IRS includes several AICPA recommendations in corporate AMT interim guidance

Interim guidance issued Tuesday by the IRS on the Sec. 55 corporate alternative minimum tax (AMT) contains several changes for which the AICPA advocated.

One such change in Notice 2025-28 is the inclusion of a top-down elective safe harbor that will allow corporate AMT entity partners to use a simplified method for allocating their distributive share of a partnership’s adjusted financial statement income (AFSI).

Overall, the notice informs taxpayers of the intention of Treasury and the IRS to partially withdraw proposed regulations (REG-112129-23) and issue revised proposed regulations regarding the application of the corporate AMT to applicable corporations with financial statement income attributable to investments in partnerships.

The notice also provides interim guidance primarily on simplified methods to determine an applicable corporation’s AFSI with respect to an investment in a partnership, reporting by partnerships of information needed to compute ASFI, and rules for partnership contributions and distributions.

The IRS stated in the notice that the interim guidance is being provided to reduce the compliance burdens and costs associated with applying the corporate AMT.

The corporate AMT, which was included in the Inflation Reduction Act of 2022, P.L. 117-169, originally imposed a 15% minimum tax based on book income rather than taxable income on corporations with AFSI of over $1 billion beginning after Dec. 31, 2022. Treasury estimated that about 100 of the largest U.S. corporations would pay the corporate AMT annually.

AICPA recommendations

In addition to the top-down elective safe harbor, the notice includes several other AICPA recommendations, said Reema Patel, the AICPA’s senior manager–Tax Policy & Advocacy, including:

• Allowing for simplified methods and reducing reporting for immaterial partnership interests when the top-down election is made, which the AICPA said would reduce unnecessary complexity.
• Introducing additional methods, such as the “modified-20 method,” to compute the AFSI inclusion from contributions to, and distributions from, a partnership. The AICPA said Treasury and the IRS should not mandate one approach but rather provide taxpayers some flexibility. This method allows taxpayers to use current partnership tax rules instead of the proposed corporate AMT deferred gain rules under Prop. Regs. Sec. 1.56A-20.

AICPA advocacy

The AICPA submitted comments to Congress on corporate AMT guidance on Oct. 28, 2021, and June 21, 2022, and to the IRS on Oct. 14, 2022, March 27, 2023, Dec. 14, 2023, and Jan. 14, 2025.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.