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The IRS on 12 September released eagerly anticipated, voluminous proposed regulations (REG-112129-23) on the application of the 15% corporate alternative minimum tax (CAMT) on the adjusted financial statement income (AFSI) of large corporations. Treasury also issued Notice 2024-66, which provides penalty relief for corporations that fail to pay estimated taxes with respect to CAMT liabilities for tax years that begin after 31 December 2023 and before 1 January 2025 (Covered CAMT Year).

The 600+ page proposed regulations contain comprehensive rules for determining AFSI, whether a corporation is an applicable corporation, including rules for foreign-parented multinational groups, and the CAMT foreign tax credit. The proposed regulations generally incorporate interim guidance issued by Treasury and the IRS in notices over the past two years. The proposed regulations also differ from the prior guidance in some notable respects, however. For example, the proposed regulations would make permanent the safe harbor for determining applicable corporation status and take a different approach regarding the treatment of financial statement income reported with respect to contributions of property to partnerships and distributions of property by partnerships.

Additionally, the proposed regulations provide guidance on items not previously addressed in prior interim guidance, including:

• A CAMT entity's distributive share of AFSI with respect to a partnership investment, including in a tiered partnership structure
• The AFSI adjustments for a financial statement period differing from the tax year
• The treatment of mark-to-market gains and losses in certain hedging transactions
• The determination of AFSI resulting from certain corporate transactions
• The application of the CAMT to affiliated corporations filing a consolidated income tax return
• The application of regular tax rules to certain items resulting from ownership of foreign corporation stock, regardless of whether the foreign corporation is a controlled foreign corporation
• An anti-abuse rule for CAMT avoidance transactions

Certain sections of the proposed regulations would apply to tax years ending after the date the proposed regulations are published in the Federal Register. Other sections of the proposed regulations are proposed to apply to tax years ending after the date the final regulations are published in the Federal Register. Taxpayers may choose to rely on the proposed regulations for tax years ending before these dates, provided certain requirements are met.

In accompanying Notice 2024-66, Treasury and the IRS establish a waiver for the addition to tax under IRC Section 6655 with respect to a corporation's CAMT liability for any Covered CAMT Year. Under the waiver, a corporation's required installments of estimated tax need not include amounts attributable to its CAMT liability to prevent the imposition of an addition to tax. However, failure to timely pay a CAMT liability when due may result in other penalties being imposed. A Tax Alert is pending.

According to tax press reports, Treasury and IRS officials are evaluating how to narrow the scope of future anti-partnership basis-shifting guidance, in response to comments on Notice 2024-54 and proposed regulations (REG 124593-23) issued on 17 June 2024. An IRS official said the IRS's intent in the proposed regulations "was not to cover transactions that do not have abuse potential and get flooded with disclosures of those transactions that make it harder for us to find the transactions that do." In regard to the reporting requirements, the official said the IRS is aware of some of the basis-shifting transactions, but not all, and those rules are aimed at helping to identify "additional situations of inappropriate basis-shifting transactions."

The government would also like to hear ideas in regard to transition rules or other filing relief to be included in future partnership basis-shifting transaction regulations.

A government official this week provided an international regulatory update. According to the official, the IRS is expected initially to release previously taxed earnings and profits (PTEP) and IRC Section 987 foreign currency regulations. The government official also noted that the IRS is actively working on cloud computing regulations that will follow up on proposed rules released in August 2019. The final cloud computing package will address characterization as well as include a notice of proposed ruling making on sourcing — to be released concurrently, the IRS official said.

Taxpayers may have to wait longer for IRC Section 245A dividend received deduction guidance, however, which is expected to be released after the above-described guidance.

The OECD on 11 September released a standardized template for tax administrations to use in issuing international compliance assurance program (ICAP) outcome letters to multinationals at the end of a tax risk assessment. The ICAP handbook is available here.

An OECD official this week was quoted as saying the organization is working with country delegates on guidance that will address incentives governments are offering that could undermine the intent of the BEPS Pillar Two global minimum tax rules. According to the official, the guidance reportedly will focus on "related benefits," which he said are benefits jurisdictions are providing to companies that are in-scope of the global anti-base erosion (GloBE) rules.