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TAX CLINIC

■ Adjusted financial statement ■ 80% of adjusted financial statement General business credits
income is reduced by (1) tax depre- income “computed without regard to The act limits general business credits
ciation deductions allowed under the deduction allowable under” new to 75% of the taxpayer’s net income
Sec. 168 and (2) tax amortization Sec. 56A(d). tax that exceeds $25,000 (with no
deductions allowed under Sec. 197 “Financial statement net operating limit against the first $25,000). Net
only for qualified wireless spectrum. loss” means the net loss on the corpora- income tax is the sum of the taxpayer’s
● “Qualified wireless spectrum” tion’s applicable financial statement for regular U.S. federal income tax liability
is defined as wireless spectrum tax years ending after Dec. 31, 2019. (including BEAT under Sec. 59A) and
that is used in the trade or busi- The act contemplates that a taxpayer the tax imposed by Sec. 55 (including
ness of a wireless telecommuni- may carry forward a financial statement the corporate alternative minimum
cations carrier and was acquired NOL indefinitely. tax).
after Dec. 31, 2007, and before
the date of enactment. Corporate alternative minimum Credit for prior-year minimum
● Adjusted financial statement tax foreign tax credit tax liability
income does not include book The corporate alternative minimum The act adjusts the rules in Sec. 53 to
depreciation and amortization tax foreign tax credit may reduce the provide a minimum tax credit for ap-
with respect to such property corporate alternative minimum tax (if plicable corporations. Under modified
(so the reduction to adjusted the taxpayer chooses to credit foreign Sec. 53, the net minimum tax (i.e., the
financial statement income taxes for regular U.S. federal income tax imposed by Sec. 55) for all prior
equals the tax depreciation and tax purposes) (Sec. 59(l)). The corpo- tax years beginning after 2022 can
amortization noted previously). rate alternative minimum tax foreign generally be carried forward and uti-
Note: The adjustments for de- tax credit equals the sum of: lized as a credit against the taxpayer’s
fined benefit pensions and partner- ■ The taxpayer’s pro rata share of regular tax liability, including any
ship distributive shares apply only to applicable foreign taxes paid or BEAT liability.
a corporation that is subject to the accrued by CFCs (for which the
corporate alternative minimum tax taxpayer is a U.S. shareholder) and Treasury to issue regulations
for determining its adjusted financial included in the CFCs’ applicable The act directs Treasury to issue
statement income to compute the financial statements (or, if less, 15% regulations and other guidance for the
corporate alternative minimum tax of the amount determined under purpose of carrying out various provi-
amount. In contrast, when applying Sec. 56A(c)(3)); and sions, including:
the adjusted financial statement in- ■ The applicable foreign taxes paid ■ Sec. 59(k) (defining an applicable
come three-tax-year qualification test, or accrued by the taxpayer and corporation), including guidance
adjusted financial statement income taken into account in the taxpayer’s on a simplified method for
is determined without regard to these applicable financial statement. determining whether a corporation
adjustments (i.e., adjusted financial In other words, the “indirect” cor- is an applicable corporation and
statement income is based on defined porate alternative minimum tax foreign guidance clarifying the rules for
benefit pension amounts included in tax credit in respect of creditable a corporation that experiences a
book income and partnership income foreign income taxes paid or accrued change in ownership;
that must be aggregated under Sec. by CFCs is limited to 15% of the ■ Sec. 56A(c) (determining adjusted
52). taxpayer’s pro rata share of its CFCs’ financial statement income) to
income; the “direct” corporate alterna- provide for adjustments to adjusted
Deduction for financial tive minimum tax foreign tax credit in financial statement income, includ-
statement net operating loss respect of creditable foreign income ing adjustments to prevent the
The act allows taxpayers to deduct taxes paid or accrued by domestic cor- omission or duplication of any
financial statement net operating porations is not. item, and adjustments with respect
losses (NOLs) from adjusted finan- Taxpayers whose pro rata share of to corporate liquidations and
cial statement income. The deduction creditable foreign income taxes paid reorganizations and partnership
equals the lesser of: or accrued by CFCs exceeds 15% of contributions and distributions; and
■ The aggregate amount of financial their pro rata share of the CFCs’ in- ■ Sec. 59(l) (regarding the corporate
statement NOL carryovers to the come may carry the excess forward for alternative minimum tax foreign
tax year; or five years. tax credit).

10 January 2023 The Tax Adviser