023-64 and confirmed them in proposed regulations. To qualify, your average financial statement income must fall below these simplified thresholds:

• US corporation: $500 million average FSI
• Foreign-owned US subsidiary: $50 million average FSI

You must retain supporting documentation and indicate safe harbor status on Schedule K, Line 29c of Form 1120.

How to calculate the corporate AMT safe harbor

If you qualify under the simplified method, you avoid the full AFSI computation when determining CAMT applicability. You still perform a streamlined calculation, but the burden is significantly lighter than a complete CAMT analysis.

Using the safe harbor makes sense when your financial statement income falls well below the full CAMT thresholds and your regular tax liability is close to or exceeds what a 15% AFSI calculation would produce. If your situation is more complex—say, you have large book-to-tax differences or significant credit usage—running the full CAMT calculation may be worth the effort to confirm your actual liability.

Tax credits that can reduce CAMT liability

Certain tax credits directly offset your CAMT obligation, reducing the tentative minimum tax before it's compared to your regular tax liability. Understanding which credits apply can meaningfully lower your CAMT exposure.

General business credits

General business credits can apply against CAMT, but with limitations. Not all credits that reduce your regular tax liability carry over to the CAMT calculation. The IRS restricts which general business credits offset the tentative minimum tax, so you'll need to review each credit's eligibility under the CAMT rules separately.

Credits related to research and development, low-income housing, and certain employment incentives may partially offset CAMT, but the specific limitations depend on the credit type and your overall tax position.

Foreign tax credits under CAMT

Foreign tax credits (FTCs) receive specific treatment under CAMT. You can use a CAMT foreign tax credit to reduce your tentative minimum tax, but the calculation follows different rules than the regular FTC.

Under CAMT, the foreign tax credit is based on taxes paid or accrued on income included in AFSI, not taxable income. Carryforward rules also differ from the regular FTC framework. If you operate across multiple jurisdictions, mapping your foreign taxes to the correct CAMT buckets requires careful coordination between your international tax and financial reporting teams.

Clean energy and IRA tax credits

The Inflation Reduction Act created both CAMT and a suite of clean energy tax credits, and the two interact in important ways. Clean energy credits—including production tax credits and investment tax credits for renewable energy projects—can offset CAMT liability.

These credits also come with transferability options. You can sell or transfer certain IRA credits to other taxpayers, and purchased credits affect your AFSI calculation. If you're evaluating clean energy investments, factor in the CAMT benefit alongside the regular tax benefit to get the full picture of the credit's value.

How CAMT differs from the old corporate AMT

If you remember the pre-2018 corporate AMT, CAMT may feel familiar, but the 2 systems work very differently. The old corporate AMT, repealed by the Tax Cuts and Jobs Act (TCJA) in 2017, used adjusted taxable income as its base and applied a 20% rate to a much broader set of corporations.

CAMT flips the approach entirely. Instead of starting with taxable income and making adjustments, it starts with book income from your financial statements. It also applies a lower rate (15%) but targets only the largest corporations.

This distinction matters because corporations that managed AMT exposure under the old system may need entirely different strategies for CAMT. Book income and taxable income can diverge significantly, especially for companies with large depreciation deductions, deferred revenue, or stock-based compensation.

CAMT reporting requirements and IRS compliance

Corporations subject to CAMT must meet specific filing obligations and stay current with evolving IRS guidance.

IRS Form 4626 for corporate AMT

Form 4626 is used to calculate and report CAMT liability. You must include it with your annual federal tax return if CAMT applies.

• Part I: Determine whether you're an applicable corporation
• Part II: Adjust financial statement income (AFSI) using IRS rules
• Part III: Calculate tentative minimum tax by applying the 15% rate and subtracting credits
• Part IV: Compare CAMT to regular tax liability and report the larger amount

Corporations subject to CAMT must also make quarterly estimated tax payments based on CAMT liability and maintain audit-ready records supporting their AFSI calculations.

Recent CAMT regs and Treasury guidance

CAMT's regulatory landscape continues to evolve. Key guidance issued so far includes:

• IRS Notice 2023-64 (safe harbor rules): Introduced the simplified method for determining CAMT applicability, with reduced AFSI thresholds and streamlined calculations for taxpayers unlikely to meet full filing requirements
• Proposed regulations (September 2024): Expanded on CAMT applicability, AFSI adjustments, partnership reporting, and deferred gain treatment. These rules clarify compliance obligations for large corporations, private equity funds, and multi-tier partnerships, while leaving room for public comment.
• Technical corrections (December 2024): Treasury and the IRS issued technical corrections to the September 2024 proposed regulations
• IRS Notice 2025-27 (June 2025): Provides an optional interim simplified method for determining whether a taxpayer is an "applicable corporation" by lowering the $1 billion and $100 million AFSI thresholds to $800 million and $80 million, respectively
• IRS Notice 2025-28 (July 2025): Announced that the IRS intends to partially withdraw and revise the 2024 proposed regulations, and provided rules simplifying the application of CAMT rules to partnerships
• IRS Notice 2025-46 (September 2025): Provides guidance on domestic corporate transactions, troubled companies, tax consolidated groups, and financial statement net operating losses (FSNOLs). The intent is to reduce compliance burdens by more closely following regular tax principles.
• IRS Notice 2025-49 (September 2025): Completely overhauled the applicability dates and reliance rules from the 2024 proposed regulations. Treasury and the IRS now anticipate that no section of the CAMT proposed regulations will be applicable for any taxable year before forthcoming revised proposed regulations are published.
• IRS Notice 2026-7 (February 2026): Described by practitioners as arguably the most taxpayer-favorable piece of guidance so far. It responds directly to comments identifying situations where adherence to book income without corresponding adjustments creates improper CAMT liabilities or severe compliance burdens.

Future tax reforms or adjustments by Congress could reshape the policy. Subscribe to IRS updates or consult your tax advisor regularly for more information and to stay ahead of changes.

CAMT and private equity: A closer look

Private equity firms face unique challenges under CAMT, particularly when managing tiered partnerships and complex ownership arrangements.

CAMT introduces specific complications for private equity sponsors and funds with flow-through structures:

• Contributions and distributions: The IRS treats property transfers to and from partnerships as deferred sale transactions. CAMT entities must recognize gain or loss over the asset's recovery period based on its CAMT basis, even when no traditional tax event occurs.
• Tiered ownership: In multi-entity structures, each partnership in the chain must compute and report AFSI for each upstream CAMT entity partner. This increases complexity for sponsor groups with many affiliated entities.
• Scoping rules: The IRS may deem non-corporate entities as corporations for CAMT purposes if they own at least 50% of a foreign corporation and consolidate it under applicable financial accounting rules. This could bring entire fund structures into CAMT scope.

If you're a finance leader at a private equity firm, assess whether any part of your structure meets these definitions. Accurate consolidation and reporting across tiered entities are now essential.

How finance teams can prepare for CAMT compliance

Proactive preparation is the best way to manage CAMT exposure and avoid surprises at filing time. Here are 5 steps to get started:

1. Calculate your 3-year average AFSI to determine if you're approaching the threshold. Analyze AFSI trends from your GAAP or IFRS statements and apply IRS aggregation rules if you're part of a larger group.
2. Review your financial statement adjustments to understand potential AFSI modifications. Map your largest book-to-tax differences—depreciation, deferred compensation, intercompany transactions—and quantify their impact on AFSI.
3. Evaluate available tax credits that can offset CAMT liability. Identify which general business credits, foreign tax credits, and clean energy credits apply under CAMT rules, and model their effect on your tentative minimum tax.
4. Assess safe harbor eligibility to simplify compliance. If your financial statement income falls below the simplified thresholds, gather the documentation needed to claim safe harbor status on your return.
5. Automate financial tracking to maintain accurate records for CAMT calculation. Tools like Ramp help finance teams track expenses and maintain clean financial data, which supports accurate AFSI calculations and reduces manual effort during reconciliation and close.

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