Last summer, Moore Doeren Mayhew shared information about the new 15% corporate alternative minimum tax (CAMT) that passed after a whirlwind final day in the United States Senate in August 2022.
Back then, our advisors discussed the adjusted financial statement income (AFSI) thresholds for multinational groups with U.S. source business income. If a foreign corporation’s U.S. business activity exceeds $100 million while the whole foreign group’s AFSI exceeds $1 billion, then the U.S. activity will be subject to the CAMT.
Executives and officers of multinational groups closely following the CAMT developments may worry about the complexity of applying general adjustments required by the new statute. Many have uncertainty of whether their businesses cross those thresholds in any given year. These same executives may also be worried about the additional cost of applying all these required adjustments.
To address these concerns, the Internal Revenue Service (IRS) recently released Notice 2023-7, which created a safe harbor for determining whether a corporation crossing those AFSI thresholds will be subject to the CAMT. The safe harbor “simplified method” allows taxpayers to ignore most of the general adjustments required when computing adjusted financial statement income, leaving only a few adjustment provisions in effect. But it’s a tradeoff. To get access to the simplified AFSI calculations, the triggering thresholds are significantly lowered.
The safe harbor does the following.
- The safe harbor replaces the $1 billion threshold for the foreign group with a $500 million threshold to help figure out the adjusted financial statement income.
- When running the calculation for the U.S. subsidiary or branch, the safe harbor replaces the $100 million threshold with $50 million.
Meaning, if your multinational group wants access to the simpler calculations, then it must accept the lower dollar-amount threshold. If your multinational group does not want to be subject to the CAMT at those thresholds, then it is stuck with the more complicated and onerous CAMT calculations.
Stay tuned! Moore Doeren Mayhew will continue to share developments as they are made. If you’re an executive or officer of a multinational business, contact our international tax advisors for help understanding your CAMT calculations.
Contacts:
Robert Hanson
