Tax insight

IRS provides interim CAMT relief for repairs, Section 197 intangibles, and domestic R&E costs

Insight
5 minute read
February 19, 2026

What happened?

The IRS on February 18 issued Notice 2026-7, which modifies certain interim guidance previously released on the corporate alternative minimum tax (CAMT) (especially portions of Notice 2025-49 and Notice 2025-46) and adds several new adjusted financial statement income (AFSI) adjustments and clarifications.

Why is it relevant?

The notice provides new and expanded AFSI adjustment mechanics in areas where book/tax timing and capitalization commonly differ, including repairs on Section 168 property, amortizable Section 197 intangibles, pre-One Big Beautiful Bill Act (OBBBA) domestic research or experimental (R&E) amortization, Section 181 production costs, and low-cost tangible property treated as materials and supplies.

The notice also updates CAMT rules for certain cross-border transactions (including a rebuttable presumption in the covered asset transaction anti-abuse rule and Section 367(d) coordination) and clarifies aspects of the financially troubled company guidance in Notice 2025-46. The notice indicates that forthcoming proposed regulations are expected to include rules similar to the interim rules.

Actions to consider

Taxpayers should consider whether to adopt the new AFSI adjustments (that generally come with consistency and return statement requirements) and update CAMT models accordingly. Taxpayers also should consider whether to use the Notice 2026-7 transition option for either the repairs AFSI adjustment or the AFSI adjustment for eligible intangibles, which allows application of the original Notice 2025-49 rules for tax years beginning before February 18, 2026, and the modified Notice 2026-7 rules for tax years beginning on or after February 18, 2026.

PwC will provide a separate, detailed insight on Notice 2026-7 in the coming days.