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:
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.
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.
The CAMT applies to C corporations (not S corps or partnerships) with:
If a corporation meets the threshold in any year, it remains subject to CAMT in subsequent years, unless the IRS issues guidance stating otherwise.
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.
The IRS has released a draft Form 4626 for CAMT. This form will be used by corporations subject to CAMT to:
Expect further guidance, instructions, and reporting requirements as the IRS finalizes the form and clarifies rules.
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.