Tax insight

IRS notice simplifies CAMT compliance and extends relief from estimated tax penalties

Insight
5 minute read
June 10, 2025

What happened?

The IRS on June 2 issued Notice 2025-27, providing significant interim guidance on the application of the corporate alternative minimum tax (CAMT). The Notice (1) introduces a new optional simplified method for determining whether an applicable corporation exists for purposes of CAMT, (2) modifies the computation of adjusted financial statement income (AFSI) under the new simplified method, and (3) extends relief from estimated federal income tax penalties with respect to CAMT liabilities.

Why is it relevant?

Notice 2025-27 provides welcome relief for many taxpayers by raising the thresholds of the AFSI tests and expanding the scope of AFSI adjustments that are used to determine whether a corporation satisfies the simplified method for determining whether it is an applicable corporation. This guidance could further limit the number of corporations required to perform the extensive computations required to comply with the CAMT regime. Likewise, the extension of the estimated tax penalty relief applicable to the CAMT liability provided by Notice 2025-27 reduces risks associated with taking positions in a complex area rife with uncertainty.

Action to consider

Issuance of Notice 2025-27 is particularly timely for corporations that are computing their 2025 estimated federal income tax payments for the second quarter. Corporations that have AFSI near the below described statutory thresholds and that may be subject to CAMT should assess their status under the new simplified method of Notice 2025-27. The new dollar thresholds introduced by Notice 2025-27 substantially reduce the CAMT compliance burden on companies that meet the new thresholds as these companies will not be required to file a Form 4626, Alternative Minimum Tax-Corporations. However, it remains important for companies to consider the effects of changes proposed in the “One, Big, Beautiful Bill,” such as the restoration of deductions under Sections 163(j) and 174 that inadvertently could trigger CAMT liabilities for certain taxpayers.