On June 7, 2023, the IRS released Notice 2023-42 (the Notice), providing taxpayers relief from the addition to tax under Section 6655 in connection with the application of the new corporate alternative minimum tax (CAMT). In other words, Notice 2023-42 generally provides a waiver of penalties for 2023 for any taxpayers not making estimated tax payments related to the CAMT. As part of the Inflation Reduction Act of 2022 (IRA), Congress enacted the 15% CAMT, effective for taxable years beginning after December 31, 2022, generally on corporations with book profits exceeding $1 billion. The CAMT applies only if the 15% rate applied to an applicable corporation’s applicable financial statement income exceeding $1 billion with adjustments is greater than the applicable corporation’s regular US Federal income tax liability plus any base erosion and anti-abuse tax under Section 59A. Since the enactment of the CAMT, the IRS has issued only two pieces of administrative guidance, Notices 2023-7 and 2023-20, so, although narrowly-focused on consideration of a taxpayer’s potential CAMT liability in its estimated tax payments, Notice 2023-42 should be welcomed by taxpayers.
Specifically, Section 3.01 of the Notice provides a one-year waiver from the addition to tax under Section 6655 with respect to an applicable corporation’s CAMT liability for any taxable year that begins after December 31, 2022, and before January 1, 2024, e.g., the 2023 calendar year (the Covered CAMT Year). For that year, the applicable corporation’s required installments of estimated tax need not include amounts attributable to its CAMT liability to prevent the imposition of an addition to tax under Section 6655. If an applicable corporation fails to timely pay its CAMT liability under Section 55 when due though, other Code sections may apply, for example, Section 6651 could impose additions tax if payment of the CAMT liability is not made by the due date of the corporations’ return.
Procedurally, the Notice indicates that Form 2220, Underpayment of Estimated Tax by Corporations, will be modified to clarify that no addition to tax will be imposed under Section 6655 based on a corporation’s failure to make estimated tax payments of its CAMT liability for the Covered CAMT Year. Further, taxpayers may exclude such amounts when calculating the amount of its required annual payment on such form. To avoid any penalty notice, the Notice also reminds affected taxpayers of the requirement to file a Form 2220, even if they owe no estimated tax penalty, as well as including an amount of estimated tax penalty on their Form 1120, even if that amount is zero.
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