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In Notice 2024-66, the IRS has waived the penalty under IRC Section 6655 for a corporation's failure to pay estimated tax installments attributable to its alternative minimum tax (CAMT) liability under IRC Section 55 for any tax year that begins after December 31, 2023, and before January 1, 2025.

At the same time, the IRS released the long-awaited CAMT proposed regulations (REG-112129-23), which propose rules regarding the application of the 15% CAMT on the adjusted financial statement income of large corporations. A detailed Tax Alert on the proposed regulations is forthcoming.

Under the waiver, a corporation's required installments of estimated tax do not have to include amounts attributable to its CAMT liability to prevent the imposition of an addition to tax. Failure to timely pay a CAMT liability when due, however, may result in other penalties being imposed.

The IRS has waived the penalty before. In June 2023, the IRS waived the penalty for all installments for the 2023 tax year (see Tax Alert 2023-1038). In April 2024, the IRS waived the penalty for the installment due on April 15, 2024, for a tax year beginning in 2024 (and May 15, 2024, for a fiscal-year taxpayer with a tax year beginning in February 2024) (see Tax Alert 2024-0802). In June 2024, the IRS waived the penalty for the installment due on or before August 15, 2024, for a tax year beginning in 2024 (see Tax Alert 2024-1179).

The IRS gives the same reason as it did for the previous waivers, citing the challenges of determining whether a corporation is subject to CAMT, i.e., an "Applicable Corporation" under IRC Section 59(k) and the amount of a corporation's CAMT liability under IRC Section 55.

The IRS also will modify the instructions to Form 2220, Underpayment of Estimated Tax by Corporations, to clarify it will not impose the addition to tax based on a corporation's failure to make estimated tax payments of its CAMT liability for the relevant period.

Implications

Notice 2024-66 is helpful to corporations that expected to make (or made) estimated tax payments for their remaining 2024 installments, and struggled with the complexities and ambiguities of determining whether they are an Applicable Corporation and their CAMT liability. Corporations that may have excluded amounts attributable to CAMT from their calculation of the required estimated payment or made significant judgements in areas for which guidance was pending will not be penalized for doing so. Now that the proposed regulations have been issued, and penalty relief has been extended to the remaining installments for 2024 tax years, corporations should shift their focus to analyzing the proposed regulations and evaluating their impact on the CAMT liability due at extension.

Although corporations will not be penalized under IRC Section 6655 (failure by corporation to pay estimated income tax) for failing to make estimated payments attributable to CAMT, other additions to tax could apply if a corporation fails to timely pay its CAMT liability when due. For example, penalties could apply under IRC Section 6651 (failure to file tax return or to pay tax) if the CAMT liability is not paid by the due date (excluding extensions) of the corporation's return. Additionally, taxpayers should also comply with the latest instructions to IRS Form 2220 to avoid a penalty under IRC Section 6655.