The IRS on Wednesday issued Notice 2023-42, which grants penalty relief for corporations that did not pay estimated tax in connection with the new corporate alternative minimum tax (CAMT), saying the move is "in the interest of sound tax administration."
In the notice, the IRS is waiving the Sec. 6655 estimated tax penalty with respect to a corporation's Sec. 55 corporate AMT liability for tax years beginning after Dec. 31, 2022, and before Jan. 1, 2024. The notice cited "challenges associated with determining whether a corporation is an Applicable Corporation and the amount of a corporation's CAMT liability" as reasons for waiving the penalty.
The Inflation Reduction Act, P.L. 117-169, imposed a 15% minimum tax based on book income rather than taxable income on corporations with adjusted financial statement income over $1 billion (and foreign-parented companies must meet an additional $100 million income threshold) beginning after Dec. 31, 2022. The Sec. 6655 requirement to pay estimated tax applies to taxpayers that owe the Sec. 55 corporate AMT.
Affected taxpayers must still file Form 2220, Underpayment of Estimated Tax by Corporations, with their federal income tax return, even if they owe no estimated tax penalty. Form 2220 must be completed without including the corporate AMT liability from Schedule J, Tax Computation and Payment, of Form 1120, U.S. Corporation Income Tax Return (or other appropriate line of the corporation's income tax return in the Form 1120 series).
These corporations also must include an amount of estimated tax penalty on line 34 of their Form 1120 (or other appropriate line of the corporation's income tax return in the Form 1120 series), even if that amount is zero. Failure to follow these instructions could result in affected taxpayers' receiving a penalty notice that will require an abatement request to apply the relief provided by this notice.
— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.