CAMT Series Part 2: What Will Be the Fate of CAMT Under Trump?

As the Biden administration drew to a close, Treasury worked through its regulatory to-do list. A big item on that list was the proposed corporate alternative minimum tax (“CAMT”) regulations (REG–112129–23), released in mid-September. Now that the dust has settled on the 2024 elections and Republicans have taken control of the House, Senate, and White House, many taxpayers may understandably wonder about the fate of the proposed CAMT regulations, as well as CAMT itself. Though Biden-era tax provisions like CAMT are unpopular amongst the new Republican majority, there are several reasons for taxpayers to keep their eye on CAMT and the proposed regulations. For one, the legislative process for enacting reforms may necessitate keeping revenue generating provisions like CAMT. Further, because CAMT is already in effect, taxpayers will need to contend with CAMT when filing their tax returns, which means that the proposed regulations may still be relevant. We discuss these considerations as part of our ongoing CAMT series.

Tax Priorities of the Second Trump Administration, Congress May Be Limited by the Legislative Process

One of the main priorities of the Republican majority is to extend the soon-expiring provisions of the Tax Cuts and Jobs Act , which were passed during the first Trump administration. President Trump has also floated further cuts to the corporate income tax rate, among other proposals. These reforms would come with a hefty price tag. The Congressional Budget Office projects that extending the expiring TCJA provisions alone would increase the deficit by over $4 trillion (Congressional Budget Office, Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues (May 2024)).

This price tag is particularly significant because any tax legislation will likely need to be passed through the budget reconciliation process. This process, which has in recent years become the path for most major legislation, allows Congress to pass legislation by a simple majority, bypassing the threat of a filibuster in the Senate. But to qualify for this streamlined approach, the bill must meet both budgetary and content requirements.

On the budgetary front, the bill must not increase the deficit by more than a particular cap over a budget window (typically, 10 years). This cap is set by the House and Senate budget committees, which issue a reconciliation instruction stating that the bill cannot add more than a certain amount to the federal deficit. For example, the reconciliation instruction for the TCJA set the cap at $1.5 trillion. However, as noted above, the cost of extending the expiring TCJA provisions is significantly larger—more than $4.5 trillion over a 10-year period, according to estimates prepared by the federal government. Issuing a reconciliation instruction for that amount (or more) would likely face resistance from deficit hawks within the Republican party.

The budgetary impact of the Republicans’ main priority — extending the TCJA — means that further cuts to the corporate tax rate and any removal or reform of CAMT would be difficult to achieve without including provisions that raise substantial amounts of revenue, thus bringing the total cost down to a more palatable amount. When originally enacted as part of the Inflation Reduction Act, the Joint Committee on Taxation scored the CAMT as raising $222 billion from 2023 to 2032. Thus, even though CAMT is unpopular amongst Republicans, they may opt to keep it in the Code in order to keep the cost of the bill within the reconciliation instruction cap. The fate of CAMT will likely come down to budgetary math.

Fate of Proposed CAMT Regulations in the New Administration

If CAMT is not repealed as part of the anticipated tax bill, the new administration will have a major, unfinished project on its hands. The piecemeal interim guidance and massive proposed regulation package released during the Biden administration demonstrated that the CAMT regime is exceedingly complex and difficult to get across the finish line. This will likely prove an even more difficult endeavor when led by an administration that doesn’t like the provision much in the first place. We anticipate that finalizing the proposed CAMT regulations may not be high on the priority list for IRS and Treasury, especially if any new provisions in the forthcoming tax bill require significant guidance. Final CAMT regulations could be a long ways away.

In the meantime, taxpayers are left with proposed regulations and sub-regulatory guidance. Taxpayers are generally not bound by regulations that are in proposed form. Abiding by proposed regulations can be a safe approach amid uncertainty, especially during long waits for final guidance. If the proposed regulations or portions thereof are finalized at a future date without modification, Treasury may argue that the final regulations are applicable to the years where the proposed regulations were published in the Federal Register and only available in proposed form.

As a practical matter, this means that taxpayers may continue to be in the position of working with their return preparers to apply the statute without the benefit of final guidance and will continue to consider whether to apply the proposed regulations in preparing their returns. During this liminal period, different taxpayers may reach different conclusions in applying CAMT.

It is likely that, due to turnover in the IRS and Treasury, there will be some changes to the personnel responsible for working on the CAMT regulations. Though the comment period was extended to January 16, 2025, there may be additional opportunities to engage with the new team to advocate for modifications or new guidance after that date. Due to the complexity of the regime, any new members to the Treasury and IRS team responsible for CAMT will likely take time to get up to speed with the full impact and complexity of the proposed regulations, as well as any concerns raised by taxpayers during the comment period. The change in administration and personnel may present an opportunity to highlight the practical effects of the proposed CAMT regulations for new decisionmakers.

Conclusion

Though the results of the 2024 election would suggest that Biden-era tax provisions like CAMT will be on the chopping block, the budget constraints of the reconciliation process could force Republicans to keep CAMT in the Code. The proposed CAMT regulations therefore remain important, especially if final guidance is delayed significantly. Opportunities may arise to engage with new decision-makers to discuss the practical effect of the proposed CAMT regulations and shape more helpful final guidance.

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

Author Information

Alexandra Minkovich is a partner in Baker McKenzie LLP’s Washington, D.C. office.