Does Notice 2025-27 apply to me as a small business owner?

The IRS continues to refine how the corporate alternative minimum tax (CAMT) works in practice. Notice 2025-27 provides interim guidance that clarifies who is subject to CAMT and, just as importantly, who is not. For most small business owners, the answer is still not subject to. What has changed is how tax professionals can efficiently confirm and document that conclusion.

If your business is not a large C corporation with average annual adjusted financial statement income (AFSI) approaching the hundreds of millions, Notice 2025-27 does not change your tax liability. It does, however, change the process for determining CAMT status. This is especially relevant if your client is growing quickly or operates within a consolidated structure.

A quick refresher on CAMT

In simple terms, the CAMT is basically a backup tax system for large C corporations. This tax was enacted as part of the Inflation Reduction Act of 2022 to make sure big corporations pay at least a minimum amount of tax, even if they use deductions and credits to significantly lower their regular taxable income. It imposes a 15% minimum tax on the AFSI of applicable corporations for tax years beginning after Dec. 31, 2022.

CAMT applies only to C corporations. S corporations, partnerships and sole proprietorships are excluded by statute. Whether a C corporation is subject to CAMT depends on its average annual AFSI over a three-year period, not its taxable income. That distinction is where compliance complexity often begins.

Statutory AFSI thresholds under §59(k)

Under the statute, a corporation is an applicable corporation if it meets one of the following two tests:

• General AFSI test: For corporations that are not members of a foreign-parented multinational group (FPMG), the average annual AFSI exceeds $1 billion over the applicable three-year period.
• FPMG test: For corporations that are members of a foreign-parented multinational group, the group exceeds the $1 billion threshold, and the corporation’s own average annual AFSI is at least $100 million.

These statutory $1 billion and $100 million thresholds remain in place, but applying them can require complex AFSI calculations that go far beyond what many corporations ultimately need.

What Notice 2025-27 changes

Notice 2025-27 introduces an optional interim simplified method for determining applicable corporation status. The goal is to reduce the compliance burden for corporations that are clearly not intended to be subject to CAMT but would otherwise need to perform detailed calculations to demonstrate that.

Under the interim simplified method:

• The general AFSI threshold is $800 million.
• The FPMG threshold is $80 million.

These thresholds are higher than the $500 million and $50 million thresholds in the CAMT proposed regulations and lower than the statutory $1 billion and $100 million thresholds, creating a practical screening tool while final regulations are still pending.

Exceeding the interim simplified method thresholds does not automatically make a corporation subject to CAMT. It simply means the corporation must apply the statutory average annual AFSI tests under §59(k), including the $1 billion general test and, if applicable, the $100 million FPMG threshold, to determine status.

How to calculate AFSI under the interim simplified method

The interim simplified method intentionally limits which adjustments must be made. Start with net income or loss from the applicable financial statement and then make only the following adjustments:

• Adjust for certain federal income taxes and specified foreign taxes.
• Adjust for direct pay credits and transferred credits, including those under §§48D, 6417 and 6418.
• Adjust for tax-exempt entities, limiting AFSI to unrelated business taxable income (UBTI) or income from debt-financed property.
• For FPMG members, adjust for income effectively connected with a U.S. trade or business.
• Take into account applicable financial statement consolidation entries, except those eliminating transactions between entities not treated as a single employer or not included in the group.

Other adjustments, including those for financial statement net operating losses (NOLs), are not made unless specifically required under the interim method.

The IRS continues to refine AFSI adjustments through subsequent guidance, including Notice 2026-7, which addresses specific amortization, repair and production cost adjustments.

Next steps for confirming CAMT status

For most small businesses, this notice affects how applicable corporation status is determined and documented, not the corporation’s tax liability.

First, determine whether the interim simplified method applies. If the average annual AFSI is well below $800 million, or $80 million for FPMG members, the interim method can be used to confirm that the corporation is not an applicable corporation for the year.

Second, document the calculation. Maintain records showing how AFSI was determined and which interim simplified method adjustments were applied. When the corporation is not an applicable corporation, Form 4626, Alternative Minimum Tax – Corporations, is not required. Schedule K of Form 1120, U.S. Corporation Income Tax Return, must be completed to reflect that determination.

Third, apply the estimated tax relief correctly. For tax years beginning after Dec. 31, 2024, and before Jan. 1, 2026, the IRS will waive additions to tax under §6655 for underpayment of estimated tax attributable to CAMT. CAMT liability does not need to be included in estimated payments for these years. However, affected corporations must still file Form 2220, Underpayment of Estimated Tax by Corporations, completed without including CAMT liability, even if the resulting penalty amount is zero.

Practical impact of Notice 2025-27

Notice 2025-27 does not expand CAMT to small businesses. Instead, it provides a clearer, more efficient way to confirm when CAMT does not apply, while final regulations are still in development. The interim simplified method gives preparers defensible thresholds and limited adjustments, along with continued penalty relief, all aimed at practical administration rather than unnecessary complexity.

NATP will continue monitoring CAMT developments and breaking down interim guidance so members can confidently explain the rules and document their positions. We’ll keep members informed as this area continues to evolve.