This was partly—but only partly—the result of President Donald Trump's 2017 tax cuts, which lowered the top corporate tax rate from 35 percent to 21 percent and eliminated the corporate alternative minimum tax (or CAMT). But hardly any corporations have ever paid a fixed price before. Even when the top rate was 35 percent, ITEF's group of highly profitable large corporations actually paid an average of 22 percent, thanks to various tax loopholes. After the top rate dropped to 21 percent, this cohort actually paid an average of 12.8 percent.
To address this type of tax avoidance, President Joe Biden's Inflation Reduction Act of 2022 reinstated CAMT. Under Biden's version, any company with average revenue exceeding $1 billion (only about 80 exceptionally wealthy corporations do so) must calculate its tax liability in three steps. The first step is to calculate based on the 21 percent corporate rate, including any deductions, credits or other loopholes allowed by the IRS code. The second step is to calculate based on the CAMT rate of 15 percent using the larger amount of earnings (“adjusted financial statement income”) reported to investors. The third stage is the payment of the larger of the two amounts. At the time of adoption of the CAMT, the Joint Committee on Taxation calculated this would increase revenues by $222 billion over ten years.
But November 8 New York TimesJesse Drucker reported that the Trump Administration is “quickly gutting” CAMT through a series of proposed regulations and other Treasury Department administrative actions. In July, for example, the Internal Revenue Service published guidance regarding partnerships called Notice 2528which modified or rescinded previous rules issued under Biden. The new management has had an effect, according to accounting firm KPMG. advised clients“reducing the likelihood or extent of CAMT liability.” In September, to give another example, the I.R.S. Notice 2546 And Notice 2549 changed or revoked another set of previous rules issued under Biden. The new recommendations have had an effect, according to law firm Vedder Price. advised clientsallowing them to “ignore unrealized gains on cryptocurrency and other digital assets” when calculating CAMT liabilities. (You may have heard that our President moonlights as a crypto investor.)
