Democrats in the House and Senate say that new Treasury regulations will allow large corporations to avoid paying the corporate alternative minimum tax (CAMT).
The CAMT is a sweeping tax rule that Democrats passed in the 2022 Inflation Reduction Act and that Republicans largely left in place in their One Big Beautiful Bill Act earlier this summer, to the surprise of many in the accounting field.
But Democrats say that new guidance from the Treasury is undermining the rule and will allow corporations to avoid paying taxes on profits.
“These notices will allow major corporations to circumvent the law by using accounting trickery to pay zero taxes on their massive profits,” Sens. Elizabeth Warren (D-Mass.), Angus King (I-Vt.) and others wrote to Treasury Secretary Scott Bessent on Monday.
They took issue with two proposed regulations in particular, one allowing companies to avoid the tax if their income is below $800 million. The threshold was set at $500 million by the Biden administration.
The other allows companies to factor in unrealized capital gains into their tax liability calculation, thereby lessening what they could owe in tax.
“In combination, these actions indicate that under President Trump, the IRS is at best delaying the full implementation of CAMT to allow the largest corporations to avoid paying taxes, and at worst abandoning its legal responsibility to administer and enforce CAMT altogether,” the lawmakers wrote.
By maintaining the CAMT, Democrats in 2022 made the tax code broadly consistent with an international tax framework at the Organisation for Economic Cooperation and Development (OECD) that requires corporations to pay a 15-percent minimum tax.
This consistency allowed the U.S. to strike what Treasury called a “side-by-side” arrangement with the Group of Seven large economies over the summer that then allowed it to pull out of the OECD deal, which Republicans have long resisted.
Republicans threatened large capital taxes on foreign investors in the form of the Section 899 “revenge tax,” which was eventually dropped from the One Big Beautiful Bill Act, in order to make sure the US didn’t have to sign up to the OECD deal, which taxed profits more rigorously than the U.S. tax code does by not allowing company subsidiaries to merge their tax bills.
However, the exclusion of the U.S. from the OECD framework opens up the possibility of retaliatory taxes on big tech companies, such as the one that Canada recently put in place and then rescinded as part of trade talks with the U.S.
Alternative minimum taxes exist because the U.S. tax code contains so many targeted credits and deductions that taxpayers could get out of paying any tax at all if they made full use of the law.
The CAMT adds an additional tax regime on top of that to make sure corporations pay a minimum of tax rather than modifying or restricting individual credits.
The CAMT in its current form was the result of a massive regulatory effort under the Biden administration.
“Crafting the rules to implement this tax has been one of the most significant projects the Treasury Department has undertaken in decades,” the Treasury Department under the Biden administration said last year. “Congress delegated a significant amount of authority to Treasury to implement the CAMT.”
