In a letter submitted to the Department of Treasury and the Internal Revenue Service, the American Institute of CPAs recommended improvements to the Corporate Alternative Minimum Tax (CAMT) guidance for financially troubled companies, specifically Notices 2025-46 and 2026-07. These notices address the application of the CAMT to domestic corporate transactions, troubled companies and tax consolidated groups.
The letter’s specific recommendations include:
I. Treatment of cancellation of debt income (CODI)
- Refine the order of the CAMT CODI attribute reduction rule.
- Refine the liability floor limitation.
- Refine the catch-all CAMT basis reduction rule.
- Clarify the coordination between the CAMT attribute reduction with subsequent adjusted financial statement remeasurements.
- Provide a true-up mechanism to address applicable financial statement (AFS) and Tax CODI timing differences.
II. Insolvency Exclusion
- Refine and clarify the insolvency exclusion rules.
III. Bankruptcy Exclusion
- Align the “debtor” rule with section 108(d)(2).
- Clarify eligibility for the bankruptcy exclusion.
- Exclude from adjusted financial statement income (AFSI) one-time AFS deconsolidation effects.
IV. Emergence from Bankruptcy
- Clarify the AFSI consequences resulting from fresh start accounting.
- Treat emergence from bankruptcy as a qualifying ownership change.
“The AICPA’s recommendations are intended to promote consistency in CAMT guidance for financially troubled companies, reduce the compliance burden, improve administrability and provide greater certainty for taxpayers and tax practitioners,” said Ning Yim, senior manager, AICPA Tax Policy & Advocacy. “As Treasury and the IRS continue to provide CAMT guidance, these recommendations would help ensure the rules are workable in practice and provide greater certainty for financially troubled companies and the tax professionals who advise them.”
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