IRS Sets Out Modifications to CAMT Proposed Rules in Interim Guidance

The IRS on September 30 released two notices announcing plans to partially withdraw proposed regulations on the corporate alternative minimum tax (CAMT) that were issued last year and issue revised proposed regulations. The notices include interim guidance that taxpayers may rely on pending publication of new proposed regulations. 

Notice 2025-46 sets forth interim CAMT guidance regarding domestic corporate transactions, troubled companies, tax consolidated groups, and financial statement net operating losses (FSNOLs) with an aim to reduce compliance burdens and associated costs.

Notice 2025-49 includes interim guidance on the application of the CAMT with respect to certain adjustments to determine adjusted financial statement income (AFSI), proposed applicability dates, and reliance on interim CAMT guidance (including the CAMT proposed regulations).

CAMT Background and Previous IRS Guidance

The Inflation Reduction Act of 2022 (IRA) amended Section 55 to create a CAMT for tax years ending after December 31, 2022. The CAMT applies only to “applicable corporations” and generally exacts a tax equal to 15% of an applicable corporation’s AFSI. In general, a corporation’s AFSI is the net income shown on its applicable financial statement (AFS), after taking into account various adjustments set out in Section 56A. 

On September 13, 2024, the IRS published lengthy proposed regulations (and, in December 2024, technical corrections thereto) addressing the application of the CAMT (collectively, the “2024 Proposed Regulations). In June 2025, the IRS released further guidance (Notice 2025-27) providing taxpayers an interim optional simplified method for determining whether a corporation is an applicable corporation and, therefore, subject to the CAMT.  In August 2025, the IRS announced in Notice 2025-28 that it intends partially withdraw and revise proposed regulations on the application of the CAMT to partnerships and CAMT entity partners; pending publication of the revised rules, the notice provides interim guidance.

Notice 2025-46

Pending the release of forthcoming revised proposed regulations, Notice 2025-46 describes interim guidance on the CAMT with respect to domestic corporate transactions, troubled companies, tax consolidated groups, and FSNOLs. 

Domestic Corporate Transactions

The guidance on domestic corporate transactions addresses how a CAMT entity determines: (1) the amount of its AFSI resulting from its ownership of stock of a domestic corporation that is not a member of the same tax consolidated group as the CAMT entity, and (2) the AFSI and CAMT basis consequences of certain transactions involving domestic corporations. In the 2024 Proposed Regulations, Treasury and the IRS created a complicated set of rules regarding domestic corporate transactions that require taxpayers to follow financial accounting principles in certain circumstances and regular tax principles in other circumstances. In an effort to reduce compliance burdens and costs, Notice 2025-46 imports regular tax principles with CAMT inputs in order to determine the AFSI consequences resulting from domestic corporate transactions. Specifically, Notice 2025-46 adheres to regular tax principles (with CAMT inputs) with respect to (i) stock ownership in domestic corporations that are not part of the CAMT entity’s tax consolidated group, (ii) tax-free (or partially tax-free) corporate asset transactions, (iii) deemed asset transactions (i.e., stock transactions treated as asset sales as a result of elections under Sections 338 or 336(e)), and (iv) transactions that involve purchase and pushdown accounting.

Troubled Companies

The IRS intends the interim guidance with respect to troubled companies to provide relief, clarify the circumstances in which regular tax rules (as opposed to financial accounting standards) apply in determining the CAMT consequences for a troubled company, and more closely align the CAMT rules with the rules that apply for regular tax purposes. Although the 2024 Proposed Regulations generally follow regular tax bankruptcy and insolvency rules regarding the exclusion of discharge of indebtedness income (with a corresponding attribute reduction), Notice 2025-46 further aligns the CAMT with regular tax principles as it applies to troubled companies by: (i) providing that regular tax principles for debt capitalizations and debt-for-equity exchanges apply for purposes of the CAMT; and (ii) clarifying the definition of insolvency, the attribute reductions rules, how CAMT entity partners take into account a partnership’s discharge of indebtedness income, and the impacts of “fresh start” accounting for entities emerging from bankruptcy.  

Tax Consolidated Groups

The 2024 Proposed Regulations only adopted limited aspects of the consolidated return regulations. With the goal of reducing compliance burdens and costs, Notice 2025-46 provides that the forthcoming proposed regulations are anticipated to generally authorize the application of the consolidated return regulations in determining a tax consolidated group’s AFSI, using CAMT inputs (e.g., AFSI instead of taxable income, CAMT basis instead of adjusted basis, and FSNOLs instead of net operating losses). Certain consolidated return provisions, however, are not anticipated to apply (i.e., the separate return limitation year rules, the consolidated return regulations addressing the application of Section 382, and any other rule inapplicable under Section 56A [e.g., the rules for capital gain and loss]). 

FSNOLs

To further reduce compliance burdens, the interim guidance revises the rules for determining the amount of FSNOLs available to reduce AFSI. The 2024 Proposed Regulations limited the use of FSNOLs acquired in certain transactions. The revised proposed regulations would remove these limitation rules.

Notice 2025-49

The planned changes to the proposed regulations described in Notice 2025-49 address applicability dates and reliance rules, as well as various adjustments to AFSI that were requested by taxpayers in response to the 2024 Proposed Regulations.

Applicability Dates and Reliance Rules

The interim guidance addresses certain complexities and ambiguities resulting from the applicable dates and reliance rules set forth in the 2024 Proposed Regulations. Under the 2024 Proposed Regulations, certain rules applied to tax years ending after September 13, 2024, while other rules applied prospectively to tax years ending after final regulations are published. Notice 2025-49 clarifies that no section of the proposed or final regulations will apply to any tax year beginning before the date the final regulations are published. 

Notice 2025-49 also sets forth reliance rules. In particular, taxpayers may rely on: 

(i)    the 2024 Proposed Regulations for tax years ending before the publication of final regulations (in whole or in part, subject to consistency requirements applicable to certain related provisions); 

(ii)    the 2024 Proposed Regulations as modified by any subsequent published guidance (e.g., the interim guidance published by the IRS in Notice 2025-27, Notice 2025-38, Notice 2025-46, and Notice 2025-49) for tax years beginning before the forthcoming proposed regulations are published; or 

(iii)    the interim guidance published by the IRS in Notice 2025-27, Notice 2025-38, Notice 2025-46, and Notice 2025-49 for tax years beginning before the forthcoming proposed regulations are published without being required to follow any section (or part thereof) of the 2024 Proposed Regulations (except to the extent incorporated into the interim guidance). 

For taxpayers that file a Form 4626, Notice 2025-49 requires a statement to be attached that describes the approach taken in completing such form and the guidance relied upon for such tax year.

Additional Adjustment to AFSI

The interim guidance set forth in Notice 2025-49 also adds several new adjustments to AFSI. These additions are meant to mitigate potentially harsh AFSI consequences that result from the application of financial accounting principles to years prior to the effective date for CAMT and to certain unique situations. These AFSI adjustments relate to expenses capitalized to regulatory assets under ASC 980, items that are annually measured at fair value solely for financial statement purposes, CAMT entities subject to the tonnage tax regime, depreciation deductions that are embedded in net operating losses from tax years prior to the creation of FSNOLs, nonlife insurance company net operating loss carrybacks, and goodwill amortization from transactions that pre-date the release of legislative text to enact the CAMT. The guidance also intends to modify the 2024 Proposed Regulations with respect to changes in accounting principles and AFS restatements by allowing for a simplified method to calculate the AFSI adjustment.