Corporate Alternative Minimum Tax (CAMT) — 15% Book Income Tax
The Corporate Alternative Minimum Tax (CAMT) is a 15% minimum tax on the "adjusted financial statement income" — sometimes called "book income" — of large corporations with average annual profits exceeding $1 billion. Enacted by the Inflation Reduction Act of 2022 and effective for tax years beginning after December 31, 2022, the CAMT was Congress's answer to a persistent problem: some of the most profitable companies in the United States were paying little or no federal income tax, even in years when their financial statements showed billions in profits. Unlike the regular corporate income tax, which applies to "taxable income" after deductions and credits, the CAMT starts with the number on a company's audited financial statements and works backward. Roughly 150 U.S. corporations are large enough to be subject to the CAMT, and the IRS has been issuing guidance on the complex mechanics ever since the law took effect.
Current Law (2026)
| Parameter | Value |
|---|---|
| Core statute | 26 U.S.C. §§ 55(b)(2), 56A |
| Enacted | Inflation Reduction Act of 2022 (IRA), P.L. 117-169 |
| Effective date | Tax years beginning after December 31, 2022 |
| Rate | 15% of adjusted financial statement income (AFSI) |
| Trigger threshold | Average annual AFSI > $1 billion over prior 3 tax years |
| Foreign-parented companies | Average annual AFSI from U.S. operations > $100 million; must be part of a foreign-parented group with avg AFSI > $1 billion |
| AMT credit | Companies that pay CAMT receive a minimum tax credit usable against regular corporate tax in future years |
| Affected corporations | ~150 of the largest U.S. companies |
Legal Authority
- 26 U.S.C. § 55(b)(2) — Tentative minimum tax for applicable corporations: 15% of adjusted financial statement income (as defined in § 56A) minus the corporate AMT foreign tax credit; for non-applicable corporations, tentative minimum tax is zero
- 26 U.S.C. § 56A — Adjusted financial statement income: defined as the net income or loss set forth on the corporation's "applicable financial statement" for the taxable year, with numerous adjustments specified in this section; the "applicable financial statement" means the entity's audited financial statement (as defined in § 451(b)(3))
- 26 U.S.C. § 59 — Other definitions and special rules: the AMT foreign tax credit (used to offset CAMT liability), minimum tax credit carryforward rules, and special rules for pass-through entities and REITs
What Is "Adjusted Financial Statement Income"?
The CAMT's novel feature is its starting point: a corporation's adjusted financial statement income (AFSI) under § 56A. This is the net income or loss shown on the corporation's applicable financial statement — typically its Form 10-K filed with the SEC, prepared under GAAP.
The statute and IRS regulations require numerous adjustments to the raw financial statement income figure:
Depreciation: Companies must use financial statement depreciation rather than the accelerated tax depreciation that often generates large deductions under the regular tax. This is one of the biggest drivers of the tax — companies that use 100% bonus depreciation or accelerated MACRS schedules for regular tax purposes cannot use those accelerated methods for CAMT purposes.
Research and development: Under the regular tax, companies must capitalize and amortize R&D costs over 5 or 15 years (under the TCJA 2017 change that took effect in 2022). For CAMT, the treatment follows the financial statement — if R&D is expensed on the books (as it typically is under GAAP), it can be expensed for CAMT purposes.
Tax credits and deductions: Most federal tax credits — production tax credits, clean energy credits, low-income housing credits, and others — can still reduce regular tax liability below what the CAMT would require. This creates a floor: a company's effective tax rate cannot go below 15% of its book income through use of deductions alone, but certain credits can reduce CAMT liability too.
Partnerships and consolidated groups: If a corporation holds an interest in a partnership, its share of the partnership's financial statement income flows through. Special rules govern consolidated groups — the CAMT generally applies to each entity in the consolidated group, not just the consolidated return.
Controlled foreign corporations (CFCs): A U.S. shareholder of a CFC must include its pro-rata share of the CFC's adjusted financial statement income in computing its own AFSI. This prevents multinational corporations from shifting CAMT income offshore.
Who Must Pay
A corporation is an "applicable corporation" subject to CAMT if its average annual AFSI exceeds $1 billion over the prior three tax years. For corporations that are part of a foreign-parented group (i.e., the ultimate parent is not a U.S. corporation), the threshold is $100 million of U.S.-source AFSI if the group as a whole has at least $1 billion in global AFSI.
The $1 billion threshold is designed to capture only the very largest corporations — primarily S&P 500 companies. Once a corporation becomes an "applicable corporation," it remains subject to CAMT going forward unless its AFSI drops below the threshold for a sustained period.
Corporations generally not subject to CAMT:
- Companies with less than $1 billion average annual book income
- S corporations
- REITs (subject to special rules)
- RICs (regulated investment companies / mutual funds)
- Most private companies, small businesses, and mid-size corporations
How the CAMT Interacts with the Regular Corporate Tax
The CAMT does not replace the regular corporate income tax — it operates as a floor. A corporation calculates both its regular corporate tax liability and its tentative minimum tax (15% of AFSI minus the AMT foreign tax credit). If the tentative minimum tax exceeds the regular tax, the CAMT applies — the company pays the difference as additional tax.
The minimum tax credit: When a company pays CAMT in one year, it receives a minimum tax credit (sometimes called the CAMT credit) that can be used to reduce regular corporate tax liability in future years when the regular tax exceeds the tentative minimum tax. The credit prevents permanent double-taxation — it acknowledges that the CAMT accelerated the taxation of income that will eventually be subject to regular tax anyway.
Interaction with other credits: General business credits, clean energy credits (such as the investment tax credit and production tax credit), and other non-refundable credits are subject to special rules when CAMT applies. Companies with large credit positions need to carefully model CAMT exposure.
Why CAMT Was Enacted
The political motivation for the CAMT was high-profile reporting showing that a number of Fortune 500 companies — including some paying zero or negative effective federal income tax rates in specific years — were using legitimate deductions, credits, and tax preferences to minimize regular tax liability while reporting billions in profits to shareholders. The "book income vs. taxable income" gap became a focal point in the debate over the Inflation Reduction Act.
Advocates argued that the CAMT would ensure large corporations pay a minimum level of tax reflecting their economic profits. Critics argued it would penalize companies that invested heavily in capital equipment (accelerated depreciation for regular tax purposes), R&D, and other activities Congress had specifically incentivized through the tax code. Business groups argued that a book-income tax would penalize good accounting rather than tax avoidance.
The CAMT applies to a narrow slice of companies — roughly 150 corporations — but those companies represent a significant portion of total U.S. corporate profits and assets. Initial IRS estimates projected the CAMT would raise approximately $35 billion in revenue over the first decade of enforcement.
IRS Guidance and Compliance
The IRS issued initial temporary regulations and notices starting in late 2022 and continued issuing guidance through 2023 and 2024. Key areas addressed:
- How to compute AFSI for consolidated groups
- Treatment of partnerships and CFCs
- Definition of the "applicable financial statement"
- Transition rules for the first years of applicability
- Application of the AMT foreign tax credit
The CAMT rules are complex enough that most affected corporations have engaged outside advisors to model their exposure and build compliance processes. Annual computation of AFSI requires reconciling tax and book accounting differences at a granular level.
How It Affects You
If you're an executive or investor in a large public company: CAMT targets the gap between book income and taxable income — specifically at companies that use accelerated depreciation, large tax credits, or other preferences to pay little regular tax despite strong GAAP earnings. Capital-intensive sectors (utilities, energy, manufacturing, transportation) and companies with significant clean energy investment tax credit positions are most exposed. The CAMT creates a 15% floor: if bonus depreciation and credits reduce your regular tax below 15% of book income, CAMT makes up the difference. Importantly, companies that pay CAMT receive a minimum tax credit — a credit carryforward they can apply against regular tax in future years when regular tax exceeds the CAMT. For most companies, this means CAMT is a timing issue rather than a permanent cost, though it affects cash taxes in the near term.
If you work in corporate tax at an affected company: AFSI computation requires reconciling GAAP net income with a long list of statutory adjustments — and coordinating between tax and financial reporting teams in ways most companies hadn't done before 2023. The three biggest complexity items: (1) depreciation — CAMT uses book depreciation rather than MACRS or bonus, potentially adding back hundreds of millions for asset-heavy companies; (2) partnership interests — your share of every significant partnership's financial statement income must be included, requiring financial data from GPs and fund managers who may not be expecting these requests; and (3) clean energy credits — the ITC and PTC interact with CAMT liability in complex ways, with some credits offsetting CAMT and others not. The IRS's September 2024 proposed regulations provide detailed rules, but final regulations haven't been issued as of 2026, creating ongoing uncertainty.
If you're a shareholder analyzing a large company's effective tax rate: A growing CAMT credit balance on the balance sheet signals sustained CAMT exposure — the company is consistently paying more than 15% of book income and accumulating credits against future regular tax. Watch the relationship between book income (from the income statement), taxable income (from the tax footnote), and cash taxes paid (from the cash flow statement). Companies that report strong GAAP earnings but low effective cash tax rates are exactly the CAMT targets Congress had in mind. The tax footnote's deferred tax and credit carryforward disclosures are the primary place to find this information.
If your company is approaching the $1 billion AFSI threshold: The CAMT uses a three-year average — so a company that crosses $1 billion in book income only in a single good year won't immediately become an "applicable corporation." But a sustained period above the threshold triggers CAMT status, and you'll need to model your exposure before that first applicable year. The most important planning question is the book-tax depreciation gap: if your company uses significant bonus depreciation for regular tax but straight-line or GAAP-accelerated depreciation for books, the AFSI add-backs could be large. Run the CAMT calculation proactively with outside tax counsel the year before you expect to cross the threshold — surprises in the year you first owe CAMT are costly and avoidable.
Pending Legislation
- S 796 (Sen. Thune, R-SD) — Book Minimum Tax Repeal Act: would repeal the CAMT entirely and replace it with a modified individual AMT framework. Status: Introduced.
- Republican-led proposals in the 119th Congress have generally sought to repeal or narrow the CAMT, while Democratic proposals have sought to broaden or strengthen it.
Recent Developments
- 2023: Treasury issued Notice 2023-7 (initial guidance), Notice 2023-20 (insurance companies), and Notice 2023-64 (additional interim guidance on the application of the CAMT) to help corporations comply in the first year of enforcement.
- 2024: IRS issued proposed CAMT regulations in September 2024, providing detailed rules on AFSI computation, partnership interests, consolidated groups, and CFCs.
- 2025-2026: Final regulations expected; companies continue applying proposed regulations pending finalization. The CAMT has generated roughly $8-12 billion in annual revenue from the approximately 150 corporations subject to it, broadly consistent with initial estimates.