Corporate Alternative Minimum Tax (CAMT): Form 4626, AFSI, and OBBBA Practitioner Guide

The Corporate Alternative Minimum Tax (CAMT), enacted in the Inflation Reduction Act of 2022, imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of applicable corporations under IRC 55(b)(2)(A)(i). Now in its fourth year, CAMT compliance for 2026 requires practitioners to layer OBBBA provisions (qualified production property expensing, IRC 174A R&E changes), Notice 2026-7 AFSI guidance, Form 5471 Schedule H-1 requirements for CFC shareholders, and ongoing uncertainty around pending IRC 56A regulations.

This guide is written for enrolled agents, CPAs, and tax attorneys who advise C corporations on CAMT exposure, Form 4626 preparation, AFSI computation, and related compliance obligations. All statutory citations, regulatory references, and IRS guidance must be verified against the enacted OBBBA text, current IRC 55 and IRC 56A (and the proposed or final regulations thereunder), Notice 2023-7, Notice 2023-20, Notice 2026-7, current Form 4626 instructions, and current IRS.gov guidance before reliance in any specific client matter.

Section 1: Why CAMT Matters in 2026

The CAMT took effect for taxable years beginning after December 31, 2022, as part of the Inflation Reduction Act of 2022. The first three years of CAMT compliance (2023, 2024, and 2025) forced many large C corporations to determine whether they were applicable corporations, build AFSI computation workflows, and grapple with interim guidance from Notice 2023-7 and Notice 2023-20. In 2026, that compliance infrastructure faces a new layer of complexity: OBBBA provisions enacted July 4, 2025, and Notice 2026-7 (February 18, 2026).

2026 Is the Fourth Year of CAMT

For calendar-year taxpayers, the 2026 taxable year is the fourth year CAMT applies. Corporations that determined applicable corporation status in prior years must re-evaluate that status annually, because the applicable corporation determination uses average AFSI for the three preceding taxable years (ending with the preceding taxable year). As AFSI computations from 2023, 2024, and 2025 mature, some corporations may cross or exit the threshold under IRC 55(e)(4)(A). Confirm the current threshold at IRS.gov; do not assume it is unchanged.

LB&I Audit Priority for 2026

IRS Large Business & International (LB&I) has designated CAMT as an active audit priority for 2026. Incorrect or incomplete Form 4626 filings, including errors in the AFSI computation, inadequate depreciation adjustments, missing partnership AFSI data, and absent Form 5471 Schedule H-1 for CFC shareholders, are expected to generate examination activity. Practitioners should ensure Form 4626 is complete, accurate, and supported by a documented AFSI computation workpaper.

OBBBA Interactions Must Be Layered In

OBBBA (signed July 4, 2025) made several changes that interact with CAMT. The most significant for 2026 practitioners are: (a) IRC 168(n) qualified production property (QPP) immediate expensing and its AFSI reduction for CAMT purposes; (b) IRC 174A immediate R&E expensing and the Notice 2026-7 AFSI adjustment guidance; and (c) NCTI (formerly GILTI) and the international tax restructuring, which affects CFC AFSI computations and Form 5471 Schedule H-1. Every 2026 CAMT analysis must account for these OBBBA interactions. For the IRC 163(j) business interest and CAMT AFSI interaction (both affect capital-intensive businesses), see the IRC 163(j) Business Interest Limitation OBBBA Practitioner Guide.

Notice 2026-7 Applies to Tax Years Beginning After February 18, 2026

IRS Notice 2026-7 (February 18, 2026) issued additional AFSI adjustment guidance for R&E expenditures and intangible amortization. Practitioners must apply this notice when computing AFSI for tax years beginning after its issuance date. For fiscal-year taxpayers, the effective date must be analyzed against the specific taxable year's start date. Final regulations under IRC 56A are anticipated and will supersede or codify the notice guidance; monitor IRS.gov.

State Income Tax Treatment of CAMT

States do not uniformly conform to the federal CAMT. Some states that impose their own corporate income taxes may not recognize CAMT as a deductible federal tax for state purposes, or may compute state taxable income from a starting point that does not mirror AFSI. State conformity to OBBBA provisions interacting with CAMT (including QPP expensing and IRC 174A) also varies. For a state-by-state analysis of OBBBA conformity (including provisions that interact with CAMT), see the State OBBBA Conformity Practitioner Guide.

Section 2: What Is "Applicable Corporation" Status -- and Who Is NOT Subject to CAMT

Not every C corporation is an applicable corporation. The applicable corporation definition under IRC 55(e)(4) is the threshold gate for CAMT. A corporation that is not an applicable corporation is not subject to CAMT and does not file Form 4626. Practitioners should confirm applicable corporation status annually; it is not a once-determined permanent status.

The Applicable Corporation Threshold

Under IRC 55(e)(4)(A), a C corporation is an applicable corporation if its average annual AFSI for the three consecutive taxable years ending with the preceding taxable year exceeds the applicable threshold. Confirm the current threshold at IRS.gov; the brief provides no specific dollar figure because the applicable threshold under IRC 55(e)(4)(A) must be confirmed from current authoritative sources and practitioners should not assume it is unchanged from the amount applied in prior years.

The three-year lookback means that for the 2026 taxable year, the relevant lookback period is the average annual AFSI for 2023, 2024, and 2025 (for a calendar-year taxpayer). As corporations complete their 2025 AFSI computations, the 2026 applicable corporation determination becomes determinable.

Who Is NOT Subject to CAMT

• Pass-through entities (partnerships, S-corps, LLCs taxed as pass-throughs): CAMT does not apply at the entity level to pass-through entities. However, a C corporation that is a partner in a partnership must include the partnership's AFSI in the corporation's own AFSI (IRC 56A(c)(2)). The C corp partner, not the partnership, bears the CAMT obligation.
• C corporations below the AFSI threshold: C corporations whose average annual AFSI does not exceed the applicable threshold under IRC 55(e)(4)(A) are not applicable corporations and are not subject to CAMT. Confirm the current threshold at IRS.gov.
• Newly formed corporations: A corporation that does not have three full taxable years of AFSI history uses the available years (or a single-year average for the first year) to determine applicable corporation status. Hedge the specific rules for newly formed corporations to IRC 55(e)(4)(B) and current Form 4626 instructions.
• S corporations: S corporations are generally not C corporations and are not subject to CAMT at the entity level. Individual S-corp shareholders are not applicable corporations by reason of their S-corp ownership.

Private Companies Are NOT Exempt

The CAMT is not limited to publicly traded companies. A privately held C corporation that prepares audited GAAP financial statements (the applicable financial statement, or AFS) and whose average annual AFSI exceeds the applicable threshold is an applicable corporation subject to CAMT. Practitioners advising large private C corporations, including private equity portfolio companies with audited GAAP financials, should confirm applicable corporation status annually.

The AFS (Applicable Financial Statement)

AFSI starts from the applicable financial statement (AFS), which is generally the annual audited consolidated GAAP financial statements of the corporation. If the corporation has both consolidated and separate-company statements, specific rules under IRC 56A and the regulations thereunder determine which is the AFS. Hedge all AFS identification rules to IRC 56A and current IRS guidance; the selection of the correct AFS is a threshold step in the AFSI computation.

Section 3: Adjusted Financial Statement Income (AFSI) -- Core Computation Under IRC 56A

Starting Point: GAAP Net Income from the AFS

AFSI begins with the corporation's net income or loss shown on its applicable financial statement (AFS) for the taxable year (IRC 56A(a)). The AFS is generally the annual audited GAAP consolidated financial statements. A corporation reporting a GAAP net loss starts from a negative AFSI base (subject to the adjustments described below). Hedge the precise AFS identification rule (including which statement controls when a consolidated group files separately and together) to IRC 56A and the proposed or final regulations thereunder.

AFSI Is Not Taxable Income and Not EBITDA

Practitioners who conflate AFSI with any other tax or financial reporting concept will compute incorrect CAMT. AFSI is not taxable income (which starts from gross income and applies deductions under the IRC); it is not pretax income (which does not apply the IRC 56A adjustments); and it is not EBITDA (which adds back interest, taxes, depreciation, and amortization to net income without the IRC 56A statutory adjustment set). The starting point is GAAP net income, not any tax measure, but AFSI then applies tax-specific statutory adjustments to that GAAP starting point.

For capital-intensive businesses, the IRC 163(j) business interest limitation and the CAMT AFSI computation both affect the after-tax economics of leverage, though through different channels. For the IRC 163(j) EBITDA-based ATI analysis under OBBBA, see the IRC 163(j) Business Interest Limitation OBBBA Practitioner Guide.

Key AFSI Adjustments Under IRC 56A

IRC 56A requires a series of adjustments to convert GAAP net income to AFSI. The following describes the principal categories of adjustments; hedge all specific adjustment mechanics, phase-in rules, and cross-references to IRC 56A, the proposed or final regulations under IRC 56A, Notice 2023-7, Notice 2023-20, and Notice 2026-7. The regulations, when finalized, will govern over the notices.

Section 4: OBBBA Qualified Production Property (QPP) and CAMT

IRC 168(n): QPP Immediate Expensing

OBBBA enacted IRC 168(n), which provides 100% immediate expensing (full cost recovery in the year placed in service) for qualified production property (QPP). QPP is defined as depreciable tangible personal property used in domestic manufacturing, production, or refining. The QPP immediate expensing provision is one of the OBBBA provisions specifically designed to incentivize domestic manufacturing and industrial investment.

Hedge all specifics of the QPP definition, the IRC 168(n) eligibility requirements, and the mechanics of the 100% expensing election to the enacted OBBBA text and current IRS.gov guidance. Regulatory guidance under IRC 168(n) is expected; do not treat complex QPP fact patterns as settled until final regulations are issued.

The CAMT Problem QPP Would Create Without the OBBBA Fix

Without a corresponding AFSI adjustment, QPP immediate expensing under IRC 168(n) would create a book-to-tax difference that increases AFSI and CAMT exposure. The reason: a manufacturing company that expenses 100% of a QPP asset for regular tax purposes (IRC 168(n)) but amortizes it over its GAAP useful life would have a lower tax deduction in Year 1 for GAAP than for tax. Under the basic AFSI computation, GAAP net income (which reflects the lower book deduction) is the starting point. Without adjustment, AFSI would be higher than regular taxable income in Year 1, potentially triggering CAMT.

OBBBA's AFSI Fix for QPP: CAMT Burden Mitigation

OBBBA addressed this directly: for CAMT purposes, QPP that qualifies for IRC 168(n) immediate expensing can be treated as if the full cost recovery (100% expensing) applies in computing AFSI, reducing the AFSI base. In other words, the QPP CAMT AFSI adjustment allows the manufacturing company to bring its AFSI treatment of QPP into alignment with its tax treatment, eliminating or reducing the CAMT liability that would otherwise arise from the book-to-tax difference.

This is one of the most practically significant OBBBA-CAMT interaction points for manufacturing, energy, and industrial companies that invest heavily in depreciable tangible personal property in domestic production.

Regulatory Hedge: QPP CAMT AFSI Adjustment Is Pending Guidance

Hedge all specifics of the QPP CAMT AFSI adjustment to the enacted OBBBA text and IRS.gov. Regulatory guidance under IRC 56A addressing the QPP AFSI adjustment is expected. Do not treat the QPP CAMT AFSI adjustment as fully settled for complex fact patterns (such as partial QPP qualification, mid-year placements, or leased property used in manufacturing) until final regulations or authoritative IRS guidance is issued. This is a developing area of CAMT law.

Section 5: Notice 2026-7 AFSI Adjustments (February 18, 2026)

IRS Notice 2026-7, "Additional Interim Guidance Regarding the Application of the Corporate Alternative Minimum Tax," was released February 18, 2026 and published in IRS Internal Revenue Bulletin 2026-11. It is the fifth major interim CAMT guidance package since the Inflation Reduction Act enacted the 15% corporate AMT. Notice 2026-7 builds on and modifies Notice 2025-49, the most direct predecessor on the AFSI adjustment track. The proposed regulatory framework remains T.D. 10021 and the 2024 Proposed Regulations issued in September 2024.

Notice 2026-7 identifies five categories of book-tax timing differences that cause Adjusted Financial Statement Income (AFSI) to overstate the CAMT base relative to regular taxable income, and it provides specific adjustment mechanics for each. The five categories, the IRC authority for each, and the critical practitioner traps are described below.

(a) Eligible Repair Assets (Section 3 of Notice 2026-7)

Repair and maintenance costs on IRC Section 168 property are frequently deducted immediately for regular tax under IRC 162 and Treas. Reg. 1.263(a)-3, yet capitalized and depreciated for financial statement purposes. This timing difference increases AFSI relative to regular tax income without a corresponding economic advantage. Per Notice 2026-7 (IRS IRB 2026-11, February 18, 2026), the applicable corporation reduces AFSI by the tax repair deduction taken and disregards the corresponding book depreciation on those repair costs for the same period.

This category modifies the repair-cost rules previously addressed in Notice 2025-49. For taxable years beginning before February 18, 2026, taxpayers may apply either notice; for years beginning on or after that date, Notice 2026-7 governs.

(b) Section 197 Intangibles and Goodwill (Section 4 of Notice 2026-7)

"Eligible intangibles" are assets amortizable over 15 years under IRC 197(a) for regular tax but not amortized for book purposes until impairment or disposal, most commonly acquired goodwill. Per Notice 2026-7 (IRS IRB 2026-11, February 18, 2026), the applicable corporation reduces AFSI by the IRC 197 amortization actually taken for regular tax, disregards covered book intangible amortization, and makes a corresponding AFSI adjustment at disposition. Assets subject to the IRC 197(f)(9) anti-churning rules are excluded from the eligible intangibles definition. Applicable corporations must attach a statement titled "AFSI adjustment for eligible intangibles" disclosing the reasonable method used to determine the adjustment.

Applicability threshold trap (critical): The Section 197 and goodwill AFSI adjustments do not apply when computing the $1 billion average annual AFSI threshold under IRC 59(k)(1)(B) for applicable corporation status. Applicable corporation status is determined on unadjusted AFSI. Treasury has proposed separately modifying the applicability test regulation, but that modification is not yet final; verify current status at IRS.gov before advising clients.

(c) Domestic R&E Expenditure Amortization and the OBBBA Connection (Section 5 of Notice 2026-7)

The Tax Cuts and Jobs Act required capitalization and 5-year domestic amortization of research and experimentation (R&E) expenditures under IRC 174 for taxable years beginning after December 31, 2021. The One Big Beautiful Budget Act (OBBBA) reinstated immediate expensing for domestic research under new IRC 174A for taxable years beginning after December 31, 2024. GAAP continues to amortize R&E expenditures over their useful life (typically under ASC 730). This gap between full tax expensing under IRC 174A and multi-year book amortization causes AFSI to overstate the CAMT base relative to regular taxable income without adjustment.

Per Notice 2026-7 (IRS IRB 2026-11, February 18, 2026), the applicable corporation reduces AFSI by the IRC 174 amortization actually taken for regular tax on 2022 to 2024 vintage expenditures and disregards the corresponding book R&E amortization for those same amounts. Taxpayers with unamortized IRC 174 balances may elect to deduct those amounts in full in the first taxable year beginning after December 31, 2024, or ratably over two years, per OBBBA Section 70302(f)(2)(A). Confirm current IRS guidance on election mechanics and timing at IRS.gov before advising clients on the OBBBA election.

(d) Qualified Production Costs (Section 6 of Notice 2026-7)

Costs for qualified film, television, live theatrical, and sound recording productions may be deducted under IRC 181 for regular tax in the year paid or incurred, yet are capitalized and depreciated for financial statement purposes. Per Notice 2026-7 (IRS IRB 2026-11, February 18, 2026), the applicable corporation reduces AFSI by the qualified production deduction taken for regular tax and disregards the corresponding book depreciation on those capitalized production costs.

(e) Low-Cost Tangible Property: Materials and Supplies (Section 7 of Notice 2026-7)

Items costing $200 or less, per Treas. Reg. 1.162-3(c)(1)(iv) as applied in Notice 2026-7, are treated as deductible materials and supplies for regular tax purposes but are frequently capitalized and depreciated on the financial statements. Per Notice 2026-7 (IRS IRB 2026-11, February 18, 2026), the applicable corporation reduces AFSI by the deductible materials and supplies amounts and disregards the corresponding book depreciation on those items.

Key Rules, Traps, and Cross-Cutting Requirements

1. Applicability threshold is computed on unadjusted AFSI. The $1 billion average annual AFSI threshold under IRC 59(k)(1)(B) is not reduced by any of the five Notice 2026-7 AFSI adjustments. A corporation that uses these adjustments to reduce its Form 4626 CAMT base remains subject to CAMT if its unadjusted AFSI averaged $1 billion or more over the three-year test period. Do not apply Notice 2026-7 adjustments when running the applicability threshold calculation.

2. Consistency requirement is mandatory. Once a taxpayer adopts any AFSI adjustment under Notice 2026-7, it must apply that adjustment consistently for all subsequent taxable years until the relevant assets are disposed of or further guidance changes the rule. This is a mandatory requirement, not an annual election.

3. Reliance period. Taxpayers may rely on Notice 2026-7 for any taxable year beginning before the date final CAMT proposed regulations are issued. Treasury has stated it intends to issue new comprehensive proposed CAMT regulations by end of 2026; when those regulations are issued, they will supersede the reliance-period notices.

4. Transition rule for repair and intangible categories. For taxable years beginning before February 18, 2026, taxpayers may apply either Notice 2025-49 or Notice 2026-7 for the repair asset and Section 197 intangible categories. For taxable years beginning on or after February 18, 2026, Notice 2026-7 governs both categories.

Guidance Chain: See Also

Foundational: Notice 2023-7 (December 2022), Notice 2023-20 (March 2023), Rev. Proc. 2024-14 (January 2024), T.D. 10021 and the 2024 Proposed Regulations (September 2024). Intermediate: Notice 2025-27, Notice 2025-28, Notice 2025-46. Most direct predecessor on AFSI adjustments: Notice 2025-49 (September 30, 2025). Current: Notice 2026-7 (February 18, 2026, IRB 2026-11).

Section 6: Minimum Tax Credit (MTC) Under IRC 53

CAMT Generates an MTC Carryforward

When an applicable corporation pays CAMT in a taxable year (because CAMT exceeds regular tax for that year), the amount of CAMT paid in excess of the regular tax generates a minimum tax credit (MTC) under IRC 53. The MTC is carried forward indefinitely; it does not expire. There is no carryback of the MTC.

How the MTC Is Used in Future Years

In a future taxable year where regular tax (reduced by other allowable credits, but before the MTC) exceeds CAMT for that year, the corporation may apply MTC carryforward from prior years to reduce regular tax liability. The MTC offset is limited to the amount by which regular tax exceeds CAMT in the carryforward year; in other words, the MTC can reduce regular tax down to the tentative minimum tax (CAMT) level, but not below it.

This mechanism is what makes CAMT a timing difference rather than a permanent tax cost in most cases. When a corporation's AFSI (book income) exceeds its regular taxable income in a given year (CAMT applies), the corporation pays extra tax that year. In future years when taxable income exceeds AFSI (regular tax exceeds CAMT), the corporation recovers the extra tax paid through the MTC.

When the Timing Difference May Not Reverse

The MTC recovery depends on future years in which regular tax exceeds CAMT. For corporations with structurally loss-generating GAAP operations (where AFSI remains consistently high relative to regular taxable income, for example, due to permanent book-to-tax differences rather than timing differences), the MTC carryforward may go partially or fully unused. The MTC is a deferred tax asset for GAAP purposes and should be evaluated for recoverability under ASC 740, including potential valuation allowances if recovery is uncertain.

Cite IRC 53 for the MTC. Hedge all specifics of MTC computation (including the treatment of corporate preference items and the interaction with other credit limitations) to current Form 4626 instructions and IRS.gov.

Section 7: CAMT Foreign Tax Credit

The CAMT liability under IRC 55(b)(2)(A)(i) is reduced by a CAMT foreign tax credit. This credit is separate from and not the same as the regular foreign tax credit (FTC) computed under IRC 901 and IRC 904. A corporation with foreign operations that generates foreign income taxes must compute a separate CAMT FTC for purposes of reducing its CAMT liability.

What the CAMT FTC Is

The CAMT FTC is a proportionate share of the foreign income taxes paid or accrued that are attributable to foreign-source AFSI. Because AFSI is a book-based measure (GAAP net income with IRC 56A adjustments, not taxable income), the allocation of foreign income taxes to AFSI is a separate computation from the regular IRC 904 FTC limitation, which is based on taxable income from foreign sources.

The CAMT FTC Limit Is Separate from the Regular FTC Limit

The CAMT FTC is subject to its own limitation. A corporation cannot simply apply its regular IRC 904 FTC limitation to the CAMT computation. The CAMT FTC limit is computed on Form 4626 using the AFSI-based foreign income proportion, not the taxable income proportion used in Form 1118 for the regular FTC. Hedge all CAMT FTC computation mechanics to current Form 4626 instructions and IRS.gov; the CAMT FTC rules are still developing as final regulations under IRC 56A are pending.

Excess CAMT FTC

If the CAMT FTC available exceeds the CAMT FTC limitation in a given year, the treatment of any excess CAMT FTC (carryback or carryforward) should be confirmed against current Form 4626 instructions and IRS.gov. Hedge all excess CAMT FTC mechanics to the Form 4626 instructions and any applicable IRS guidance under IRC 56A.

Section 8: Form 5471 Schedule H-1 and Partnership AFSI Compliance

Form 5471 Schedule H-1 (December 2025 Revision)

In December 2025, the IRS revised Form 5471 to add Schedule H-1. Schedule H-1 requires U.S. corporate shareholders of controlled foreign corporations (CFCs) to report AFSI data for each CFC. This data is required so that the parent corporation can compute the CFC's AFSI contribution to the parent's overall AFSI for CAMT purposes, because the parent's AFSI must include CFC AFSI amounts.

Practitioners advising C corporations that own CFCs must ensure that Schedule H-1 is completed for each Form 5471 filed for a CFC. Failure to include Schedule H-1 may result in an incomplete Form 5471 and potential penalties. The information required on Schedule H-1 may require the corporation to obtain AFSI data from its foreign subsidiaries, including the CFC's GAAP net income (adjusted for IRC 56A items), which may require coordination with the CFC's local accounting and tax teams.

Hedge all Schedule H-1 requirements, applicable definitions, and completion mechanics to the current Form 5471 instructions at IRS.gov. For a broader discussion of Form 5471 and related foreign corporation reporting, see the FBAR/FATCA Form 114 and Form 8938 Foreign Information Reporting Practitioner Guide. Because CFC income flows through Form 5471 Schedule H-1 into the CAMT AFSI computation, corporate CFC owners must also track the OBBBA international regime; see the NCTI (formerly GILTI) and FDDEI (formerly FDII) OBBBA international tax guide.

Partnership AFSI: The Compliance Burden on C Corp Partners

Under IRC 56A(c)(2), a C corporation that is a partner in a partnership must include its distributive share of the partnership's AFSI items (not its distributive share of the partnership's taxable income) in computing its own AFSI. This means the corporation's AFSI is based on the partnership's book income (as adjusted under IRC 56A), not on the amounts reported on the Schedule K-1 (which reflects taxable income items).

This creates a two-sided compliance burden: the C corporation needs the partnership to provide AFSI data (the partnership's book income items and any applicable IRC 56A adjustments at the partnership level), and the partnership must be prepared to supply that data to its corporate partners. For large corporations with interests in multiple partnerships (including infrastructure partnerships, real estate partnerships, and private equity fund structures), aggregating the partnership AFSI data across all holdings is a significant compliance exercise.

The Partnership AFSI Difference from Schedule K-1 Income

A critical practitioner distinction: the partnership AFSI share that a C corporation includes in its AFSI is NOT the amounts on Schedule K-1 from the partnership. Schedule K-1 reflects the partner's distributive share of the partnership's taxable income items (ordinary income or loss, capital gains, Section 1231 gains, etc., computed under the IRC). AFSI uses the partnership's book income (GAAP net income, with IRC 56A adjustments), which may differ materially from taxable income. In years where the partnership has material book-to-tax differences (depreciation, deferred revenue, mark-to-market adjustments, etc.), the AFSI share can be substantially different from the K-1 income allocation. Hedge all partnership AFSI computation specifics to IRC 56A(c)(2) and current IRS guidance on partnership AFSI.

Infrastructure and Real Estate Partnership Exposure

C corporations that are partners in infrastructure or real estate partnerships face particularly significant CAMT exposure from the partnership AFSI rule, because these partnerships frequently have large book-to-tax differences (for example, partnerships that use GAAP straight-line depreciation while the partnership's assets are eligible for accelerated tax depreciation, creating AFSI that is higher than the K-1 income). Corporations with significant partnership interests in these sectors should model the partnership AFSI contribution to total AFSI as a core component of their annual CAMT computation.

Frequently Asked Questions: CAMT Corporate Alternative Minimum Tax

1. What is the Corporate Alternative Minimum Tax (CAMT)?

   The CAMT is a 15% minimum tax on the adjusted financial statement income (AFSI) of applicable corporations (certain large C corporations above the applicable AFSI threshold; confirm at IRS.gov). It was enacted in the Inflation Reduction Act of 2022 and is computed on Form 4626. The CAMT applies in addition to the regular corporate income tax; the corporation pays whichever is higher in a given year. Cite IRC 55(b)(2)(A)(i) for the 15% rate and IRC 56A for the AFSI definition.

2. Which corporations are subject to CAMT?

   Only "applicable corporations" under IRC 55(e)(4) are subject to CAMT. Generally, this means C corporations with average annual AFSI exceeding the applicable threshold under IRC 55(e)(4)(A) (confirm the current threshold at IRS.gov) for the prior three taxable years. Not all C corporations are applicable corporations. Pass-through entities (partnerships, S-corps) are not subject to CAMT at the entity level, though a C corporation that is a partner in a partnership must include the partnership's AFSI in its own AFSI computation under IRC 56A(c)(2).

3. What is adjusted financial statement income (AFSI)?

   AFSI is defined in IRC 56A as the corporation's net income or loss from its applicable financial statement (generally audited GAAP financials), with a series of statutory adjustments. Key adjustments include depreciation (tax vs. book), R&E expensing as modified by Notice 2026-7, partnership AFSI share under IRC 56A(c)(2), and CFC AFSI data reported on Form 5471 Schedule H-1 (December 2025 revision). AFSI is not taxable income and not EBITDA. Hedge all adjustment specifics to IRC 56A, the proposed or final regulations thereunder, Notice 2023-7, Notice 2023-20, and Notice 2026-7.

4. How does OBBBA affect CAMT?

   OBBBA enacted qualified production property (QPP) immediate expensing under IRC 168(n) and provided that QPP eligible for 100% expensing can also reduce AFSI for CAMT purposes, mitigating the CAMT burden for manufacturing companies. OBBBA also enacted IRC 174A for R&E expensing; Notice 2026-7 (February 18, 2026) provides AFSI adjustment guidance for R&E and intangibles in light of these changes. Hedge all OBBBA QPP CAMT specifics to the enacted OBBBA text and IRS.gov as regulatory guidance is expected. Do not treat the OBBBA QPP CAMT interaction as fully settled until final regulations are issued under IRC 56A.

5. What is the minimum tax credit (MTC) and does CAMT ever get recovered?

   Yes. CAMT paid in excess of regular tax generates a minimum tax credit (MTC) under IRC 53 that carries forward indefinitely (no expiration) to offset regular tax in future years when regular tax exceeds CAMT. In most cases, CAMT is a timing difference: book income exceeds taxable income in the CAMT year; in future years when taxable income is higher, the MTC reverses the overpayment. However, if regular tax never exceeds CAMT in any future year, the MTC may go unused. Cite IRC 53 and hedge all MTC computation specifics to current Form 4626 instructions and IRS.gov.

6. What is IRS Notice 2026-7 and why does it matter?

   IRS Notice 2026-7 (February 18, 2026) provides AFSI adjustment guidance for R&E expenditures (where IRC 174A immediate expensing differs from GAAP amortization) and intangible assets (including goodwill). Practitioners must apply Notice 2026-7 when computing AFSI for tax years beginning after its issuance date. Final regulations under IRC 56A are expected and will supersede or codify the notice guidance; monitor IRS.gov for updates. Do not rely on this guide or any secondary source as a substitute for reading Notice 2026-7 in full.

7. What is Form 5471 Schedule H-1 and who needs it?

   Form 5471 was revised in December 2025 to add Schedule H-1, which requires U.S. corporate shareholders of controlled foreign corporations (CFCs) to provide AFSI data for each CFC. This data is needed so the parent corporation can include the CFC's AFSI contribution in computing its own CAMT base. Practitioners advising C corporations with CFC ownership must ensure Schedule H-1 is completed for each Form 5471. Failure to include it may result in an incomplete Form 5471 and potential penalties. Hedge all Schedule H-1 requirements to current Form 5471 instructions and IRS.gov.

8. Is CAMT the same as the old corporate AMT repealed under TCJA?

   No. The CAMT enacted in the Inflation Reduction Act (2022) is different from the prior corporate AMT regime. The new CAMT is based on AFSI (GAAP net income with IRC 56A adjustments) rather than alternative minimum taxable income (AMTI), which was based on tax preferences and adjustments to taxable income. The new CAMT rate is 15% on AFSI (IRC 55(b)(2)(A)(i)), compared to the old 20% corporate AMT on AMTI. The MTC mechanism is similar in concept (CAMT paid generates a credit for future years when regular tax exceeds the minimum tax) but different in computation because the base (AFSI vs. AMTI) and rate (15% vs. 20%) differ.

Disclaimer and Limitations

This guide is published by Americas Tax for informational and educational purposes only. It does not constitute legal advice, tax advice, or a legal opinion on any specific fact pattern. The CAMT, AFSI computation under IRC 56A, Form 4626 filing requirements, Notice 2026-7 AFSI adjustments, OBBBA QPP and R&E provisions, and related guidance are subject to change as the IRS issues final regulations under IRC 56A, as Congress amends the applicable statutes, and as IRS.gov guidance evolves. All practitioners must independently verify every citation, statutory reference, regulatory reference, and IRS notice citation against current authoritative sources at IRS.gov before applying this information in any client engagement. Americas Tax makes no representation as to the accuracy, completeness, or current applicability of the information in this guide as of any date after its publication.

Related Practitioner Guides

The following guides cover OBBBA provisions and related tax rules that practitioners should consider alongside the CAMT analysis.

• Form 5471 and Form 5472 Foreign Corporation Reporting Guide -- Schedule H-1 was added to Form 5471 in December 2025 to collect AFSI data for CAMT computations; U.S. shareholders of foreign corporations that are also CAMT taxpayers must coordinate Form 5471 Schedule H-1 reporting with the CAMT base computation under IRC 55.
• IRC 174A Research and Experimental Expenditures Guide -- the IRC 174A immediate deduction for domestic R&E creates an AFSI adjustment under Notice 2026-7 that directly affects CAMT liability; practitioners advising on R&D must understand the CAMT interaction.
• IRC 41 Research and Development Tax Credit Guide -- the IRC 41 R&D credit reduces AFSI through the adjusted financial statement income computation; CAMT taxpayers claiming R&D credits need both guides.
• IRC 163(j) Business Interest Limitation Guide -- capital-intensive corporations subject to CAMT also commonly face IRC 163(j) business interest limitations; AFSI excludes certain interest items in ways that differ from regular tax ATI.
• IRC 48C and 45X Advanced Manufacturing Credit Guide -- large manufacturing companies eligible for IRC 48C and IRC 45X credits are the same taxpayers most likely to be CAMT taxpayers; general business credits interact with CAMT liability.
• Foreign Tax Credit Form 1116 and Form 1118 OBBBA Guide -- corporate CAMT filers must coordinate their CAMT computation with the foreign tax credit; AFSI adjustments and deemed-paid FTC calculations interact for multinational C corporations subject to both the 15% CAMT and the 90% NCTI basket FTC haircut.
• IRC 6662: Accuracy-Related Penalties and Reasonable Cause -- Practitioner Guide -- IRC 6662 penalty tiers, the IRC 6664(c) reasonable cause defense, Form 8275 disclosure, OBBBA penalty exposure, and transfer pricing valuation misstatement penalties.
• IRC 55 and Form 6251: Individual Alternative Minimum Tax Guide -- CAMT under IRC 55(b)(2) applies to applicable corporations while individual AMT under IRC 55(b)(1) applies to individuals including S-corp and partnership owners; practitioners advising closely held C corporations and their shareholders must evaluate CAMT at the entity level (Form 4626) and individual AMT at the shareholder level (Form 6251) simultaneously, particularly when OBBBA QPP bonus depreciation elections create divergent tax outcomes at the two levels.