IRS Releases Interim Simplified Method for Determining CAMT Applicable Corporation Status, Plus New Estimated Tax Relief

The IRS has issued Notice 2025-27, which provides important interim guidance on two major issues affecting corporate taxpayers in 2025, the Corporate Alternative Minimum Tax (CAMT) and a temporary waiver of estimated tax penalties under section 6655.

This guidance is designed to reduce compliance burdens while Treasury finishes the full CAMT regulations, and it offers practical tools corporations can rely on immediately.

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1. A New Interim Simplified Method for Determining CAMT Applicable Corporation Status

Under the Inflation Reduction Act, corporations must determine whether they are an "applicable corporation" subject to CAMT by evaluating their Adjusted Financial Statement Income (AFSI). The statutory framework is complex, especially for consolidated groups and multinational structures, so Treasury is offering an optional simplified pathway.

Higher thresholds to reduce compliance burdens

The interim simplified method increases the thresholds used to determine CAMT applicability:

• General AFSI threshold

  Raised from $1 billion to $800 million

• Foreign parented multinational group (FPMG) test threshold

  Raised from $100 million to $80 million

These expanded thresholds give relief to mid-market corporations that would otherwise face a heavy compliance burden calculating AFSI under the full rules.

Streamlined AFSI calculation

Under the simplified method, AFSI is calculated using only a subset of adjustments:

• Adjustments for federal and foreign income taxes

• Adjustments for direct pay and transferable clean energy credits

• Adjustments for unrelated business income for §511 organizations

• Certain effectively connected income adjustments for FPMG testing

• Consolidation entries from the financial statements, except those eliminating transactions between entities not treated as a single employer

These rules allow corporations to leverage their existing financial statements more directly when testing CAMT applicability.

AFS year flexibility

If a corporation's AFS year differs from its tax year, it may compute its three year average AFSI using the AFS year instead of the tax year. This flexibility avoids complicated recomputations and aligns the test with real world financial reporting.

If a corporation exceeds the simplified thresholds

Exceeding the simplified method thresholds does not automatically make a corporation CAMT liable. It simply means the corporation must apply the full statutory AFSI rules or the CAMT proposed regulations to determine its true status.

When the simplified method can be used

Corporations may rely on this interim method for any tax year ending on or before the date Treasury issues final regulations adopting a permanent simplified test, so long as the original federal income tax return has not yet been filed.

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2. Waiver of Section 6655 Estimated Tax Penalties for CAMT Amounts

Notice 2025-27 also provides significant penalty relief for CAMT estimated payments.

Which years qualify for relief

The IRS will waive additions to tax under §6655 for underpayment of estimated tax to the extent the underpayment relates to CAMT liability for any tax year:

• Beginning after December 31, 2024, and

• Before January 1, 2026

For these years, corporations do not need to include CAMT amounts when calculating required estimated payments. This relief recognizes lingering uncertainty as taxpayers and Treasury finalize the complex CAMT computation rules.

Return filing requirements

To receive this relief, corporations must:

• File Form 2220 with their income tax return

• Complete Form 2220 without including CAMT liability in estimated tax calculations

• Still enter an amount on the estimated tax penalty line of Form 1120, even if the amount is zero

Failure to follow these instructions may generate automated penalty notices that then require abatement.

Other penalties may still apply

While §6655 penalties are waived for CAMT-related underpayments, failing to timely pay CAMT shown on the return may trigger penalties under:

• §6651 for late payment

• Other enforcement provisions of the Code

The waiver applies only to estimated tax installments, not to late payment of the tax itself.

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How Margen Helps Corporations Navigate CAMT and Estimated Tax Relief

The CAMT rules create a challenging new compliance environment, and the interim guidance adds multiple layers of thresholds, adjustments, consolidation rules, AFS year substitutions, and relief provisions. Margen makes it easier for corporate tax teams to interpret these rules by answering questions such as:

• "Do we qualify as an applicable corporation under the interim simplified method?"

• "How should we adjust AFSI for transferable credits or direct pay amounts?"

• "If our financial statement year differs from our tax year, which three year period applies?"

• "Can we exclude our CAMT liability from estimated tax payments for 2025 under the section 6655 waiver?"

• "How do consolidation entries affect AFSI under Notice 2025-27?"

Margen uses your financial reporting inputs and the latest IRS guidance to compute CAMT applicability, adjust AFSI correctly, and ensure your estimated tax payments are compliant, accurate, and penalty protected.

For full details, see IRS Notice 2025-27.