IRS Form 4626 – In today’s complex tax landscape, large corporations must navigate various compliance requirements to ensure they meet their obligations under U.S. tax law. One critical component is IRS Form 4626, which addresses the Corporate Alternative Minimum Tax (CAMT). This form helps determine if a corporation is subject to a 15% minimum tax on its adjusted financial statement income (AFSI). Whether you’re a tax professional, CFO, or business owner, understanding Form 4626 is essential for accurate filing and avoiding penalties. This guide covers everything you need to know about IRS Form 4626, including its purpose, who must file, step-by-step completion instructions, and recent updates for tax year 2025.
What Is IRS Form 4626 and the Corporate Alternative Minimum Tax?
IRS Form 4626, titled “Alternative Minimum Tax – Corporations,” is used by corporations to figure out if they qualify as an “applicable corporation” under section 59(k) of the Internal Revenue Code and, if so, to calculate their CAMT liability under section 55. The CAMT was introduced by the Inflation Reduction Act of 2022 (IRA) and applies to tax years beginning after December 31, 2022. It ensures that profitable large corporations pay at least a minimum level of tax, even if deductions and credits reduce their regular tax liability.
Unlike the pre-2018 corporate AMT, which was based on taxable income, the current CAMT is calculated on AFSI—a measure derived from financial statements prepared under GAAP, IFRS, or similar standards. The tax rate is 15% on AFSI after certain adjustments, minus any allowable CAMT foreign tax credit (FTC). If the resulting tentative minimum tax exceeds the corporation’s regular tax plus base erosion minimum tax (under section 59A), the difference is the CAMT owed.
This form must be attached to the corporation’s income tax return, such as Form 1120, and filed by the due date, including extensions. For affiliated groups filing consolidated returns, the CAMT is computed on a consolidated basis.
History and Background of the Corporate AMT
The corporate AMT has evolved significantly. It was originally enacted in 1986 but repealed for tax years after 2017 by the Tax Cuts and Jobs Act. The IRA reinstated a version of it as the CAMT, targeting corporations with average annual AFSI exceeding $1 billion over a three-year period. This change shifts the focus from taxable income to book income, aiming to close loopholes and ensure fair taxation.
Recent developments include proposed regulations issued on September 13, 2024, which provide detailed rules on AFSI calculations, applicable corporation status, and more. These regs allow for reliance on certain provisions for tax years ending after that date, with others applying post-finalization.
Who Must File IRS Form 4626?
Not all corporations need to file Form 4626. Filing is required if the corporation is potentially an applicable corporation and doesn’t qualify for an exclusion. Exclusions include:
- S corporations
- Regulated investment companies (RICs)
- Real estate investment trusts (REITs)
- Tax-exempt entities with no unrelated business taxable income (even if part of a controlled group)
- Corporations that meet and elect to use the simplified method or interim simplified method and are not deemed applicable
Corporations must file if they are members of a controlled group or foreign-parented multinational group (FPMG) and meet the AFSI tests. An applicable corporation is generally one (excluding S corps, RICs, REITs) with a three-year average AFSI over $1 billion. For FPMGs, an additional $100 million U.S.-related AFSI test applies.
| Threshold | General Corporations | FPMGs |
|---|---|---|
| Primary AFSI Test | > $1 billion (3-year average) | > $1 billion (including group AFSI) |
| Secondary Test | N/A | ≥ $100 million (U.S.-related AFSI) |
If a corporation was applicable in a prior year, it remains so unless it meets specific loss or change-in-ownership criteria.
Key Definitions for Form 4626
- Applicable Financial Statement (AFS): The highest-priority financial statement filed with the SEC or similar agency, such as 10-K or audited statements.
- Adjusted Financial Statement Income (AFSI): AFS net income/loss with adjustments like disregarding taxes, including CFC pro-rata shares, depreciation differences, and more.
- Financial Statement Net Operating Loss (FSNOL): Post-2019 losses carried forward, limited to 80% of AFSI.
- Foreign-Parented Multinational Group (FPMG): Groups with a foreign parent including at least one domestic corporation and one foreign entity.
How to Complete IRS Form 4626: Step-by-Step Guide?
Form 4626 (2025) has six parts, plus preliminary items A–C. Start with the header (name, EIN), then answer Items A–C about group membership and prior applicable status.
Part I: Applicable Corporation Determination
Aggregate AFS net income/loss over three prior years, apply adjustments (e.g., taxes, depreciation), and compute the three-year average AFSI. If over $1 billion (and $100 million for FPMGs), proceed to Part II.
Part II: Corporate AMT Calculation
Compute current-year AFSI with adjustments, reduce by FSNOL (up to 80%), apply 15% rate, subtract CAMT FTC, and compare to regular tax to find CAMT. Formula: CAMT = max(0, (15% × AFSI – CAMT FTC) – (regular tax + base erosion tax)).
Part III: Adjustment for Certain Taxes
Disregard federal and foreign taxes reflected in AFS.
Part IV: CAMT Foreign Tax Credit
Calculate allowable FTC from domestic and CFC taxes, with carryovers.
Part V: Members of Controlled Group and FPMG
List group members’ details if applicable.
Part VI: Aggregate Pro-Rata Share of CFC Adjusted Net Income/Loss
Detail CFC pro-rata shares and negative adjustments.
Attach statements for methodologies and file with your return.
Recent Updates for Tax Years 2023–2025
The IRS has issued several updates:
- 2025 Simplified Method: A new method using $500 million/$50 million thresholds to determine status, reducing filing burdens.
- Interim Simplified Method (Notice 2025-27): Uses $800 million/$80 million thresholds; no filing required if not applicable.
- Penalty Relief: For 2025 estimated tax underpayments related to CAMT.
- Proposed Regulations (September 2024): Cover AFSI adjustments, partnerships, and more; partial applicability from 2024.
- Form Changes: New Item C and Schedule A for 2024; instructions updated December 2024.
- Tax-Exempt Exception: Granted October 2024 for certain organizations.
For 2025, the form includes corrections and new guidance on partnerships (Notice 2025-28) and transactions (Notice 2025-46).
Filing Tips and Common Mistakes to Avoid
- Use the latest form from IRS.gov (2025 version released March 2025).
- Gather three years of AFS data early.
- Consult proposed regs for consistent application.
- Avoid over-relying on safe harbors without verification.
Frequently Asked Questions About IRS Form 4626
What if my corporation’s AFSI is below the threshold?
You may not need to file if you qualify for the simplified method.
How does CAMT affect foreign corporations?
Only effectively connected income is included; special rules for FPMGs.
Can I carry forward losses?
Yes, FSNOLs are carried indefinitely, limited to 80% of AFSI.
For the official PDF, download from IRS.gov.
Staying compliant with IRS Form 4626 requires careful attention to financial statements and tax rules. Consult a tax advisor for personalized guidance, especially with ongoing regulatory changes. This ensures your corporation minimizes tax liabilities while adhering to the law.