Internal Revenue Bulletin No. 2025–44

## Bulletin Snapshot: CAMT Relief and Admin Updates

This edition of the Internal Revenue Bulletin (IRB) 2025-44, released October 27, 2025, provides crucial guidance to taxpayers and practitioners. In line with the IRS mission "to provide America’s taxpayers top-quality service by helping them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all," this bulletin offers both compliance relief and administrative updates. Key highlights include interim guidance designed to alleviate the compliance burden associated with the Corporate Alternative Minimum Tax (CAMT) and the annual procedural updates for substitute tax forms.

Specifically, Notice 2025-49 addresses pressing concerns regarding the application of the CAMT, established by the Inflation Reduction Act (IRA) of 2022 and codified in Sections 55, 56A, and 59 of the Internal Revenue Code (IRC). These code sections together impose a 15% minimum tax on the Adjusted Financial Statement Income (AFSI) of applicable corporations, generally those with average annual AFSI exceeding $1 billion over a three-year period. The notice provides much-needed adjustments to AFSI calculations and clarifies applicability dates, offering a degree of certainty amid ongoing regulatory development.

Furthermore, Revenue Procedure 2025-27 updates the guidelines for substitute tax forms and schedules, superseding Rev. Proc. 2024-33. This procedure, which effectively provides the next revision of Publication 1167, outlines the requirements for developing, printing, and securing IRS approval for these substitute forms. This annual update is vital for tax professionals and software developers ensuring compliance with IRS specifications.

## Notice 2025-49: The CAMT Compliance Reprieve

Following Revenue Procedure 2025-27, which updates the guidelines for substitute tax forms and schedules, Notice 2025-49 offers a measure of certainty amid ongoing regulatory development.

Notice 2025-49, issued on September 30, 2025, provides additional interim guidance concerning the Corporate Alternative Minimum Tax (CAMT) established by Section 10101 of the Inflation Reduction Act of 2022, which amended Section 55 of the Internal Revenue Code. The CAMT, found in Sections 55, 56A, and 59, imposes a 15% minimum tax on the Adjusted Financial Statement Income (AFSI) of applicable corporations—generally, those with average annual AFSI exceeding $1 billion over a three-year period. Recognizing the complexities and compliance burdens associated with the CAMT, and in response to numerous comments, the IRS is offering a temporary reprieve by relaxing the applicability dates and reliance rules associated with proposed regulations.

The primary impetus for Notice 2025-49 is the Treasury Department and IRS's intent to partially withdraw the initial CAMT Proposed Regulations (REG-112129-23) and issue revised proposed regulations. This action is driven by feedback from tax practitioners and corporations, which highlighted the challenges of complying with complex rules based on the initial publication date rather than the finalization date. Sections 1 through 3 of the Notice specifically address the applicability dates and reliance rules.

The 'reliance' rules are pivotal. Previously, taxpayers faced restrictions on selectively adopting portions of the CAMT Proposed Regulations. The new guidance significantly eases these constraints. For taxable years beginning before the date the corresponding final regulation is published in the Federal Register, taxpayers can generally rely on any section of the CAMT Proposed Regulations, provided they consistently follow that section in its entirety for all such taxable years. This flexibility extends to relying on sections as modified by subsequent guidance, including the interim guidance within Notice 2025-49 itself, as well as guidance provided in Notice 2025-27, Notice 2025-28, and Notice 2025-46.

However, there are exceptions. Specifically, a taxpayer may rely on proposed Section 1.56A-4 (AFSI adjustments and basis determinations with respect to foreign corporations) or 1.56A-6 (AFSI adjustments with respect to CFCs) only if the taxpayer also consistently follows proposed Sections 1.56A-8 (AFSI adjustments for certain Federal and foreign income taxes) and 1.59-4 (CAMT foreign tax credit).

The interplay with previous Notices is also crucial. Notice 2025-27 provides a simplified method for determining applicable corporation status and waives certain penalties under Section 6655 related to CAMT liability. Notice 2025-28 addresses AFSI calculations for investments in partnerships. Notice 2025-46 provides interim guidance on the application of the CAMT to domestic corporate transactions, troubled companies, tax consolidated groups, acquired FSNOLs, and certain built-in items. Taxpayers relying on the specific guidance within these prior notices are not required to adhere to any section of the CAMT Proposed Regulations unless explicitly mandated by those Notices.

Finally, corporations must include a statement with their Form 4626, Alternative Minimum Tax—Corporations, describing their approach to completing the form and the specific guidance they relied upon.

In essence, Notice 2025-49 acts as a bridge, granting taxpayers greater flexibility in navigating the CAMT landscape until final regulations are issued. It reduces the immediate pressure to comply with potentially changing rules and allows for a more phased and informed approach to CAMT compliance. This is a welcome development for tax practitioners and corporations grappling with the complexities of this new tax regime.

## Valuation & Utilities: Solving the Book-Tax Mismatch

Following the flexibility offered for shipping income, Notice 2025-49 addresses book-tax differences arising from specific accounting methods, particularly concerning valuation and utilities. Sections 4 and 5 of the Notice provide targeted relief related to regulated operations and fair value accounting, aiming to prevent unintended CAMT burdens.

### Relief for Regulated Operations: ASC 980

Section 4 of Notice 2025-49 focuses on providing an adjustment to Adjusted Financial Statement Income (AFSI) for CAMT entities subject to Accounting Standards Codification (ASC) 980, which governs the accounting for "Regulated Operations." ASC 980 (formerly SFAS 71) allows rate-regulated entities to defer certain costs (as regulatory assets) or revenues (as regulatory liabilities) that would otherwise be recognized in the current period under standard Generally Accepted Accounting Principles (GAAP). This accounting treatment is predicated on the "regulatory compact," ensuring that the financial statements reflect the economic impact of rate-making actions by a regulator. ASC 980 applies to entities with operations subject to rate-making or other forms of price control by a regulatory body. These regulated entities, often utilities, face unique accounting challenges because they capitalize certain costs as "regulatory assets" on their financial statements that might be expensed immediately for tax purposes. A common example is the capitalization of repairs and maintenance costs that are currently deductible under Section 162, which allows deductions for ordinary and necessary business expenses.

The Notice defines a "CAMT entity subject to ASC 980" as one that has regulated operations meeting the criteria of ASC 980-10-15-2 and prepares its financial statements (AFS) according to GAAP, including ASC 980. An "eligible regulatory asset" is defined as any cost attributable to tangible property repairs or maintenance that is capitalized under ASC 980-340-25-1 and subject to depreciation for AFS purposes. The adjustment is *not* available for costs capitalized under other GAAP provisions or any costs required to be capitalized under Section 263(a), which outlines the rules for capitalizing improvements to tangible property.

The core of the relief lies in allowing these CAMT entities to adjust their AFSI calculation. Specifically, AFSI can be reduced by the amount of costs incurred under GAAP and capitalized as eligible regulatory assets during the tax year under ASC 980-340-25-1. This reduction is permitted only to the extent that these costs are not otherwise required to be capitalized for AFS purposes under any other GAAP rule, standard, or procedure, and are not required to be capitalized under Section 263(a) for regular tax purposes. Additionally, the AFSI can be adjusted to disregard "regulatory asset book COGS depreciation" and "regulatory asset book depreciation expense" related to these eligible regulatory assets.

The Notice provides further clarification on determining the "regulatory asset book COGS depreciation" adjustment. Generally, a CAMT entity subject to ASC 980 must apply the same methods of accounting it uses for AFS purposes to determine regulatory asset book inventoriable depreciation. However, the Notice allows some flexibility, permitting the use of any reasonable method to determine regulatory asset book inventoriable depreciation, provided it is consistent with and reflects the accounting methods used for AFS purposes. For entities using the Last-In-First-Out (LIFO) method for inventories, a reasonable method includes one similar to that provided in proposed Section 1.56A-15(d)(3)(ii)(C).

If a CAMT entity makes the AFSI adjustment for eligible regulatory assets, it must include a statement with its Federal income tax return. This statement, titled “AFSI adjustment for eligible regulatory assets,” must include the entity's name, address, taxpayer identification number, a statement confirming the use of a reasonable method to determine regulatory asset book inventoriable depreciation, a description of the method used, and a declaration that the method is consistent with AFS accounting.

A consistency requirement is also imposed: if a CAMT entity makes this AFSI adjustment, it must continue to do so for all subsequent taxable years until all eligible regulatory assets are disposed of for regular tax purposes, or until the Treasury Department and IRS prescribe otherwise. Finally, for purposes of determining applicable corporation status under Section 59(k)(1)(B), which defines an applicable corporation as one with average annual AFSI exceeding $1 billion over a three-year period, AFSI is determined *without* regard to this adjustment.

The implications for utility types can vary. For example, electric utilities often focus on volatility in fuel prices and infrastructure recovery, potentially creating regulatory assets for storm damage restoration or energy conservation programs. Gas utilities are driven by commodity price fluctuations and safety mandates, potentially creating regulatory assets for deferred fuel costs or pipeline integrity projects. Water utilities are heavily influenced by long-term infrastructure and environmental compliance, potentially creating regulatory assets for environmental remediation or infrastructure deferrals.

### Fair Value and Hedges: The FVI Exclusion Option

Beyond regulated operations, the Notice addresses concerns related to the inclusion of unrealized gains and losses from fair value accounting in AFSI. Many companies use fair value accounting for financial reporting purposes, which requires certain assets and liabilities to be reported at their current market value. However, these values may fluctuate significantly without any corresponding realization for tax purposes. The inclusion of these unrealized gains and losses in AFSI could lead to a CAMT liability even when the company has not generated actual taxable income.

To address this, Notice 2025-49 introduces the "FVI Exclusion Option" and the "Hedge Coordination Option." These options provide relief for taxpayers by allowing them to exclude or coordinate the treatment of certain "Fair Value Items" (FVIs) in the calculation of AFSI. A "Fair Value Item" is defined as any asset or liability that is marked to market on the company's applicable financial statement (AFS). This generally refers to instances where the book value reflects fair market value, but the tax basis does not. These options are intended to prevent the imposition of tax on unrealized financial statement gains or losses that are not recognized for regular tax purposes, thereby aligning the CAMT more closely with realized economic income.

The Notice provides interim guidance to address distortions in Adjusted Financial Statement Income (AFSI) caused by unrealized financial statement gains and losses. It introduces two primary elective options to align book-tax timing for items measured at fair value.

#### Fair Value Item (FVI) Exclusion Option
This option allows an "applicable corporation" to adjust its AFSI by disregarding gains and losses from Fair Value Measurement Adjustments for certain assets or liabilities that are not marked-to-market for regular tax purposes. Unrealized gains/losses included in financial statement income (FSI) are removed from AFSI. These amounts are generally deferred rather than permanently excluded, as the cumulative disregarded adjustments are recognized upon a "subsequent adjustment date" (e.g., when the asset is sold or matures).

For example, a corporation might hold a significant portfolio of Bitcoin. Under recent accounting standards (e.g., ASU 2023-08, which created ASC 350-60), digital assets must be measured at fair value each reporting period, with both gains and losses recognized in net income immediately. However, for regular tax purposes, Bitcoin is generally only taxed upon sale. By electing the FVI Exclusion, the corporation removes the unrealized "paper" gains from its AFSI, preventing a CAMT liability on income it has not yet realized in cash. Similarly, a corporation holding debt securities classified as "trading securities" for financial reporting (measured at fair value) but treats them as capital assets for tax (taxed only upon realization). The FVI option allows the corporation to ignore annual market fluctuations in its CAMT calculation. Electing the FVI option, however, requires rigorous tracking of a new "CAMT basis" for assets, which will differ from both book basis and regular tax basis. Industry news highlights that the FVI option is particularly beneficial for the cryptocurrency and fintech sectors to avoid massive, non-cash tax bills during bull markets.

#### Hedge Coordination Option
This option addresses "mismatches" where one leg of a hedge is marked-to-market for book purposes while both legs are marked-to-market for tax purposes. Corporate hedging strategies include currency hedging (using forward contracts or options), fair value hedges (to offset changes in asset or liability value), and cash flow hedges (to manage variable cash flow risk).

If a taxpayer has a hedged item and a corresponding hedge that are both marked-to-market for regular tax (creating offsetting gains and losses), but only *one* is marked-to-market for book purposes, the taxpayer may disregard the fair value adjustment on the book-side item.

For instance, consider a corporation that hedges its foreign currency exposure. For regular tax purposes, both the hedge contract and the underlying transaction are marked-to-market under Section 988 or 1256, resulting in a net-zero or minimal tax impact. Section 988 governs the treatment of certain foreign currency transactions, while Section 1256 addresses mark-to-market rules for regulated futures contracts and other similar instruments. However, the financial statements might only mark the hedge to fair value while keeping the underlying item at cost. Without this option, the "gain" on the hedge would increase AFSI without an offsetting "loss" on the hedged item. The Hedge Coordination Option allows the corporation to disregard that hedge gain in AFSI, maintaining the neutral "offsetting" effect found in regular tax rules.

While Notice 2025-49 provides relief, it is not automatic. Taxpayers must attach a specific statement to their return and apply the choice consistently to *all* eligible items, creating a "lock-in" effect that requires careful modeling before election.

## Niche Relief: Shipping, Insurance, and M&A Goodwill

Following the guidance on Fair Value Items and the options for managing book-tax differences in their calculation of AFSI, this section will cover industry-specific adjustments to the CAMT contained in Notice 2025-49. Sections 6 through 10 provide relief for businesses in the shipping and insurance industries and those that have engaged in M&A activity. The rules also provide a correction for an inconsistency in the treatment of Net Operating Losses (NOLs).

### Tonnage Tax and CAMT: A Subchapter R Solution

Section 6 of Notice 2025-49 addresses the interaction between the CAMT and the Tonnage Tax regime under Subchapter R (Sections 1352 through 1359 of the Internal Revenue Code). Subchapter R, enacted to bolster the U.S. shipping industry, allows qualifying vessel operators to elect to be taxed on "notional shipping income" rather than their actual income. This notional income is based on the net tonnage of their vessels.

The Notice anticipates upcoming proposed regulations under Section 56A(c)(15) and (e) that will provide AFSI adjustments for CAMT entities subject to Subchapter R. Specifically, the guidance applies to CAMT entities that are electing corporations as defined in Section 1355(a)(1) or members of an electing group as defined in Section 1355(a)(2).

The adjustments are designed to prevent double taxation or unintended consequences arising from the difference between the regular tax treatment under the Tonnage Tax regime and the financial statement presentation. First, the AFSI of a CAMT entity is adjusted to disregard any item of income on the entity’s Applicable Financial Statement (AFS) that corresponds to income excluded from gross income under Section 1357(a) or (b). Second, AFSI is adjusted to disregard any expense, loss, or other reduction on the AFS that corresponds to a deduction, credit, or loss disallowed under Section 1357(c)(1) or 1358(b). Interest expense disallowed under Section 1357(c)(3) is also disregarded.

Moreover, the gain or loss on the AFS from the disposition of a qualifying vessel (as defined by Section 1355(a)(4)) is disregarded. Instead, AFSI is adjusted to include any gain or loss for regular tax purposes resulting from the disposition of such vessel, considering the rules of Section 1357(c)(2). Finally, AFSI is *increased* by the CAMT entity’s notional shipping income for the year, as determined under Section 1353. Section 1353 specifies that the daily notional shipping income for each qualifying vessel is the sum of $0.40 per 100 net tons for the first 25,000 tons and $0.20 per 100 net tons for any tonnage exceeding 25,000 tons. For purposes of the average annual AFSI test under Section 59(k)(1)(B), AFSI is determined *without* regard to these adjustments. This provision will apply to taxable years beginning on or after the date the final regulations are published. However, CAMT entities subject to the tonnage tax regime may rely on this guidance for taxable years ending before that date, provided they apply Section 6 in its entirety.

For example, a 35,000-ton vessel operating for 365 days would calculate its notional shipping income as follows: First 25,000 tons: (25,000 / 100) * $0.40 = $100/day. Excess 10,000 tons: (10,000 / 100) * $0.20 = $20/day. Total = $120/day * 365 = $43,800 annual taxable income.

### Embedded Depreciation Deductions in NOLs

Section 7 of Notice 2025-49 addresses an issue arising from the interaction of depreciation deductions and Net Operating Losses (NOLs) under the CAMT. Specifically, it allows a CAMT entity to reduce AFSI by the portion of an NOL carryover attributable to pre-2020 "embedded depreciation deductions" that are allowed as an NOL deduction for the tax year under Section 172(a), which governs the NOL deduction. This adjustment does *not* apply to computing a Controlled Foreign Corporation's (CFC’s) adjusted net income or loss. The Notice intends to resolve the mismatch between regular tax NOLs and financial statement NOLs.

Several key definitions are important for understanding this adjustment. A "pre-CAMT NOL" is an NOL, as determined under Section 172(c), arising in a taxable year ending on or before December 31, 2019. "Historical tax depreciation" means the amount of deductible tax depreciation and tax Cost of Goods Sold (COGS) depreciation taken into account in determining the pre-CAMT NOL. "Deductible tax depreciation" and "tax COGS depreciation" have the same meaning as provided in proposed regulations Section 1.56A-15(b)(5) and Section 1.56A-15(b)(7), respectively. The "eligible NOL deduction" is the amount of the pre-CAMT NOL carried forward and allowed as a deduction under Section 172(a) in computing taxable income for the tax year.

The CAMT entity may use any reasonable approach to determine the portion of an eligible NOL deduction that is attributable to historical tax depreciation (the "historical depreciation portion"). The Notice deems two approaches as reasonable: the "Proportional Approach" and the "Lesser-of Approach." Under the Proportional Approach, the historical depreciation portion of an eligible NOL deduction is calculated by multiplying the eligible NOL deduction by the "applicable depreciation percentage." The applicable depreciation percentage is the fraction where the numerator is the CAMT entity’s historical tax depreciation for the pre-CAMT NOL year, and the denominator is the sum of the CAMT entity’s total cost of goods sold and total deductions allowed in computing taxable income for that pre-CAMT NOL year.

Under the "Lesser-of Approach," the historical depreciation portion of an eligible NOL deduction is the lesser of (1) the amount of the "remaining depreciation carryforward" for the pre-CAMT NOL as of the beginning of the tax year or (2) the amount of the eligible NOL deduction attributable to the pre-CAMT NOL for such tax year. The "original depreciation carryforward" for the pre-CAMT NOL is the *lesser* of the amount of the CAMT entity’s historical tax depreciation for the pre-CAMT NOL year *or* the amount of the pre-CAMT NOL for that year. The "remaining depreciation carryforward" is then calculated as the original depreciation carryforward *minus* the cumulative amounts attributable to that pre-CAMT NOL that reduced AFSI in prior taxable years.

If a CAMT entity makes this AFSI adjustment, it must attach a statement to its Federal income tax return, titled "AFSI adjustment for embedded depreciation deductions," providing specific details, including the pre-CAMT NOL year, the approach used, and the amount of the historical depreciation portion. Consistency is required; once an approach is chosen for a pre-CAMT NOL, it must be used in all subsequent years. For purposes of applying the average annual AFSI test in Section 59(k)(1)(B), AFSI is determined without regard to this adjustment.

The guidance provided in this section may be relied upon for taxable years beginning before the date the forthcoming proposed regulations are published in the Federal Register.

### Nonlife Insurance Company NOL Carrybacks

Section 8 of Notice 2025-49 provides relief for nonlife insurance companies concerning NOL carrybacks. It allows an "eligible CAMT entity" (a nonlife insurance company) to make certain adjustments to AFSI for nonlife insurance company NOL carrybacks. Section 172(b)(1)(C)(i) allows for a two-year carryback of losses for non-life insurance companies.

If an eligible CAMT entity takes an NOL deduction for regular tax purposes on an "eligible return" (an amended return or application for tentative carryback adjustment) for an NOL carryback year, the AFSI for such year is *reduced* by the NOL deduction taken for regular tax purposes. However, if an eligible CAMT entity reduces AFSI by an NOL carryback amount, there is a corresponding *increase* to AFSI in one or more later taxable years equal to the absolute value of the reduction. The entire amount of this "NOL inclusion" is carried to the first taxable year succeeding the loss year of the nonlife insurance company NOL. For such year, AFSI is increased by the *lesser* of (1) the remaining NOL inclusion as of the beginning of the tax year or (2) the absolute value of any reduction to AFSI taken into account for the tax year under Section 56A(d), governing adjustments to taxable income, or proposed Section 1.56A-23(c), regarding financial statement net operating losses.

For purposes of applying the average annual AFSI test in Section 59(k)(1)(B), AFSI is determined without regard to the AFSI adjustments provided in this section. The guidance in this section may be relied upon for taxable years beginning before the date the forthcoming regulations are published in the Federal Register.

### Amortization of Goodwill Under Section 197

Section 9 of Notice 2025-49 addresses the amortization of goodwill under Section 197, which governs the amortization of intangible assets. This section is particularly relevant for companies engaged in mergers and acquisitions (M&A). Under Section 197, acquired goodwill is amortized ratably over 15 years (180 months) starting the month of acquisition. Notice 2025-49 permits a CAMT entity to adjust AFSI for "eligible goodwill" that is amortizable under Section 197(c)(1) and (d)(1)(A) and acquired in a transaction that was announced to the public *on or before October 28, 2021* (the date the House released the first version of the legislative text of H.R. 5376 that contained the CAMT) or, if not announced, *closed and completed on or before October 28, 2021*.

"Eligible goodwill" means goodwill that is an amortizable Section 197 intangible under Section 197(c)(1) and (d)(1)(A) and meets the announcement or closing date requirements. The AFSI of a CAMT entity for a tax year may be (1) *reduced* by deductible goodwill tax amortization with respect to eligible goodwill (to the extent allowed as a deduction in computing taxable income) and (2) adjusted to *disregard* "covered book goodwill amortization expense" and "covered book goodwill expense."

"Covered book goodwill amortization expense" includes amortization expense, other recovery of AFS basis (including from an impairment loss), or impairment loss reversal, taken into account in Financial Statement Income (FSI) with respect to eligible goodwill. "Covered book goodwill expense" means an amount, other than covered book goodwill amortization expense, that reduces FSI and is reflected in the basis for depreciation of eligible goodwill for regular tax purposes. The adjustment allows for the deduction of the tax amortization under Section 197, while eliminating the book amortization, thereby reconciling the book-tax difference.

Financial statements often do not amortize goodwill, instead testing it for impairment. This difference between financial statement accounting and tax accounting can create CAMT liability exposure. If a CAMT entity chooses to make this adjustment and has eligible goodwill attributable to more than one qualifying transaction, the entity must make the AFSI adjustment with respect to *all* such eligible goodwill. Moreover, once the adjustment is chosen, it must be consistently applied until all such eligible goodwill is disposed of for regular tax purposes.

Upon disposition of eligible goodwill, the CAMT entity must adjust AFSI for the year of disposition to redetermine any gain or loss taken into account in its FSI by reference to the CAMT basis (in lieu of the AFS basis) of the eligible goodwill as of the disposition date. The CAMT basis is the AFS basis adjusted for (1) decreases for eligible goodwill tax amortization, (2) increases for any covered book goodwill expense, and (3) increases for any covered book goodwill amortization expense.

For purposes of applying the average annual AFSI test in Section 59(k)(1)(B), AFSI is determined without regard to these adjustments. The guidance provided in this section may be relied upon for taxable years beginning before the date the forthcoming regulations are published in the Federal Register.

## Rev. Proc. 2025-27: The Rules of Reproduction

Revenue Procedure 2025-27, which supersedes Revenue Procedure 2024-33, provides the updated guidelines and general requirements for developing, printing, and securing IRS approval of substitute tax forms for the 2025 tax year. This Revenue Procedure is essentially the next revision of Publication 1167.

**The Rule:**
The IRS annually updates its requirements for substitute forms to ensure consistent and accurate data capture and processing. Vendors and tax practitioners who create their own tax forms must adhere to these strict guidelines to guarantee the IRS accepts the forms.

**The Context:**
The Internal Revenue Service (IRS) uses Rev. Proc. 2025-27 to maintain a standard for the thousands of software vendors and tax professionals creating substitute tax forms, schedules, and payment vouchers. These standards support efficient processing, minimize errors, and adapt to changes in technology and tax law. As the IRS relies increasingly on automated scanning (OCR and ICR) and electronic data capture, adherence to these specifications becomes critical. Failure to comply can result in processing delays or outright rejection of tax filings.

**The Implication:**
Tax practitioners and software developers must carefully review and implement the requirements of Rev. Proc. 2025-27 to avoid potential penalties and ensure their clients' tax returns are processed smoothly. Key requirements include:

*   **Paper Stock and Ink:** Use of chemical wood writing paper of specified weight (at least 18 pound) and printing in black ink. Specified fonts, OCR A, OCR B, or Courier 10.
*   **Margins:** Strict adherence to margin requirements (typically 0.5 inch to 0.25 inch on all sides) to accommodate IRS processing needs. Note that printing in the top right margin of the tax return form (e.g., Form 1040) is *prohibited* as the IRS uses this space for the Document Locator Number.
*   **Form Dimensions:** Maintaining precise form dimensions.
*   **Font and Type Size:** Using specified fonts and type sizes for data entries. Entries of taxpayer data may be no smaller than 8 points.
*   **OCR and ICR Compliance:** Designing forms that comply with optical character recognition (OCR) and image character recognition (ICR) standards, when applicable.
*   **Voucher Specifications:** Adhering to specific guidelines for payment vouchers, including scan line placement, font usage (OCR A), and paper weight. The vouchers must be imaged in black ink using OCR A, OCR B, or Courier 10.
*   **No State Tax Data:** Prohibition on including state tax information on federal forms (with limited exceptions).
*    **2-D Bar Codes for Schedule K-1:** Special rules for Schedule K-1 substitute forms, particularly those with 2-D bar codes, which require rigorous testing and alignment with IRS specifications. Ensure the 6-digit form ID code is included in the upper right of the Schedules K-1.
*   **"See attached statement for additional information."** A preprinted warning must be included in the lower right-hand side on Schedules K-1 of Forms 1041, 1065, and 1120-S.

The Revenue Procedure also highlights the "20-business-day" approval policy for electronic submissions of substitute forms. This means the IRS aims to review and approve submissions within 20 business days of receipt, particularly for forms that have not been substantially changed. However, this policy does *not* apply to newly created or substantially revised forms and relies on the submitter having made accurate submissions with proper formating. The IRS has been known to contact vendors even after 20 business days have elapsed to inform them of any inaccuracies.

### IFRS and its Relevance to CAMT

International Financial Reporting Standards (IFRS) are the principles-based accounting standards issued by the International Accounting Standards Board (IASB). Under IRC Section 56A(b) and Notice 2023-64, the IRS defines the "Applicable Financial Statement" (AFS) used as the starting point for CAMT. IFRS holds a high priority in this hierarchy: U.S. GAAP has the highest priority, followed by IFRS for taxpayers who do not file GAAP statements but file IFRS statements with foreign regulators or the SEC, and lastly, other regulatory or government statements. IFRS-based corporations face unique CAMT challenges due to specific accounting differences from U.S. GAAP. Unlike GAAP, IFRS permits the "revaluation model" for fixed and intangible assets (IAS 16). Corporations may write up assets to fair value, creating book income that would increase AFSI and trigger CAMT. IFRS also allows the reversal of previous impairment losses if an asset's value recovers (IAS 36), while U.S. GAAP prohibits such reversals; these reversals appear as income in IFRS financial statements and would be included in AFSI. Moreover, IFRS prohibits the "Last-In, First-Out" (LIFO) inventory method. Since regular tax often relies on LIFO for significant tax deferrals, IFRS-reporting companies will have a structurally higher AFSI compared to their regular taxable income, potentially making them "perpetual" CAMT payers. Finally, IFRS recognizes contingent liabilities (provisions) when the likelihood of loss is >50% ("more likely than not"), whereas U.S. GAAP typically requires a higher threshold (approx. >75%), which can lead to earlier expense recognition—and thus lower AFSI—under IFRS compared to GAAP.

### Legal Research & Precedents (2020–Present)

Since CAMT (enacted 2022) is relatively new, few cases have reached final adjudication. However, recent Tax Court and Appellate activity provides a framework for how judges are interpreting "book-tax" discrepancies and "plain text" statutory mandates. Notice 2025-49 specifically authorizes the FVI and Hedge options to prevent "non-economic" results. In *Aventis, Inc. v. Comm'r (166 T.C. No. 1, 2026)*, the court rejected a complex securitization structure (FASIT), emphasizing that statutory compliance must be exact, suggesting the Tax Court will strictly scrutinize "reasonable methods" used in CAMT adjustments. *Sirius Solutions, L.L.L.P. v. Comm'r (5th Cir. 2026)*, reversing the Tax Court, held that courts must follow the "plain text" of the Code rather than a "functional analysis," which provides a critical defense for taxpayers relying on the literal wording of Section 56A adjustments. *Soroban Capital Partners LP v. Comm'r (T.C. Memo 2025-52)*, addressed whether partners are "limited partners" for self-employment tax, is relevant because CAMT requires complex "look-through" adjustments for partnership income under Sec. 56A(c)(2)(D). Furthermore, in *3M Co. v. Commissioner (8th Cir., Oct. 2025)*, the court held that the IRS could not use IRC § 482 (which allows the IRS to reallocate income) to allocate royalty income to a U.S. parent when Brazilian law prohibited the subsidiary from paying it; this case reinforces the "dominion and control" standard for income recognition. The case of *Liberty Global v. United States (10th Cir., Ongoing/2025)* regards the Economic Substance Doctrine (IRC § 7701(o)), and the court is examining whether complex cross-border reorganizations designed to exploit TCJA tax-free repatriation (Section 245A) must have a non-tax business purpose to be valid. Finally, the Tax Court case of *JM Assets, LP v. Commissioner (165 T.C. No. 1, July 2025)*, struck down a Treasury regulation that attempted to extend the IRS's period for partnership adjustments, emphasizing that regulations cannot conflict with the plain language of the Code (IRC § 6235).