Treasury Department and IRS officials released new draft rules on Sept. 12 that could raise taxes on profits generated by “around 100” of the largest corporations.
The Corporate Alternative Minimum Tax (CAMT), signed into law as part of the Inflation Reduction Act, would require companies to pay at least 15 percent of adjusted financial statement income (AFSI) for taxable years beginning after Dec. 31, 2022.
This would “increase tax fairness” and “make the biggest corporations and wealthiest pay their fair share,” the Treasury said in a statement.
Without the CAMT, these corporations would have paid an average effective federal tax rate of 2.6 percent, according to the Treasury. Sixty percent of CAMT payers would have paid a rate of 1 percent or less, and a quarter would have had an effective tax rate of zero.
The CAMT was designed to prevent large corporations from using deductions, exceptions, and loopholes to pay little or no taxes on their profits. Officials say the CAMT helps “level the playing field for small businesses” and ensures that corporations are not paying lower tax rates than firefighters, nurses, police officers, and teachers.
Government estimates show that the tax would generate more than $250 billion over the next 10 years, including $20 billion in 2025.
“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,” Treasury Secretary Janet Yellen said in a statement. “The Corporate Alternative Minimum Tax will also help level the playing field for small businesses while generating hundreds of billions of dollars in revenue.”
The proposed rule will be open for comment until Dec. 12. A public hearing on the proposal will be scheduled for Jan. 16, 2025.
“Treasury and the IRS will carefully consider all comments that we receive on the proposed regulations and make changes based on those comments as appropriate,” the announcement reads.
What Is Being Said
In recent months, Democrat lawmakers have encouraged the administration to finalize rules surrounding the CAMT quickly to ensure that “giant corporations begin paying their fair share.”“We urge you to quickly issue strong regulations to implement the corporate minimum tax to ensure that the largest corporations begin to pay their fair share and respectfully request that you promptly brief our staff on the status of your work.”
The Republican presidential nominee pledged to once again repeal the CAMT.
Economists and tax policy organizations have provided different assessments of a corporate alternative minimum tax.
The current administration’s proposal would result in “a similar set of industries” that would be “disproportionately penalized,” according to the foundation.
“Ultimately, the corporate alternative minimum tax has either ended up as a heavy burden on investment or as an ineffective revenue raiser,” the analysis reads.
David Kass, executive director at Americans for Tax Fairness, called the CAMT “a vital policy” that continues the work to make corporations “pay their fair share” and “create a fairer tax code.”
“We must continue to implement policies that hold them accountable. Using extensive loopholes to dodge taxes gives massive corporations unfair advantages against small businesses, and leaves the rest of us to pick up the bill. Wealthy corporations should not be paying lower rates of federal taxes than teachers, nurses, and firefighters.”
Corporate tax policy has been a focal point in the 2024 presidential race.
Vice President Kamala Harris, for example, has proposed raising the corporate income tax rate to 28 percent from 21 percent. Her campaign also says a potential Harris–Walz administration would quadruple the stock buyback tax to 4 percent from 1 percent.
