Big Business Doesn’t Deserve a Pass on the Corporate Minimum Tax

The corporate tax cuts signed into law on July 4 are running into a 2022 law designed to ensure that large, profitable companies pay at least some tax.

The corporate alternative minimum tax, or CAMT, is at risk of stealth repeal as business interests lobby for “relief” from the Treasury Department—unlegislated, unaccounted for, and likely unconstitutional tax cuts. Treasury shouldn’t take the bait.

Normally, corporate taxes are imposed on taxable income. But CAMT is imposed on a different income measure that public companies report to their investors, based on accounting standards (the so-called book income or financial statement income).

While companies have an interest in minimizing their taxable income (and, therefore, the taxes they owe to the IRS), they also have an interest in maximizing their book income, which provides investors with a sense of the company’s overall health and profitability and informs executive compensation.

The idea behind the CAMT is simple: Huge, successful companies shouldn’t be able to pay next to no tax year after year, while reporting large profits to their investors.

The 2025 budget reconciliation bill trimmed corporate tax bills through several new and expanded corporate tax breaks, including more generous deductions for domestic research and development expenses, business interest expenses, and foreign-derived deduction-eligible income, an export subsidy.

What the tax legislation didn’t do was repeal CAMT. This means that the gap between book income and taxable income is likely to be larger than ever, and the role of CAMT as a backstop is critical. For example, Meta Platforms Inc. has already reported a massive tax charge of nearly $16 billion, which it attributes to CAMT.

Tax experts have drawn attention to one particular CAMT interaction with the 2025 law’s generous retroactive application of R&D expensing. Rewarding corporations for past spending on research and development does nothing to spur future investment. Retroactive windfalls make no sense from an economic or fairness perspective.

The issue goes beyond research and development expensing. Another expanded tax break that may trigger CAMT for some big corporations is the deduction for foreign-derived deduction eligible income, a category of income derived from the export of goods and services. The policy was originally meant to encourage US firms to bring their valuable intellectual property back to the US by providing a reduced tax rate for export income from domestic intellectual property.

It’s unclear how effectively this provision has met its original policy goal, but the 2025 tax legislation doubled down on it. Much more corporate income now qualifies as foreign-derived deduction eligible income because it includes income from tangible assets and no longer must be reduced by the value of certain expenses such as R&D spending and interest. These changes are likely to push more corporations below the 15% CAMT rate floor.

Foreign-derived deduction eligible income and its predecessor, foreign-derived intangible income, have always been questionable policies.

It provides an unnecessary tax discount for income from export activity that firms were likely to engage in anyway, even benefiting income derived from old investments. The benefits of the deduction have been concentrated among the largest firms.

Research by the Institute for Taxation and Economic Policy analyzing the financial disclosures of the largest 1,000 public companies in the US determined that more than 75% of the disclosed savings from the deduction went to the top 2% of firms in the first five years after the 2017 tax reform.

The revenue losses are ballooning. According to a recent Penn Wharton estimate, if Congress had allowed the tax rate on foreign-derived deduction eligible income to increase in 2026 as scheduled, the Treasury Department would have saved more than $140 billion over the next decade.

Instead, that $140 billion could flow directly to the largest, most profitable corporations, including Microsoft Inc., Meta, Alphabet Inc.’s Google, and Nvidia Corp. This excessively generous tax break is exactly the type of corporate handout the CAMT was intended to check.

The CAMT plays another important tax role: insulating US companies from additional tax liability under the Organization for Economic Cooperation and Development’s global minimum tax policy. If the US Treasury collects this revenue, it reduces the likelihood that US companies will be subject to top-up taxes in countries that are implementing the global minimum tax.

The Trump administration has been pushing for special treatment for US corporations under the global minimum tax. A far easier, more sensible, and fiscally responsible approach would be to ensure that US corporations pay adequate domestic tax.

Any potential CAMT “relief” that circumvents Congress could be unconstitutional as well as unaccounted for in official budget scores. The official revenue score by the Joint Committee on Taxation likely assumed the CAMT would act as a backstop to excessive new deductions for the largest firms. The 2025 tax bill was sold to the public and to policymakers at a specific price tag, and there is no reason to further grow the bill’s nearly $1 trillion in net corporate tax breaks.

The Trump administration has moved to weaken the CAMT through several IRS notices, without much public awareness or input. The Treasury Department is required to consider the Congressional intent behind enacting CAMT. It shouldn’t risk ballooning the cost of a tax reform largely paid for with deep cuts to vital health and nutrition programs for ordinary Americans, with the benefits flowing to the largest, most profitable corporations.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Zorka Milin is policy director at the FACT Coalition, where she leads international tax policy and other transparency priorities.

FACT Coalition’s Thomas Georges contributed to this article.

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