On February 18, 2026, the Department of the Treasury and the Internal Revenue Service (IRS) released Notice 2026-7, providing additional interim guidance regarding the application of the corporate alternative minimum tax (CAMT). Notice 2026-7 follows a series of other interim guidance, including Notices 2025-27, 2025-28, 2025-46, and 2025-49. Notice 2026-7 incorporates and addresses comments received in response to a prior issuance of CAMT proposed regulations. Government officials state that they intend to issue new proposed CAMT regulations incorporating the guidance provided in Notice 2026-7 and other interim guidance by the end of 2026.

The CAMT is a 15 percent minimum tax imposed on the adjusted financial statement income (AFSI) of certain corporations that meet a $1 billion AFSI threshold. In a nutshell, AFSI is defined in section 56A(c) as the taxpayer's net income or loss as represented on its applicable financial statement. The CAMT provides for several statutory adjustments in determining AFSI (including, for example, an adjustment for tax depreciation under section 168) and regulatory authority to provide additional adjustments determined to be necessary to carry out the purposes of the CAMT. Treasury and the IRS have exercised this authority to provide limited adjustments as described in our prior coverage here and here. 

During the guidance process, stakeholders raised concerns about the application of the CAMT to timing mismatches between book and tax income in certain areas. One example is the One Big Beautiful Bill Act (OBBBA) provision that allows taxpayers to elect to accelerate the deduction of unamortized domestic research and experimentation (R&E) expenditures incurred in taxable years beginning before January 1, 2025 (in 2025 or over a two-year period in 2025 and 2026). The CAMT prevented some taxpayers from fully benefiting from this elective acceleration of domestic R&E expenditures. Notice 2026-7 addresses this issue by permitting taxpayers to adjust post-2024 AFSI to conform to the regular tax treatment in those years of pre-2025 domestic R&E expenditures. In particular, section 5 of Notice 2026-7 provides an AFSI adjustment for domestic research amortization, which consists of amortization under Tax Cuts and Jobs Act (TCJA) section 174(a)(2)(B) with respect to domestic R&E expenditures that were paid or incurred for regular tax purposes and capitalized under TCJA section 174 in a taxable year beginning after December 31, 2021, and before January 1, 2025 (including "catch-up" amortization under the OBBBA).

Section 3 of Notice 2026-7 provides an AFSI adjustment for certain tax repair deductions. Under these rules, an "eligible repair asset" includes any cost attributable to repair or maintenance of section 168 property that is capitalized and subject to depreciation for AFSI purposes but not capitalized as section 168 property under sections 263, 263A, or another capitalization provision for regular tax purposes. Section 4 of Notice 2026-7 provides an AFSI adjustment for eligible intangibles, which includes goodwill and other intangibles that are amortizable for regular tax purposes under section 197 but are not amortized for AFSI purposes. Notice 2026-7 also provides AFSI adjustments for qualified production costs under section 181 (section 6) and eligible materials and supplies (section 7).

Importantly, the AFSI adjustments provided in sections 3 through 7 of Notice 2026-7 do not apply for purposes of applying the average annual AFSI test in section 59(k)(1)(B) or proposed Treas. Reg § 1.59-2(c). Thus, the AFSI adjustments apply for liability determination purposes but not for purposes of testing applicable corporation status.

For entities that adjust AFSI under sections 3 through 7, Notice 2026-7 generally imposes consistency requirements with respect to the affected items. For example, an entity that adjusts AFSI to take into account eligible repair expenses, eligible intangibles, or domestic research amortization must continue to make each such adjustment for all subsequent taxable years. The rules are similar for AFSI adjustments relating to qualified production costs and eligible materials and supplies. In addition, a CAMT entity adjusting AFSI for eligible intangibles must make the adjustment for all eligible intangibles held by the CAMT entity as of the beginning of the taxable year. 

Notice 2026-7 also imposes reporting requirements for certain AFSI adjustments. Taxpayers electing the AFSI adjustment for eligible repair assets, eligible intangibles, qualified production costs, and eligible materials and supplies must include a statement with the taxpayer's return that includes, among other requirements, a statement about any "reasonable method" used to calculate each such adjustment.

Additionally, Notice 2026-7 provides guidance for financially troubled companies (section 8), modifies the covered asset transaction section 358 anti-avoidance rule (section 9), and addresses certain CAMT consequences of outbound transactions involving intangible property subject to section 367(d) (generally providing for an offsetting downward adjustment to AFSI of a controlled foreign corporation (CFC) with respect to which a U.S. shareholder includes an amount in income under section 367(d)). 

Taxpayers should stay tuned for the proposed regulations presaged by Notice 2026-7. In the interim, Notice 2026-7 provides that taxpayers may rely on its terms, provided they follow the consistency requirements laid out in each section. 

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