Proposed regulations to implement the corporate alternative minimum tax would “severely complicate” the compliance and reporting process for banks and partnerships investing in important social and environmental projects, and they would create an extensive compliance burden for community development project sponsors organized as partnerships for tax purposes, the American Bankers Association said today in a letter to the IRS.
The Treasury Department and IRS in September released proposed regulations concerning the implementation of the corporate alternative minimum tax, or CAMT. The proposal incorporated an ABA request addressing the potential application of the CAMT to federal financial assistance for transactions involving bank takeovers of troubled financial institutions, and the association said in its letter that the draft regulations provide useful guidance in several areas. But ABA has concerns with the proposal’s requirements for calculating adjusted financial statement income for investments in partnerships. The proposal outlines six steps that each partner must take to determine its share of a partnership’s ASFI.
“In the case of tiered partnerships, in which many banks invest, these six steps must be repeated by each partnership that owns an interest in another partnership, beginning at the bottom of the ownership chain,” ABA said.
ABA’s recommendation for fixing the issue is to use financial statement income — i.e. book income — for investments made under the equity method of accounting, including the Proportional Amortization Method. “There would be no potential for abuse if Treasury and the IRS used book income, as following AFSI of the CAMT entity is consistent with the policy of CAMT as intended: to reflect a minimum tax on financial statement income of each applicable corporation,” ABA said.
