Corporate Alternative Minimum Tax (CAMT): What Large C Corporations Need to Know

The Inflation Reduction Act of 2022 introduced a new tax regime for large C corporations: the Corporate Alternative Minimum Tax (CAMT). This tax, effective for tax years beginning after December 31, 2022, was designed to ensure that large corporations with substantial financial income—but low or no taxable income—pay a minimum level of tax.

If your company reports significant book income, even if it pays little regular income tax, this new rule may apply to you.

In this post, we’ll break down:

• What the CAMT is

• Who it applies to

• How it’s calculated

• Planning considerations and compliance requirements

  
  

What Is the Corporate Alternative Minimum Tax (CAMT)?

The CAMT is a 15% minimum tax imposed on the adjusted financial statement income (AFSI) of certain large C corporations.

It’s essentially a book income tax—instead of using taxable income, it starts with income reported on financial statements (like GAAP earnings), and makes specific adjustments to arrive at the AFSI.

Why Was It Introduced?

Congress enacted the CAMT to target large corporations that report billions in book income to shareholders while paying little or no federal income tax, often due to aggressive use of deductions, credits, and loss carryforwards.

Who Is Subject to the CAMT?

The CAMT applies to C corporations (not S corps or partnerships) with:

1. Average Annual AFSI > $1 Billion

• Calculated over a three-tax-year period.

• Includes domestic and foreign income on consolidated financial statements.

• Applies to both U.S. corporations and foreign-parented U.S. subsidiaries in certain cases.

2. Foreign-Owned Corporations

• A U.S. corporation with a foreign parent may be subject to CAMT if:

  • The global group has $1 billion or more in AFSI, and

  • The U.S. subsidiary has at least $100 million in AFSI.

If a corporation meets the threshold in any year, it remains subject to CAMT in subsequent years, unless the IRS issues guidance stating otherwise.

How Is CAMT Calculated?

Step 1: Determine Adjusted Financial Statement Income (AFSI)

• Start with book income from the applicable financial statement (e.g., GAAP income).

• Make adjustments for items such as:

  • Tax depreciation vs. book depreciation

  • Dividends received

  • Certain income/losses from partnerships and CFCs

  • Tax credits, NOLs, and carryforwards (with limitations)

Step 2: Apply the 15% CAMT Rate

• Multiply AFSI by 15% to determine tentative minimum tax.

Step 3: Compare to Regular Tax Liability

• If CAMT exceeds regular corporate income tax, the corporation pays the excess as CAMT.

  
  

Interaction with Minimum Tax Credit (MTC)

If a corporation pays CAMT in one year but does not owe it in a future year, the excess CAMT paid becomes a Minimum Tax Credit (MTC) that can be used to reduce regular tax liability in future years.

Form 4626 – New Filing Requirement

The IRS has released a draft Form 4626 for CAMT. This form will be used by corporations subject to CAMT to:

• Calculate adjusted financial statement income

• Reconcile CAMT with regular tax

• Report CAMT liability and applicable credits

Expect further guidance, instructions, and reporting requirements as the IRS finalizes the form and clarifies rules.

Planning Considerations for CAMT

1. Analyze AFSI Early

• Large corporations should review consolidated financial statements across entities to determine if they exceed the $1 billion threshold.

2. Model Book vs. Tax Income Regularly

• Build models that compare financial statement income and taxable income side-by-side.

• Track adjustments that affect AFSI vs. regular tax liability.

3. Understand CAMT’s Impact on M&A and Restructuring

• CAMT rules can affect the valuation of tax assets, like NOLs and credits, and may impact deal pricing or timing.

4. Coordinate With Financial Reporting Teams

• Since AFSI is based on audited financials, tax and finance teams need to collaborate closely to ensure accurate CAMT calculations.

  
  

Final Thoughts

The Corporate Alternative Minimum Tax introduces a fundamental shift in how large C corporations approach tax planning. By taxing book income, the IRS has broadened its scope beyond the traditional tax base, targeting corporations with strong financial performance but low tax liability.

If your corporation has significant book income, even if taxable income is low, it’s time to evaluate whether CAMT applies—and if so, prepare for its impact on cash flow, compliance, and reporting.