The IRS and Treasury have issued a notice containing interim guidance for insurance companies ahead of issuing upcoming proposed regulations on the corporate alternative minimum tax (CAMT) of 15%.
The Inflation Reduction Act of 2022 created the CAMT, which imposes a 15% minimum tax on the adjusted financial statement income of large corporations for taxable years beginning in 2023. Large corporations, including insurance companies, with average annual adjusted financial statement income exceeding $1 billion are the taxpayers generally affected by the CAMT.
The guidance covers significant distortions that could occur as corporations determine their tax owed under the CAMT because of the interaction of financial accounting rules for certain life insurance assets and the CAMT.
Notice 2023-20 provides interim guidance for the determination of adjusted financial statement income as it relates to variable contracts and similar contracts; funds withheld reinsurance and modified coinsurance agreements; and the basis of certain assets held by certain previously tax-exempt entities that received a “fresh start” basis adjustment.