Corporate Alternative Minimum Tax (CAMT) Interim Guidance under IRS Notice 2025-28.
- Indhira Demorizi
- Aug 23
- 5 min read
Updated: Aug 25
On June 2, 2025, Treasury issued Notice 2025-27 providing interim guidance on the application of the Corporate Alternative Minium Tax (“CAMT”) and introducing an interim simplified method.
On July 29, 2025, Treasury issued Notice 2025-28 providing interim guidance and some relief for corporations subject to CAMT with partnership investments, addressing complexity and administrative burden in the proposed regulations.
The changes are designed to make compliance with CAMT rules more manageable and less burdensome for corporations that are unlikely to be subject to the tax.
This insight will cover Notice 2025-28. For highlights on Notice 2025-27, please refer to our separate insight.
Background on CAMT
CAMT, also known as the ‘book minimum tax’ was enacted as part of the Inflation Reduction Act of 2022 to ensure that large and highly profitable companies pay a baseline amount of U.S. tax, regardless of their regular U.S. tax liability. In effect, under the statute, CAMT:
Imposes a 15% minimum tax on an applicable corporation’s adjusted financial statement income (AFSI), generally based on net income reported in financial statements with certain adjustments.
Applies to a corporation that is a member of a foreign-parented multinational group. It does not apply exclusively to U.S. corporations. Foreign corporations are subject to CAMT only on income that is effectively connected with a U.S. trade or business.
Establishes AFSI thresholds (tests) to determine what is an applicable corporation for this purpose. While there are various nuances to how the thresholds are defined and there are other factors to consider, at its core:
For a corporation that is not a member of a foreign-parented multinational group (other than S corporations, RICs, or REITs), an applicable corporation is defined as one with average annual AFSI exceeding $1 billion over a three-year period.
For a corporation that is a member of a foreign-parented multinational group, there is a two-part test.
CAMT can apply to U.S. subsidiaries or branches of foreign-parented multinational groups if the group’s combined average annual AFSI (1) exceeds $1 billion and (2) the corporation’s average annual AFSI is at least $100 million over a three-year period.
Since enactment of this provision, Treasury and the IRS have issued proposed regulations and technical corrections, while also providing for a simplified method – including a safe harbor on adjusted AFSI thresholds -- yet numerous public comments were submitted in response which Treasury and the IRS continue to consider and study.
The table below shows the AFSI thresholds as provided under the statute, the proposed regulations, and Notice 2025-27.
Notice 2025-28 - Key Highlights
The interim guidance provides relief and simplification for partnerships and their corporate partners subject to the CAMT. The key highlights:
Introduction of two new calculation options for corporate partners: the "top-down" election (using 80% of financial statement income) and the "taxable-income" election (for certain smaller investments, using regular taxable income instead of CAMT calculations).
Partnerships are permitted to use any “reasonable method” to allocate modified financial statement income among corporate partners, provided the method is applied consistently and disclosed on the partnership’s return.
Certain reporting deadlines are relaxed, giving more time for partnerships and partners to exchange necessary information.
Introduction of new simplified methods of determining AFSI from contributions to and distributions from partnerships that better align with the tax-free treatment of such transactions in computing regular tax.
The interim guidance under the notice is effective immediately and remains in effect until new proposed regulations are published. Taxpayers may rely on the interim guidance or continue using prior methods, provided they apply their chosen method consistently.
The elections and relief provisions are generally prospective, with no requirement for retroactive application, and transition relief is provided for those changing methods.
The IRS announced it will revise proposed regulations to align with the guidance in Notice 2025-28, partially withdrawing the 2024 proposed regulations.
Business Analysis
Potential Benefits
The potential benefits of the simplified (reasonable allocation) method and the new calculation options introduced in IRS Notice 2025-28 include:
Reduced compliance costs and administrative complexity, as the use of financial statement data or regular taxable income for CAMT calculations eliminates the need for detailed and burdensome adjustments.
Greater flexibility in allocating partnership income among corporate partners, since partnerships can use any reasonable method that is applied consistently and disclosed, allowing allocations to be tailored to the partnership’s specific facts and circumstances.
Streamlined reporting and calculation for smaller or less complex partnership investments due to the new elections and simplified rules for contributions and distributions.
Alignment with existing financial reporting practices, reducing the need for additional calculations and reconciliations.
Additional time for compliance due to relaxed reporting deadlines, reducing the risk of penalties and errors.
Potential Limitations
The potential limitations or risks of using the simplified (reasonable allocation) method and new calculation options may include:
Uncertainty about what constitutes a "reasonable method" which increases the risk of IRS challenge or later disallowance if the chosen method is not ultimately accepted by the IRS or future regulations.
Requirement to consistently use the chosen method until new regulations are issued, potentially locking partnerships into a method that may become suboptimal or inconsistent with future guidance.
Risk of over- or under-allocation due to the lack of detailed guidance or safe harbors, which could lead to IRS scrutiny, adjustments, or penalties.
Increased disclosure and reporting burdens, for both the corporate partners and the partnership as partnerships must disclose their chosen allocation method and ensure consistent application, which can be complex for partnerships with multiple corporate partners.
Eligibility restrictions for the taxable-income election, limiting its use to smaller investors (corporate partners owning no more than 20% and with investments of $200 million or less).
Potential for inconsistent treatment among similar partnerships or partners if different reasonable methods are adopted, which could distort comparability and create planning uncertainty.
Risk that future IRS regulations may require retroactive changes, increasing compliance costs and uncertainty if partnerships need to revise prior filings or methods.
How We Can Help
While the notice provides interim relief and welcome news to taxpayers, assessing and applying the guidance—particularly as it relates to elections—will likely still require complex calculations. Corporate taxpayers involved in partnership joint ventures, especially those engaged in M&A transactions, should carefully evaluate these rules.
We help management navigate the complexities of CAMT by discussing, reviewing, and evaluating CAMT calculations and the applicability of interim guidance based on the company’s specific circumstances. We also assess your current strategy and recommend next steps.
For more information, contact us.
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Disclaimer
The contents of this insight are intended for general information only. illumina CPA Group, Inc. is not, by means of this communication, rendering professional advice or services. Before making any decisions or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
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