Last week, 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 provides taxpayer-favorable guidance in several nettlesome areas where the timing of items taken into account in adjusted financial statement income (AFSI), or so-called "book income," does not match the timing under the regular tax. The guidance provides adjustments to: (i) tax-deductible repairs with respect to section 168 property; (ii) section 197 amortization attributable to certain intangibles; (iii) section 174 amortization of domestic research and experimental (R&E) expenditures; (iv) certain production costs attributable to film, television, live theatrical, and sound recording productions under section 181; and (v) certain low acquisition cost tangible property treated as materials and supplies.

As we previously noted, the need for a favorable AFSI adjustment for amortization of domestic R&E expenditures was a driving force behind last week's guidance package. Last year's enactment of section 174A and related provisions restored immediate deduction of domestic R&D expenditures and allowed acceleration of unamortized domestic R&E expenditures incurred in tax years beginning before January 1, 2025. The interaction of these provisions with the CAMT created a timing mismatch. The Notice addresses the mismatch by permitting adjustments to AFSI to match the regular tax treatment of these R&E expenditures in taxable years beginning after December 31, 2024.

Notice 2026-7 also provides additional guidance with respect to financially troubled companies, the anti-abuse rule that applies to certain covered asset transactions, and transactions involving outbound transfers of intangible property subject to section 367(d).  

Notice 2026-7 joins four previously issued notices – Notice 2025-27, Notice 2025-28, Notice 2025-46, and Notice 2025-49 – which will be incorporated into re-proposed regulations that Treasury says will revamp "the entire CAMT regulatory framework to reflect stakeholder feedback and ensure final rules that are workable and predictable." In other words, taxpayers should study Notice 2026-7 and all aspects of the forthcoming proposed regulations for potential commentary and engagement with Treasury and the IRS. A new set of proposed rules is expected in late 2026 or early 2027. #TaxTake

Upcoming Speaking Engagements and Events

Rocco will speak at PLI's International Tax Issues 2026 conference on February 25.

In the News

Mike commented in the Wall Street Journal on the potential implications of the U.S. Court of Federal Claims ruling that COVID-era disaster declarations effectively suspended federal tax filing and payment deadlines for more than three years.

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