IRS ‘Safe Harbor’ Guidance Offers Corporations Compliance Relief

The IRS offered some welcome relief to corporate taxpayers navigating the corporate alternative minimum tax system by expanding the safe harbor, lowering compliance burdens, and extending underpayment of estimated tax penalty relief.

The interim guidance in Notice 2025-27 represents a step in easing the CAMT-related compliance burdens for many taxpayers without altering expected CAMT.

A company or its corporate group generally must have adjusted financial statement income, or AFSI, of at least $1 billion to be subject to CAMT. The notice features a revised safe harbor with higher AFSI test thresholds and additional taxpayer-favorable AFSI adjustments, and makes it available to taxpayers even if they don’t intend to adopt the proposed regulations.

Although the guidance doesn’t modify the calculation of tax due for affected corporations, the immediate benefit is clear. More corporations will fall below the revised safe harbor AFSI test thresholds, thus reducing their compliance burden.

Under the revised safe harbor, the general AFSI test threshold rises from $500 million to $800 million. The second prong of the AFSI test that applies only to a corporation that is a member of a foreign parented multinational groups rises from $50 million to $80 million.

These higher thresholds expand the number of taxpayers eligible for the safe harbor—those with AFSI between $500 million and $800 million—enabling more companies to avoid applying the complex rules around the full set of AFSI adjustments.

The new thresholds also will help taxpayers limit their CAMT compliance burden to simply checking the applicable boxes on the CAMT-related question on Schedule K of Form 1120.

Taxpayers below the revised thresholds don’t need to complete any portion of Form 4626, meaning more taxpayers no longer have to compile and disclose every member of their controlled group treated as a single employer or that need to be considered when determining the corporate group’s applicable corporation status.

Along with the higher thresholds, Notice 2025-27 introduces a taxpayer-favorable addition by allowing an AFSI adjustment for income amounts included in financial statements related to advanced manufacturing investment credits under Section 48D of the federal tax code and other credits under Sections 6417 and 6418.

The notice also allows corporations with a disparity between their financial statement year and tax year to align their three-year AFSI testing period to their financial reporting year, rather than to their tax year for purposes of the safe harbor.

This benefits such corporations because CAMT essentially is a third set of books that resides between financial accounting and tax principles. Because CAMT rules are aligned more closely with financial accounting rather than tax principles, this portion of the notice reduces the number of, and often the complexity of, the adjustments needed to conform a companies’ records to CAMT rules.

Previous regulations issued last year withdrew a taxpayer’s ability to rely on prior notices for tax years beginning after Sept. 13, 2024. As a result, taxpayers were left with two options for 2024 and future tax years: early adopt the specified regulations in the proposed regulations or determine their applicable corporation status by preparing Form 4626 and applying the full set of AFSI adjustments.

Notice 2025-27 restores a safe harbor option for taxpayers, who haven’t yet filed their 2024 tax return, allowing them to avoid adopting the broader framework of the proposed regulations.

In line with earlier CAMT-related notices, Notice 2025-27 extends the underpayment penalty relief for estimated tax payments for taxable years that begin after Dec. 31, 2024, and before Jan. 1, 2026.

As such, taxpayers affected by CAMT don’t need to account for their 2025 tax year CAMT liability in estimated tax installments until they file their federal extension in 2026, as long as they file Form 2220 for underpayment of estimated tax with their 2025 tax return. This relief gives taxpayers more time to digest the rules in the proposed regulations and to determine whether it may be advantageous to early adopt them.

For now, partnerships will see no changes to their current compliance burden. Notice 2025-27 mentions some upcoming guidance addressing partnership specific issues, including potentially a simpler calculation for a partner’s distributive share of partnership AFSI.

Partnerships are still expected to provide CAMT-related information when a partner requests it. Once the request is made, the partnership still must provide CAMT-related information to the partner for each tax year going forward. However, the increased AFSI test thresholds under the revised safe harbor may reduce the number of unnecessary inbound information requests a partnership receives.

Notice 2025-27 doesn’t alter whether a taxpayer is an applicable corporation, nor whether it’s ultimately subject to CAMT liabilities. Instead, it narrows the population of taxpayers required to complete Form 4626 to determine their status and extends estimated payment penalty relief through tax year 2025, reducing compliance burdens for taxpayers both within and outside of scope of CAMT.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Scott Austin is a principal with Forvis Mazars focusing on corporate and international tax issues as a member of the the national tax professional standards group.

Joshua Kamman is a manager with Forvis Mazars and works with the firm’s national tax professional standards group.

Howard Wagner is a managing director with Forvis Mazars focusing on M&A issues from the firm’s Washington National Tax Office.

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