The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued a Notice of Proposed Rulemaking (NPRM) aimed at increasing tax fairness and addressing significant corporate tax avoidance by some of the largest and most profitable U.S. corporations. This move seeks to implement the Corporate Alternative Minimum Tax (CAMT), a key component of the Inflation Reduction Act.
The CAMT is designed to ensure that around 100 of the largest and most profitable companies pay a minimum tax rate of 15% on profits reported to shareholders, with certain adjustments. According to Treasury estimates, these corporations would otherwise have paid an average effective federal tax rate of 2.6%. Notably, 60% of CAMT payers would have paid an effective tax rate of less than 1%, including 25% that would have paid zero taxes.
"The proposed rules released by Treasury today are an important step toward realizing Congress’ efforts to address the most egregious U.S. corporate tax avoidance and ensure the largest and most profitable corporations in the country cannot pay little to no taxes," said U.S. Secretary of the Treasury Janet L. Yellen. "The Corporate Alternative Minimum Tax will also help level the playing field for small businesses while generating hundreds of billions of dollars in revenue."
Treasury's NPRM aims to generate an estimated $250 billion over the next decade (2025-2034), including $20 billion in 2025 alone. The CAMT applies only to large corporations averaging more than $1 billion in profit per year, not sales, ensuring that if these corporations already pay regular taxes equating or exceeding 15% of their adjusted profits, they will not incur additional taxes.
Crafting these rules has been one of Treasury's most significant projects in decades, with Congress delegating substantial authority to implement CAMT consistent with statutory direction and intent. The proposed rules generally do not create adjustments to the tax base beyond those directed by Congress but address specific cases where adjustments are necessary, such as for bankrupt or troubled companies.
Stakeholders are invited to comment on the proposed regulations by December 12, 2024, with a public hearing scheduled for January 16, 2025. Treasury and IRS will consider all comments received before finalizing any changes.
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