Accounting
IRS and Treasury offer guidance on corporate minimum tax
The Internal Revenue Service and the Treasury Department issued
The Inflation Reduction Act created the CAMT, which imposes a 15% minimum tax on the adjusted financial statement income (AFSI) of large corporations for taxable years beginning after Dec. 31, 2022. The CAMT generally applies to large corporations with an average annual AFSI exceeding $1 billion.
The proposed regulations that came out Thursday include definitions and general rules for determining and identifying AFSI. They also include rules regarding various statutory and regulatory adjustments in determining AFSI; determining if a corporation is subject to the CAMT, including rules for members of a foreign parented multinational group (FPMG) and the determination of the CAMT foreign tax credit.
The proposed regulations also deal with the application of the CAMT to affiliated corporations filing a consolidated income tax return.
Samuel Corum/Bloomberg
The IRS had previously issued
The IRS also issued
The Treasury estimates that approximately 100 of the largest and most profitable companies will pay the CAMT annually. These corporations would have otherwise paid an average effective federal tax rate of 2.6%. An estimated 60% of CAMT payers would otherwise have paid an effective tax rate of less than 1%, including 25% of payers that would have paid an effective tax rate of zero.
It said that’s because some of the largest and most profitable corporations in the country use tax preferences and aggressive planning strategies to pay little to no taxes. The corporations report record profits to shareholders while often paying lower tax rates than nurses, firefighters, police officers and teachers. Their ability to use complex strategies to avoid tax also gives them an unfair competitive advantage over small businesses, which don’t have access to the same tax planning techniques and high-paid lawyers and accountants. The Treasury contends the CAMT helps level the playing field for small businesses by imposing a minimum tax on the profits that the largest corporations report to their shareholders.
The Treasury’s NPRM would implement the statutory requirement that the biggest corporations pay a minimum 15% tax on profits reported to shareholders, with certain adjustments, to increase tax fairness and generate an estimated $250 billion over the next 10 years (2025-2034), including $20 billion in 2025.
The CAMT only applies to large corporations that average more than $1 billion in profit per year, not $1 billion in sales. In addition, if these corporations pay regular taxes that equal or exceed 15% of their adjusted profits, they would pay no additional tax. CAMT is designed as a backstop to ensure there are not years where the most profitable corporations in the world are paying minimal taxes.
“The proposed rules released by Treasury today are an important step toward realizing Congress’ efforts to address the most egregious U.S. corporate tax avoidance and ensure the largest and most profitable corporations in the country cannot pay little to no taxes,” said Treasury Secretary Janet Yellen in a statement. “The Corporate Alternative Minimum Tax will also help level the playing field for small businesses while generating hundreds of billions of dollars in revenue.”
Crafting the rules to implement this tax has been one of the most significant projects the Treasury Department has undertaken in decades, the Treasury noted. Congress delegated a significant amount of authority to Treasury to implement the CAMT, and the Treasury and the IRS are implementing the law via these proposed regulations consistent with Congress’s statutory direction and intent.
In particular, as part of the legislative process, Congress chose to retain only a small number of regular tax preferences for the purpose of the minimum tax. The proposed rules follow suit and generally do not create adjustments to the tax base other than those directed by Congress. Consistent with the four notices Treasury previously issued to give taxpayers early clarity, the NPRM addresses limited and targeted cases where adjustments are clearly needed to accomplish congressional intent. For example, it addresses situations involving bankrupt and other troubled companies so that these companies can emerge from bankruptcy and continue to operate and employ their workers.
The Treasury noted that the guidance is a proposed rule. All stakeholders will have the opportunity to comment on the proposed regulations by Dec. 12, 2024 and may request to speak at the public hearing on the proposed regulations scheduled for Jan. 16, 2025. The Treasury and the IRS plan to carefully consider all comments they receive on the proposed regulations and make changes based on those comments as appropriate.
The Treasury and the IRS are being cautious about the regulations and guidance in light of a Supreme Court decision in June in the case of
“On the tax side, I think it’s just going to lead to taxpayers being more willing to challenge the regulations that aren’t helpful to them,” said Brian Harvel, a tax lawyer at the firm Alston & Bird, during an interview last month. “I’m already seeing that in my practice where companies want to take positions and want to engage in transactions. There may be a relatively new reg, or in some cases an older reg. reg that is essentially inconsistent with the statute, or at least, there may not be authority under the statute, or provisions of the reg, and taxpayers are now more open to taking the position they want to take. There’s less of a concern with filing the form with a tax return that says the taxpayer is going to take a position inconsistent with the reg.”
Eide Bailly LLP, a Top 25 Firm based in Fargo, North Dakota, is expanding in the Midwest, adding Volpe Brown & Co. LLC, a firm headquartered in North Canton, Ohio that specializes in serving McDonald’s franchises.
The deal is set to take effect on May 5. It will expand Eide Bailly’s footprint in northeast Ohio and add a team with over 40 years of experience in client accounting services, complex reporting, tax and advisory work, especially for McDonald’s franchise owner operators.
“After meeting with Eide Bailly’s leadership and experiencing the professionalism and care shown during due diligence, I knew this was the right path forward,” said Volpe Brown founder Tony Volpe in a statement Monday. “Their values, culture, and people-first mindset mirror what we’ve built over four decades.”
Financial terms of the deal were not disclosed. Eide Bailly ranked No. 19 on
“This addition reflects Eide Bailly’s commitment to aligning with firms that share our vision of forward-thinking service, client care, and a strong internal culture,” said Eide Bailly managing partner and CEO Jeremy Hauk in a statement. “We’re proud to welcome the Volpe Brown team and continue building our presence in Ohio with people who care deeply about their clients and community.”
Eide Bailly’s already has some employees in Canton, Ohio, but as part of the transition, they will relocate to Volpe Brown’s office in North Canton.
Eide Bailly expanded to Ohio just last year by merging in
Andersen Group, the resurrected version of the former accounting giant Arthur Andersen, has made plans to go public, submitting a draft registration statement on Form S-1 with the Securities and Exchange Commission.
The firm said Monday the registration relates to a proposed initial public offering of its common stock. But the number of shares to be offered and price range for the proposed offering have not yet been determined. The IPO is expected to take place after the SEC completes its review process, subject to market and other conditions, according to Andersen.
In February, Andersen announced plans to
It was originally known as WTAS (short for Wealth and Tax Advisory Services USA Inc.), which was founded in 2002 by CEO Mark Vorsatz and 22 former Arthur Andersen partners. Vorsatz renamed the firm Andersen Tax in 2014 after acquiring the trademarks and copyrights from Arthur Andersen LLP and Andersen Worldwide, and has since grown the network worldwide.
Andersen Global now has over 19,000 professionals worldwide and a presence in over 500 locations through its member firms and collaborating firms. In the U.S., Andersen has more than 2,000 people in 24 cities across the country.
Andersen Consulting will be offering services such as human capital management, cybersecurity, business transformation, strategy, technology, artificial intelligence and sustainability. Existing consulting clients include Abbott, BMW, Cisco, Heineken, IKEA, ING, LEGO, Mercedes-Benz, Michelin, Microsoft, Pizza Hut/Sapphire, T-Mobile and Toyota.
Semple, Marchal & Cooper LLP, a Phoenix-based firm that took over the audits of Trump Media & Technology Group last year, has filed suit against the BDO Alliance and its chairman after it was ejected from the alliance following an angry phone call.
The firm’s lawsuit alleges it was kicked out of the alliance because it took on Trump Media as a client, a contention the BDO Alliance denies.
Trump Media, the parent company of the Truth Social network founded by Donald Trump,
SM&C has been a member of the BDO Alliance for 30-plus years and was a founding member in 1994, according to a lawsuit it filed in March in an Arizona court, and over that time has paid more than $2 million in fees. There was only a brief hiatus in the firm’s membership in the alliance during that time due to a conflict of interest that the firm says has since been resolved. One of its founding partners, Robert Semple, has also been a member of the Alliance Partners’ Advisory Council for approximately 10 years. The firm has remained in good standing, at least until June of last year.
The firm’s lawsuit claims that after news reports began to circulate last May that Semple, Marchal & Cooper was Trump Media’s new auditing firm, the firm’s director of assurance services, senior partner Steven Marchal, received a phone call from Michael Horwitz, executive director of the BDO Alliance, in which Horwitz questioned the firm’s decision to take on Trump Media as a client, and asked why it didn’t alert the alliance in advance.
The suit further alleges that Horwitz threatened to kick SM&C out of the alliance if it didn’t resign from the audit, and claims that after the firm refused, it received a letter from the alliance dated May 31, 2024, with an effective date of June 30, 2024, that terminated the firm’s membership.
The BDO Alliance strongly disputes the allegation.
“The allegations in the complaint are frivolous and lack any foundation in the reality of why BDO Alliance USA chose to exercise its right to sever its relationship with the plaintiff,” it wrote in a statement to Accounting Today. “While members are independent firms charged with their own professional decision-making, BDO Alliance USA has the rarely used right to sever that relationship when quality and other issues are present. Plaintiff’s effort to distort the decision to sever the relationship will be vigorously defended in the judicial process.”
SM&C’s suit claims that the termination of the firm’s membership in the alliance has created the false and misleading implication that it happened either because somehow its independence as an auditor had been compromised by its political affiliation or because of some other supposed misconduct. But the firm asserts it has not compromised its independence nor engaged in any misconduct. Instead it says the alliance wanted it to compromise its independence by allowing political views to “infect” its role as an auditor of a publicly traded company.
Semple, Marchal & Cooper declined further comment beyond the lawsuit.
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