Corporate Alternative Minimum Tax Reporting Considerations for Asset Managers

As previously reported, the Treasury Department and the IRS on September 12, 2024, introduced proposed regulations concerning the corporate alternative minimum tax (CAMT) regime. The CAMT mandates a 15% minimum tax on the adjusted financial statement income (AFSI) of an “applicable corporation.”

The Trump administration recently imposed a regulatory freeze, preventing federal agencies from issuing or proposing new rules. Consequently, the CAMT proposed regulations remain unfinalized with no set timeline for implementation. Despite this, there are some key points that asset managers should consider now for tax year 2024 compliance and reporting related to CAMT.

CAMT General Compliance Considerations

1. Corporate Entities in Fund Structures: Asset managers should analyze their structures to determine if any corporate entities, such as portfolio companies, blockers, and special purpose vehicles qualify as applicable corporations under CAMT, necessitating compliance and reporting on Form 4626, Alternative Minimum Tax-Corporations.
2. Corporate Investors: Direct or indirect corporate investors that meet the applicable corporation criteria under CAMT must ascertain their CAMT reporting obligations and tax liabilities. They will require information to calculate their "distributive share of AFSI" from partnership interests, such as hedge funds and private equity funds, to determine any CAMT reporting obligations and liabilities.
3. Information Requests in Tiered Structures: Asset managers may need to gather additional data from lower-tier partnerships or controlled foreign corporations (CFCs) to facilitate investor reporting.

Timing

Under the proposed regulations, an applicable corporation would generally have to request CAMT information from direct investments within 30 days after the end of its tax year. In tiered partnership structures, a 14-day window would apply for requests from one tier to the next. Requests received after those deadlines would not be considered timely. As a result, reporting to the investor would not technically be required for that period but would be required in subsequent years, until the corporate investor indicates otherwise. Nonetheless, from an investor relations perspective, fund managers should consider providing the information voluntarily, even if a request is not timely.

Schedule K-1 Reporting

If a timely investor request is received, the necessary data for determining the distributive share of AFSI is reported to investors on Schedule K-1 under the new Box 20 Code AX, Corporate Alternative Minimum Tax.

Conclusion

Fund managers should consult with their tax advisors and investor relations team to address how to handle CAMT reporting requests for the 2024 tax year. Funds with direct or indirect corporate investors – such as insurance companies, banks, and other financial institutions – should expect to receive such requests, if they have not already. 

Please visit BDO’s Federal Tax Services page for more information on how BDO can help.