Businesses seek 15% minimum tax guidance for financials

Dive Brief:

The American Institute of CPAs (AICPA) has joined a growing chorus of voices asking the Internal Revenue Service and the Department of Treasury for “immediate guidance” on the new 15% Corporate Alternative Minimum Tax (CAMT).
A 10-page letter sent to the IRS and Treasury on Friday and signed by the AICPA’s Tax Executive Committee Chair Jan Lewis, states that the Inflation Reduction Act that contained the CAMT created many new financial reporting obligations but that guidance is “especially needed” on the minimum tax because public companies must typically address the impact of a new law in the reporting period it is enacted.
“Companies focused on financial statement reporting will face a challenge unless guidance is available by the time the impact will need to be disclosed within the financial statements for the first quarter of 2023,” the letter states, according to a copy emailed to CFO Dive.

Dive Insight:

Businesses, accounting firms and trade groups have been pressing the Treasury for guidance on how to interpret the corporate minimum tax since President Biden signed the Inflation Reduction Act that contained it into law in August.

The AICPA’s request for guidance comes after the accounting trade group assembled a task force to take up the issue. Its letter follows a similar request fired off by Ernst & Young (EY) in August asking the Treasury how to treat so-called split-off divestiture transactions for the purposes of calculating whether a firm is subject to the new tax.

While roughly 150 or so large companies that earn more than $1 billion annually are expected to be subject to the new tax, its complexity will require financial executives at many more companies to prepare for it, the AICPA has asserted.

April Little, a member of the AICPA’s CAMT task force and a partner at Grant Thornton, said in an interview that it’s important to note that the guidance issue is “extremely time sensitive” given that public companies generally have to disclose anticipated impacts of new legislation in upcoming financial reports. Companies with calendar year reports due would need to get the guidance by the end of January at the latest, she said.

“We’ve got public companies that have to disclose the anticipated impacts of legislation in this year’s financial statements and of course all the companies that need to make estimated 2023 April tax payments,” Little said. “Getting additional guidance will be important for both of those activities.”

While the IRS has issued some guidance related to an electric vehicle tax credit included in the IRA, a spokesperson told CFO Dive on Oct. 7 that no formal guidance has been issued on the 15% corporate minimum tax. Guidance on new tax legislation like the IRA can take months or longer, he said.