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TAX CLINIC

Foreign taxes paid by partner- partnerships; however, it does not pro- the regular U.S. federal income tax
ships: The statute’s language suggests vide any guidance on this issue. system and the alternative minimum
that corporate AMT FTCs are available Transition/carryforward issues: tax in place prior to the enactment of
only for foreign taxes paid by the cor- There are also many questions related to the TCJA. Key issues related to the
porate taxpayer and its CFCs. Although the corporate AMT FTC upon transi- corporate AMT FTC are unsettled
nothing in the language of the corporate tion to the corporate AMT rules, as and could have a significant effect on
AMT statute addresses the creditability well as questions on the carryforward of a taxpayer’s corporate AMT liability.
of foreign taxes paid by a partnership in credits under the corporate AMT FTC. Taxpayers will need guidance on how to
which the corporate taxpayer is a direct First, as mentioned, excess corporate appropriately account for the corporate
or indirect partner, Sec. 56A(c)(2)(D)(i) AMT FTCs attributable to CFCs may AMT regime.
is clear that a corporate taxpayer that be carried forward for five years. Sec. The author thanks Chris Trump, Reed
is a partner in a partnership takes into 59(l) is silent on the amount of corpo- Kirschling, Chad Hungerford, Ryan
account in AFSI the corporate partner’s rate AMT FTC carryforward from the Bowen, and John Franco for their guid-
distributive share of the partnership’s preceding five years before the effective ance and input on this item.
AFSI. Thus, corporate partners bear the date of the corporate AMT (i.e., 2023) From Lauren Richards, CPA, MT,
economic burden associated with their or from the five years before a taxpayer Denver
distributive share of the partnership’s first becomes an applicable corporation.
AFSI for purposes of computing the Sec. 56A(d) provides a transition rule for
corporate AMT liability, as well as their financial statement NOLs for tax years Practice & Procedures
share of foreign taxes paid by the part- ending after Dec. 31, 2019. Similarly,
nership. However, as the law is drafted, transition relief was provided for the im- More than three dozen IRS
it is unclear whether the corporate part- plementation of the branch basket in Sec. letter rulings allow late QOF
ners would receive a proportionate share 904 as part of the law known as the Tax self-certifications
of such taxes for purposes of computing Cuts and Jobs Act (TCJA), P.L. 115-97, Since 2018, taxpayers have been eligible
the corporate AMT FTC. under Regs. Sec. 1.904-2(j)(1)(iii). for tax deferral and reduction benefits
For example, consider Example 2, Second, Sec. 59(l) is silent on by reinvesting capital gain from a sale or
but instead assume FB1 is a partnership. whether the carryforward amount ex- exchange with an unrelated person into
As the law is currently drafted, US1 ists even if a taxpayer does not pay the self-certified investment vehicles known
would take into account its distributive corporate AMT in a particular year. as qualified opportunity funds (QOFs)
share of FB1’s net income in computing In other words, if a taxpayer has excess that must reinvest at least 90% of their
its corporate AMT liability; however, FTCs under this rule but ultimately assets into business property or busi-
it is unclear whether the taxes paid by pays regular tax, does the taxpayer have nesses located in a qualified opportunity
FB1 would be eligible for the corporate an excess carryforward account on an zone (QOZ). Early in the program, the
AMT FTC. “as if paid” basis? IRS and Treasury determined that any
Sec. 59(l)(3) provides that the IRS Lastly, there does not seem to be a eligible entity (defined as a partnership
shall provide for such regulations or rule to determine the ordering where or corporation for federal tax purposes,
other guidance as necessary to carry out there are current taxes and carryforward organized under a state, District of
the purpose of Sec. 59(l). Further, Sec. taxes (i.e., Sec. 59(l)(2) provides that Columbia, or U.S. possession statute)
56A(c)(15)(A) provides that the IRS excess taxes increase the amount of could elect to be treated as a QOF by
shall issue regulations or other guidance taxes in Sec. 59(l)(1)(A)(i) in any of filing with the IRS a self-certification
to provide for such adjustments to AFSI the first five succeeding tax years, but it form attached to a timely filed federal
as the IRS determines are necessary does not provide an ordering). Order- income tax return. Self-certification
to carry out the purposes of Sec. 56A, ing rules could be significant in terms forms for QOFs can thus be filed by
including adjustments to prevent the of a taxpayer’s ability to utilize corpo- a domestic partnership or corporation
omission or duplication of any item. rate AMT FTC carryforwards. (including, for this purpose, certain enti-
Notice 2023-7 provides guidance on ties organized under the laws of a U.S.
certain issues under the corporate AMT Taxpayers will need guidance possession) with a tax return filed by the
regarding Subchapter K of Chapter 1 As mentioned, the corporate AMT statutory due date or, in the case of an
of the Internal Revenue Code and the applies to tax years beginning after entity that timely requests a return filing
determination of applicable corporation Dec. 31, 2022. The corporate AMT extension, by the extended due date for
status in circumstances involving certain represents a significant departure from the tax return.

22 March 2023 The Tax Adviser