Navigating the corporate alternative minimum tax after OBBBA: What corporations need to know

CAMT: A new chapter in corporate tax

Enacted in 2022 as part of the Inflation Reduction Act, CAMT imposes a 15% minimum tax on adjusted financial statement income (AFSI)—a measure based on financial statement income, with certain adjustments. This means that even if a company’s regular taxable liability is low, the company may still face a significant tax bill if it is subject to the CAMT (i.e., the company is an applicable corporation) and its AFSI remains high.

Prior to CAMT, deductions could result in substantial tax savings for a company. However, if those deductions do not also reduce AFSI, the company could unexpectedly cross into CAMT liability. While a credit for CAMT paid is available against regular tax liability, some companies could be perpetual CAMT taxpayers. Additionally, the use of CAMT credits is subject to various limitations (especially if the company has significant general business credits). This shift has had an impact on tax planning considerations, and companies may need to rethink or adapt their approach.

OBBBA: Flexibility and complexity

OBBBA provided certain expensing benefits and extended certain provisions of the Tax Cuts and Jobs Act (TCJA) that should result in cash-tax savings. However, these benefits may also result in complexity and potentially unintended consequences, inadvertently subjecting some to CAMT, thereby decreasing cash-tax savings. The main provisions of OBBBA that interact with CAMT include:

• Section 174 (R&E Expenditures): OBBBA allows corporations to choose between immediately expensing domestic research and experimental (R&E) costs or capitalizing and amortizing them over time. This flexibility is a change from the previous mandatory capitalization rules since R&E costs generally are immediately expensed for book purposes. Transition rules also permit deduction of unamortized balances from prior years over one or two years, which could create a significant book-tax difference and result in a CAMT liability. While a company could elect to capitalize R&E costs to mitigate this difference, this may not align with a company’s objectives.
• Section 163(j) (Interest Limitation): OBBBA changes the calculation of adjusted taxable income (ATI) by excluding depreciation and amortization. This allows companies to deduct more interest, which can reduce regular taxable income. However, there would not be a corresponding reduction in AFSI, which could make CAMT liability more likely.
• FDII: OBBBA also significantly impacts foreign-derived intangible income (FDII), which is renamed foreign-derived deduction-eligible income (FDDEI), and is subject to a 14% tax rate. OBBBA allocates R&E costs and interest deductions away from FDDEI to income that is subject to a 21% tax rate. This can result in a company’s effective tax rate for regular tax being reduced below 15%, which correspondingly can result in a CAMT liability.

These changes mean that tax teams should not only understand the new rules but also anticipate how different choices may affect both regular tax and CAMT over time. Tax teams may need to undertake modeling exercises to gain a better understanding of the impact of the changes made by the OBBBA.

Foreign tax credits: Navigating new boundaries

CAMT includes a foreign tax credit mechanism, allowing corporations to offset CAMT liability with eligible foreign income taxes. The rules are nuanced:

• US-level taxes: Income taxes paid by a US consolidated group are generally fully creditable against CAMT.
• CFC-level taxes: Taxes paid by controlled foreign corporations (CFCs) are subject to a limitation—only up to 15% of the CFC’s AFSI can be credited, with excess taxes carried forward for up to five years.

Understanding the distinction between US and CFC-level taxes is critical for managing CAMT exposure, especially for multinational corporations. Ongoing statutory interpretation and proposed regulations may further influence how these credits are applied.

Partnerships: Complexity and relief

For corporations that own interests in partnerships, the CAMT rules are especially complex. However, recent IRS guidance, Notice 2025-28, has provided new elections and methods for calculating AFSI from a partnership investment under CAMT. These options aim to reduce compliance burdens but provide additional considerations with respect to tax planning. Under the statute, there are two partnership adjustments. These are the distributive share adjustments and transactions between partners and the partnership. The Notice provides several different elections for partners and the partnership in determining the two partnership adjustments. Careful analysis is a requirement to understand the impact, both retroactively and prospectively, on adopting these elections.

Modeling these scenarios is essential, as the chosen election may have long-term impacts for both CAMT and regular tax liability.

Modeling and accounting: The path forward

As the rules have evolved, one lesson stands out: Robust modeling is essential. Tax teams may want to consider simulating various scenarios to understand how OBBBA provisions and CAMT interact. This is especially relevant for:

• FDDEI and other permanent differences: Favorable rules may push some corporations into perpetual CAMT liability.
• General business credits (GBCs): The ordering rules for using CAMT credits can limit their usability, sometimes requiring a valuation allowance.
• ASC 740 (Deferred Tax Assets): A corporation that expects to perpetually pay CAMT should analyze, in the period that includes the enactment date, whether to assess the realizability of its deferred tax assets on the basis of all available information or, alternatively, only assess the realizability of its deferred tax assets on the basis of the regular tax system.

Analyzing whether a corporation will be a perpetual CAMT taxpayer requires careful consideration and may have an impact on financial statement presentation and tax planning.

As the tax environment continues to evolve, staying informed and proactive is key. Recently released Notices 2025-46 and 2025-49 from the Treasury and the IRS represent significant steps in the ongoing evolution of the CAMT. Consult with your tax adviser, model your options, and monitor for additional guidance to navigate CAMT and OBBBA with confidence. The story of CAMT is still unfolding, and those who stay ahead of the curve may be positioned to manage risk and identify potential opportunities.

You can view on demand our recent CAMT webcast for more guidance: Corporate alternative minimum tax (CAMT): Key considerations of OBBBA

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