Corporate AMT Form 4626: A How-to Guide
The corporate alternative minimum tax (CAMT) is a tax mechanism designed to ensure that corporations pay at least a minimum amount of tax – their fair share, regardless of deductions or credits. In the Inflation Reduction Act of 2022, the CAMT was reinstated based on adjusted financial statement income (AFSI), which is a striking update from its predecessor that relied solely on taxable income. This monumentally changes the way corporations must approach compliance and develop their corporate tax planning strategies.
As of February 2025, significant changes to CAMT are possible if the Republican majority in Congress and President Trump chose to act.
For tax professionals tasked with calculating AFSI, the process can feel daunting due to its intricate adjustments and evolving guidelines. This guide simplifies the calculation process, demonstrating how you can compute CAMT-related amounts manually in Excel and highlighting how Bloomberg Tax Workpapers can improve efficiency, reduce errors, and simplify the entire workflow.
What is the corporate alternative minimum tax?
CAMT applies to large C corporations with an average annual AFSI exceeding $1 billion over the past three years or, for U.S. companies in foreign-parented multinational groups, at least $100 million, with the aggregated group meeting the $1 billion threshold. If applicable, a corporation must compare its CAMT liability to its regular tax liability and pay the higher of the two. Once an “applicable corporation,” the corporation remains responsible for CAMT unless it can prove five consecutive years of not meeting the $1 billion (or $100 million) threshold, or a change in ownership that causes it to fall below the threshold.
The CAMT compliance regime is far-reaching: it requires corporations, including those not otherwise liable for CAMT, to separately track CAMT basis for a number of items, provide extensive information to related entities, and reconsider future investments.
Bloomberg Tax Analyst Morgan Oliver breaks down the IRS and Treasury’s latest proposed rules for determining which corporations are subject to CAMT.
Is there a safe harbor for CAMT?
Yes, to assist corporations in determining their “applicable corporation” status, the IRS introduced a safe harbor provision that saves qualifying corporations from the requirement to complete and file the lengthy Form 4626.
Initially provided in IRS Notices and largely preserved in 2024 proposed regulations, the simplified method allows corporations to assess their status by applying modified rules. This method reduces the average annual AFSI thresholds, cutting the $1 billion threshold to $500 million and, for foreign-parented multinational groups, cutting the $100 million threshold to $50 million. The simplified method also disregards most of the financial statement adjustments, effectively making the applicable corporation//income test a much more straightforward workflow.
This approach aims to simplify the determination process for certain corporations, specifically those that will fall well under the Form 4626 threshold amounts before applying financial statement adjustments. However, these corporations still need to do the simplified method calculations, retain all substantiating records, and check the box on Form 1120, Schedule K, question 29c certifying that they meet the safe harbor.
It’s important to note that these thresholds and provisions are based on proposed regulations and may be subject to change.
[Download Bloomberg Tax’s exclusive Roadmap on Corporate Alternative Minimum Tax (CAMT) to help you understand the latest proposed rules from the IRS and Treasury.]
Understanding the CAMT formula
The CAMT liability formula involves calculating the amount by which an applicable corporation’s tentative minimum tax exceeds its regular tax plus any base erosion and anti-abuse tax (BEAT). an applicable corporation’s tentative minimum tax based on its AFSI and comparing it to its regular tax liability. Here’s the high-level breakdown of the calculation process:
- Determine AFSI: Adjust the corporation’s financial statement income to account for add-backs and deductions specified in §56A.
- Apply 15% rate: Calculate 15% of AFSI and subtract any CAMT foreign tax credit to determine the tentative minimum tax.
- Compare to regular tax: Compare the tentative minimum tax to the regular federal income tax liability (plus BEAT). To the extent tentative minimum tax is greater than regular tax, the excess is added to the corporation’s federal tax liability as the alternative minimum tax amount.
The challenges of CAMT calculations in Excel
While Excel offers flexibility and familiarity, there are inherent risks and inefficiencies. These include time-consuming manual data entry, potential human error, and difficulties in adapting to frequent regulatory changes. Additionally, creating and maintaining audit-ready documentation can be a challenge for small teams.
This is where Bloomberg Tax Workpapers comes into play.
Step-by-step process for filing IRS Form 4626, Alternative Minimum Tax – Corporations
1. Determine applicable corporation status (using Part I of Form 4626)
Start by determining if the corporation is subject to CAMT. For this, you will need the corporation’s average annual AFSI from the past three years. This must exceed $1 billion, or $100 million for U.S. corporations included in foreign-parented multinational groups that meet the $1 billion test.
- Gather the financial statement income for the past three fiscal years.
- Adjust each year’s income based on IRS guidelines for AFSI adjustments, such as the inclusion of tax-exempt income or the exclusion of certain deductions.
- Compute the three-year average to determine if the threshold is met.
2. Adjust financial statement income for CAMT liability
AFSI adjustments include mandatory add-backs of certain expenses and the exclusion of items like federal income tax deductions. You’ll need to read and apply IRS-provided adjustment guidance to reflect these changes in Excel. Note that this will not just be the same calculation as the previous step because some of the financial statement adjustments are disregarded when determining applicable corporation status, like the adjustment for financial statement net operating losses, which is part of the calculation only when determining CAMT liability.
- Create separate columns to account for required add-backs (e.g., tax-exempt income) and deductions.
- Aggregate these components to calculate total adjusted income.
Bloomberg Tax Workpapers offers a CAMT-specific template that preconfigures adjustments based on the latest IRS regulations. The template eliminates the need for extensive manual research and calculations. It also includes questions to help determine CAMT applicability and walk you through AFSI adjustments step-by-step.
3. Calculate tentative minimum tax
Once AFSI is determined, apply the 15% CAMT rate and subtract any available CAMT foreign tax credit amount to calculate the tentative minimum tax amount.
4. Compare to regular federal tax liability
Gather the regular federal income tax liability calculation from the corporation’s tax return. Compare the tentative minimum tax liability to the regular tax liability. To the extent tentative minimum tax is greater than regular tax, the excess is the amount of CAMT liability.
Why use the Bloomberg Tax Workpapers template for CAMT and Form 4626
Bloomberg Tax Workpapers is purpose-built to address complex tax calculations by leveraging automation and advanced tax-specific functions to streamline the entire process.
Here are the ways it can transform CAMT calculations for tax professionals:
Time savings
Manual calculations can eat up hours for even the most straightforward cases. By automating key inputs and ensuring real-time alignment with the latest tax law updates, Bloomberg Tax Workpapers reduces the time needed for AMT compliance.
Accuracy and compliance
With built-in formulas and logic reflecting the latest tax regulations, Workpapers ensures every calculation meets compliance standards and eliminates risk due to outdated or incorrect spreadsheets. Integration with Bloomberg Tax Research also ensures easy access to the latest guidance, keeping you compliant without additional effort, including an AI-powered feature that allows users to ask questions about the relevant rules and get easy-to-understand answers with linked citations.
User-friendly templates
Bloomberg Tax Workpapers replaces messy Excel files with clean, highly customizable templates that offer clarity and efficiency. Whether you’re onboarding a new team or rolling forward to a new tax year, seamless workflows keep everything running smoothly.
Reduced risk of human error
Integrated error-checking and change-tracking functions detect potential inconsistencies at every stage.
Collaboration and control
The cloud-based platform allows teams to work securely and collaboratively. Versioning features help track changes, and role-based access ensures the right people can review or approve workpapers as needed.
Bloomberg Tax Workpapers simplifies challenging tax calculations such as corporate AMT. These tax-specific, repeatable templates automatically update your calculations with the latest tax laws so you can trust that your calculations are always up to date.
Our innovative tax solutions can help improve your entire tax process by saving you time during compliance and provision, enabling high-level analysis and corporate tax planning, and reduce key-person dependencies.
Request a demo to see how Bloomberg Tax Workpapers will work for you.