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Corporations
& Shareholders Companies should assess their structures to
identify applicable corporations, taking into
Inflation Reduction Act account the special rules for
includes 15% corporate
minimum tax on book common employer groups and
income foreign-parented multinational groups.
On Aug. 16, 2022, President Biden
signed into law the Inflation Reduc-
tion Act, P.L. 117-169. For applicable
corporations that report over $1 bil- determining adjusted financial statement annual adjusted financial statement
lion in profits to shareholders, the act income for the $1 billion qualification income, determined without regard to
includes a 15% corporate alternative test, the act generally treats adjusted loss carryovers, of $100 million or more.
minimum tax based on book income. financial statement income of all persons A foreign-parented multinational group
The corporate alternative mini- considered a single employer with a means two or more entities if (1) at least
mum tax was introduced in the House corporation under Sec. 52(a) or (b) as one entity is a domestic corporation
Ways and Means Committee’s Build adjusted financial statement income of and another is a foreign corporation;
Back Better Act (BBBA) proposal the corporation. (2) the entities are included in the same
in November 2021 (House BBBA). For a corporation that is a member of applicable financial statement; and (3)
It was then modified by the Senate a foreign-parented multinational group, the common parent of those entities is
Finance Committee in its December (1) the three-year average annual adjust- a foreign corporation (or the entities are
2021 BBBA proposal (Senate BBBA). ed financial statement income must be treated as having a common parent that
The tax, which applies to tax years over $1 billion from all members of the is a foreign corporation).
beginning after Dec. 31, 2022, is pri- foreign-parented multinational group
marily a revenue raiser. (without regard to certain adjustments Three-tax-year period
as specified in Sec. 59(k)(2)(A)), and For purposes of determining whether a
15% minimum tax and (2) the corporation must have average corporation has average annual adjusted
applicable corporations
An appliable corporation is liable for
the corporate alternative minimum
tax to the extent that its “tentative
minimum tax” exceeds its regular U.S.
federal income tax liability (computed
before taking into account general
business credits) plus its liability for
the base-erosion and anti-abuse tax
(BEAT). An applicable corporation’s
tentative minimum tax is 15% of its
adjusted financial statement income
to the extent the tax exceeds the
corporate alternative minimum tax
PHOTO BY JLGUTIERREZ/GETTY IMAGES applies to any corporation (other than
foreign tax credit for the tax year. The
corporate alternative minimum tax

an S corporation, regulated investment
company, or real estate investment
trust) whose average annual adjusted
financial statement income exceeds $1
billion for any three consecutive tax
years preceding the tax year. When

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