Bulletin No. 2026–11

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2026–11

March 9, 2026

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

ADMINISTRATIVE

Notice 2026-7, page 637.

This notice provides additional interim guidance regarding

the application of the corporate alternative minimum tax

(CAMT). The CAMT was added to title 26 of the United

States Code (Internal Revenue Code) by the Inflation Reduction Act of 2022 and generally applies to large corporations

for taxable years beginning after 2022. Specifically, this

notice provides rules for certain adjustments to adjusted

financial statement income (AFSI), rules for financially troubled companies, and anti-abuse rules for certain covered

asset transactions. In addition, the notice addresses certain CAMT consequences of transactions involving intangible property subject to section 367(d). This notice also

addresses applicability dates and the ability of taxpayers

to rely on the interim guidance provided in Notice 2025-49

and this notice.

AMINISTRATIVE, INCOME TAX

Notice 2026-15, page 658.

Notice 2026-15 provides guidance under §§ 45X, 45Y, and

48E of the Internal Revenue Code (Code) for determining

a qualified facility’s, energy storage technology’s, or eligible component’s material assistance cost ratio (MACR) for

purposes of determining whether there was material assistance from a prohibited foreign entity (PFE). This notice also

provides limited general guidance related to the definition

of a PFE and requests comments regarding definitional,

anti-circumvention, and other issues for future guidance.

EMPLOYEE PLANS

Announcement 2026-7, page 697.

This Announcement provides that IRS and the Treasury

Department anticipate that certain portions of future final

regulations relating to required minimum distributions under

Finding Lists begin on page ii.

section 401(a)(9) will apply for the distribution calendar

year that begins no earlier than 6 months after the date

that final regulations are issued in the Federal Register. In

the interim, the Announcement states that taxpayers must

apply a reasonable good-faith interpretation of the statutory

provisions underlying the regulations.

Notice 2026-14, page 654.

This notice sets forth updates on the corporate bond

monthly yield curve, the corresponding spot segment rates

for January 2026 used under § 417(e)(3)(D), the 24-month

average segment rates applicable for February 2026, and

the 30-year Treasury rates, as reflected by the application

of § 430(h)(2)(C)(iv).

INCOME TAX

Notice 2026-16, page 685.

This notice announces forthcoming proposed regulations

under § 168(n) of the Internal Revenue Code, as added by

Public Law 119-21, 139 Stat. 72 (July 4, 2025), commonly

known as the One, Big, Beautiful Bill Act, that will include

rules similar to the interim guidance provided in this notice

regarding the application of the special depreciation allowance for qualified production property. Specifically, the

interim guidance: (i) provides guidance addressing the definition of “qualified production property”; (ii) provides guidance addressing the definition of “qualified production activity” and related terms; (iii) provides guidance addressing

relevant special rules; (iv) provides the procedures for making an election to designate eligible property as qualified

production property; and (v) provides guidance addressing

depreciation recapture due to a change in use of qualified

production property.

Rev. Rul. 2026-6, page 635.

Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes

of sections 382, 1274, 1288, 7872 and other sections of

the Code, tables set forth the rates for March 2026.

The IRS Mission

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.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

March 9, 2026 

Bulletin No. 2026–11

Part I

Section 1274.—

Determination of Issue

Price in the Case of Certain

Debt Instruments Issued for

Property

(Also Sections 42, 280G, 382, 467, 468, 482, 483,

1288, 7520, 7702, 7872.)

Rev. Rul. 2026-6

This revenue ruling provides various

prescribed rates for federal income tax

Annual

AFR

110% AFR

120% AFR

130% AFR

3.59%

3.96%

4.32%

4.68%

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

3.93%

4.33%

4.72%

5.12%

5.93%

6.93%

AFR

110% AFR

120% AFR

130% AFR

4.72%

5.21%

5.68%

6.16%

Short-term adjusted AFR

Mid-term adjusted AFR

Long-term adjusted AFR

Bulletin No. 2026–11

purposes for March 2026 (the current

month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current

month for purposes of section 1274(d)

of the Internal Revenue Code. Table 2

contains the short-term, mid-term, and

long-term adjusted applicable federal

rates (adjusted AFR) for the current

month for purposes of section 1288(b).

Table 3 sets forth the adjusted federal long-term rate and the long-term

tax-exempt rate described in section

382(f). Table 4 contains the appropri-

ate percentages for determining the

low-income housing credit described in

section 42(b)(1) for buildings placed in

service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service

after July 30, 2008, shall not be less

than 9%. Finally, Table 5 contains the

federal rate for determining the present

value of an annuity, an interest for life

or for a term of years, or a remainder or

a reversionary interest for purposes of

section 7520.

REV. RUL. 2026-6 TABLE 1

Applicable Federal Rates (AFR) for March 2026

Period for Compounding

Semiannual

Quarterly

Short-term

3.56%

3.54%

3.92%

3.90%

4.27%

4.25%

4.63%

4.60%

Mid-term

3.89%

3.87%

4.28%

4.26%

4.67%

4.64%

5.06%

5.03%

5.84%

5.80%

6.81%

6.75%

Long-term

4.67%

4.64%

5.14%

5.11%

5.60%

5.56%

6.07%

6.02%

Annual

2.72%

2.97%

3.58%

REV. RUL. 2026-6 TABLE 2

Adjusted AFR for March 2026

Period for Compounding

Semiannual

2.70%

2.95%

3.55%

635

Quarterly

2.69%

2.94%

3.53%

Monthly

3.53%

3.89%

4.23%

4.59%

3.86%

4.24%

4.63%

5.01%

5.77%

6.72%

4.63%

5.09%

5.54%

5.99%

Monthly

2.68%

2.93%

3.52%

March 9, 2026

REV. RUL. 2026-6 TABLE 3

Rates Under Section 382 for March 2026

Adjusted federal long-term rate for the current month

Long-term tax-exempt rate for ownership changes during the current month (the highest of the adjusted federal

long-term rates for the current month and the prior two months.)

3.58%

3.58%

REV. RUL. 2026-6 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for March 2026

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after

July 30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit

8.00%

Appropriate percentage for the 30% present value low-income housing credit

3.43%

REV. RUL. 2026-6 TABLE 5

Rate Under Section 7520 for March 2026

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of years,

or a remainder or reversionary interest

Section 42.—Low-Income

Housing Credit

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2026. See Rev. Rul. 2026-6, page 635.

Section 280G.—Golden

Parachute Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2026. See Rev. Rul. 2026-6, page 635.

Section 382.—Limitation

on Net Operating Loss

Carryforwards and

Certain Built-In Losses

Following Ownership

Change

The adjusted applicable federal long-term rate

is set forth for the month of March 2026. See Rev.

Rul. 2026-6, page 635.

Section 467.—Certain

Payments for the Use of

Property or Services

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2026. See Rev. Rul. 2026-6, page 635.

Section 468.—Special

Rules for Mining and Solid

Waste Reclamation and

Closing Costs

The applicable federal short-term rates are set

forth for the month of March 2026. See Rev. Rul.

2026-6, page 635.

Section 482.—Allocation

of Income and Deductions

Among Taxpayers

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2026. See Rev. Rul. 2026-6, page 635.

4.8%

Section 483.—Interest on

Certain Deferred Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2026. See Rev. Rul. 2026-6, page 635.

Section 1288.—Treatment

of Original Issue Discount

on Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month

of March 2026. See Rev. Rul. 2026-6, page 635.

Section 7520.—Valuation

Tables

The applicable federal mid-term rates are set

forth for the month of March 2026. See Rev. Rul.

2026-6, page 635.

Section 7872.—Treatment

of Loans With BelowMarket Interest Rates

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

March 2026. See Rev. Rul. 2026-6, page 635.

March 9, 2026

636

Bulletin No. 2026–11

Part III

Additional Interim Guidance

Regarding the Application

of the Corporate

Alternative Minimum Tax

Notice 2026-7

SECTION 1. OVERVIEW

This notice provides additional interim

guidance regarding the application of

the corporate alternative minimum tax

(CAMT) under §§ 55, 56A, and 59 of the

Internal Revenue Code (Code).1 Prior to

the publication of any final regulations

relating to the CAMT, the Department

of the Treasury (Treasury Department)

and the Internal Revenue Service (IRS)

intend to issue proposed regulations

(forthcoming proposed regulations) that

are anticipated to include rules similar

to the interim guidance provided in sections 3 through 10 of this notice, Notice

2025-27, 2025-26 I.R.B. 1611 (June 23,

2025), Notice 2025-28, 2025-34 I.R.B.

316 (August 18, 2025), Notice 2025-46,

2025-43 I.R.B. 533 (October 20, 2025),

and Notice 2025-49, 2025-44 I.R.B. 627

(October 27, 2025).

Section 3 of this notice modifies the

interim guidance provided in section 4 of

Notice 2025-49 and addresses an adjustment to adjusted financial statement

income (AFSI)2 for deductible tax repairs

with respect to section 168 property. Section 4 of this notice modifies the interim

guidance provided in section 9 of Notice

2025-49 and addresses an adjustment to

AFSI for § 197 amortization attributable

to certain intangibles. Section 5 of this

notice addresses an adjustment to AFSI

for amortization of domestic research or

experimental expenditures. Section 6 of

this notice addresses an adjustment to

AFSI for certain production costs attributable to film, television, live theatrical,

and sound recording productions. Section

7 of this notice addresses an adjustment

to AFSI for certain low acquisition cost

1

2

tangible property treated as materials and

supplies. Section 8 of this notice clarifies

and modifies the interim guidance for

financially troubled companies provided

in section 4 of Notice 2025-46. Section 9

of this notice addresses modifications to

the anti-abuse rule in proposed § 1.56A-4

of the CAMT Proposed Regulations (as

defined in section 2.03(1) of this notice)

that would apply to certain covered asset

transactions. Section 10 of this notice

addresses certain CAMT consequences

of transactions involving intangible property subject to § 367(d). Section 11 of

this notice addresses applicability dates

and the ability of taxpayers to rely on

the interim guidance provided in Notice

2025-49 and this notice.

SECTION 2. BACKGROUND

.01 Overview of the CAMT. Section

10101 of Public Law 117-169, 136 Stat.

1818, 1818-1828 (August 16, 2022),

commonly known as the Inflation Reduction Act of 2022, amended § 55 to impose

the CAMT based on the AFSI of an applicable corporation for taxable years beginning after December 31, 2022. Section

59(k)(1)(A) provides that, for purposes

of §§ 55 through 59, the term “applicable

corporation” means, with respect to any

taxable year, any corporation (other than

an S corporation, a regulated investment

company, or a real estate investment

trust) that meets the average annual AFSI

test provided in § 59(k)(1)(B) for one

or more taxable years that (1) are prior

to that taxable year, and (2) end after

December 31, 2021.

.02 AFSI under § 56A.

(1) General definition of AFSI. For

purposes of §§ 55 through 59, § 56A(a)

provides that the term “AFSI” means,

with respect to any corporation for any

taxable year, the net income or loss of

the taxpayer set forth on the taxpayer’s

applicable financial statement (AFS) for

that taxable year, adjusted as provided in

§ 56A. Section 56A(c) provides general

adjustments to be made to AFSI.

(2) Provisions of § 56A relevant to the

interim guidance provided in this notice.

(a) Authority of the Secretary to provide necessary adjustments to AFSI. In

addition to the separate delegations of

authority provided to the Secretary of

the Treasury or the Secretary’s delegate

(Secretary) relating to the adjustments

to AFSI specified in paragraphs (2)(B)

through (D), (5), (10), (11), (13), and (14)

of § 56A(c), § 56A(c)(15) authorizes the

Secretary to issue regulations or other

guidance to provide for such adjustments

to AFSI as the Secretary determines necessary to carry out the purposes of § 56A,

including adjustments to prevent the

omission or duplication of any item.

(b) General authority of the Secretary.

Section 56A(e) authorizes the Secretary to

provide such regulations and other guidance as necessary to carry out the purposes of § 56A.

.03 CAMT Proposed Regulations.

(1) In general. On September 13, 2024,

the Treasury Department and the IRS published a notice of proposed rulemaking

(REG-112129-23) in the Federal Register (89 F.R. 75062) that addressed the

application of the CAMT and permitted

taxpayers to rely on the proposed regulations contained therein subject to certain

conditions and limitations. On December

26, 2024, the Treasury Department and

the IRS published in the Federal Register

(89 F.R. 104909) technical corrections to

the proposed regulations set forth in REG112129-23, which together with such proposed regulations are referred to as the

“CAMT Proposed Regulations” in this

notice. Numerous comments were submitted in response to the proposed rules

in §§ 1.56A-1 through 1.56A-27, 1.59-2

through 1.59-4, 1.1502‑2, 1.1502-53, and

1.1502-56A of the CAMT Proposed Regulations (proposed §§ 1.56A-1 through

1.56A-27, 1.59-2 through 1.59-4, 1.15022, 1.1502-53, and 1.1502‑56A), which

comments the Treasury Department and

the IRS continue to consider and study.

(2) Provisions in proposed § 1.56A-4

relevant to the interim guidance provided

Unless otherwise provided, all "section" or "§" references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

Unless otherwise specified, terms used in this notice have the same meaning as in the CAMT Proposed Regulations described in section 2.03 of this notice.

Bulletin No. 2026–11

637

March 9, 2026

in this notice. Proposed § 1.56A-4 would

provide rules concerning foreign corporations. Specifically, proposed § 1.56A-4

would provide rules under § 56A(c)(2)

(C) for determining the amount of AFSI

of a CAMT entity that results solely from

the CAMT entity’s ownership of stock of

a foreign corporation. As relevant for purposes of this notice, proposed § 1.56A-4

would also provide rules under § 56A(c)

(15)(B) for determining the AFSI and

CAMT basis consequences of certain

transactions involving foreign corporations referred to as “covered asset transactions” and rules for adjusting AFSI in

certain circumstances in which basis in

foreign stock received is determined under

§ 358. Proposed § 1.56A-4 would define

covered asset transactions generally as

including two categories of transactions:

(i) those involving a transfer of an asset to,

or by, a foreign corporation, and (ii) those

involving a transfer of foreign stock to, or

by, a domestic corporation. See proposed

§ 1.56A-4(b)(1)(i) and (ii).

Proposed § 1.56A-4(f) would provide

rules that apply to certain cases in which

a CAMT entity receives stock of a foreign

corporation in a covered asset transaction

and the CAMT entity’s basis in the stock

of the foreign corporation for regular tax

purposes is determined under § 358. These

proposed rules would compare the CAMT

basis in the stock of the foreign corporation (which equals its basis for regular tax

purposes under proposed § 1.56A-4(d)

(5)) with a hypothetical CAMT basis. The

hypothetical CAMT basis is computed by

substituting the CAMT basis in the relevant property for the regular tax basis (see

proposed § 1.56A-4(f)(2)). The relevant

property is the property whose basis is

used to determine (in whole or in part) the

basis of the foreign stock for regular tax

purposes. To the extent a CAMT entity’s

basis in the stock of the foreign corporation

received for regular tax purposes exceeds

its hypothetical CAMT basis in that stock,

the CAMT entity would increase its AFSI

for the taxable year in which the foreign

stock is received by the amount of such

excess if either of two requirements is satisfied. See proposed § 1.56A-4(f)(1).

The first requirement would be satisfied if a principal purpose of the covered

asset transaction is to avoid treatment

of the CAMT entity or another CAMT

March 9, 2026

entity as an applicable corporation or

to reduce or otherwise avoid a liability under § 55(a) (proposed principal

purpose rule). The second requirement

would be satisfied if within two years of

the date the stock of the foreign corporation is received, the basis in such stock

of the foreign corporation is taken into

account, in whole or in part, in determining the AFSI of the recipient CAMT

entity or another CAMT entity (proposed

two-year rule). The principles of the proposed two-year rule apply with respect to

any asset whose basis for regular tax purposes is determined in whole or in part by

reference to the basis of the foreign stock

received. For example, if stock of the foreign corporation received is subsequently

transferred in a transaction described in

§ 351(a) to another foreign corporation

in exchange for stock of such other foreign corporation (or if the foreign stock

received is exchanged under § 354 for

stock in another foreign corporation),

then the proposed two-year rule applies

to both the stock of the foreign corporation received in the initial transfer as well

as the stock of the other foreign corporation received in the subsequent transfer.

With respect to the ownership of foreign stock generally, proposed § 1.56A4(c)(1) would provide for adjustments to

a CAMT entity’s AFSI as a result of direct

ownership of stock of a foreign corporation. Specifically, proposed § 1.56A-4(c)

(1)(i) would require a CAMT entity, in

calculating AFSI, to disregard any items

of income, expense, gain, and loss resulting from ownership of stock of the foreign

corporation, including any such items

that result from acquiring or transferring

such stock, reflected in the CAMT entity’s financial statement income (FSI).

Proposed § 1.56A-4(c)(1)(ii) generally

would require the CAMT entity to include

in AFSI any items of income, deduction,

gain, and loss for regular tax purposes

resulting from ownership of stock of the

foreign corporation, including any items

that result from acquiring or transferring such stock, other than any items of

income, deduction, gain, and loss resulting from the application of §§ 78, 250,

951, or 951A.

Proposed § 1.56A-4(c)(2) would provide for adjustments to a CAMT entity’s

AFSI as a result of a transfer of an asset

638

other than stock of a foreign corporation

in a covered asset transaction. Specifically,

proposed § 1.56A-4(c)(2)(i) would require

a CAMT entity, in calculating AFSI, to

disregard any items of income, expense,

gain, and loss with respect to the transferred asset resulting from the covered

asset transaction reflected in the CAMT

entity’s FSI. Proposed § 1.56A-4(c)(2)(ii)

would require the CAMT entity to include

any items of income, deduction, gain, and

loss for regular tax purposes with respect

to the transferred asset resulting from the

covered asset transaction; however, for

this purpose, the amount of each such

item would be computed by substituting

the CAMT entity’s CAMT basis in the

transferred asset for the CAMT entity’s

basis in the transferred asset for regular

tax purposes.

(3) Provisions in proposed § 1.56A-6

relevant to the interim guidance provided

in this notice. Proposed § 1.56A-6 would

provide rules under § 56A(c)(3) regarding

an adjustment to the AFSI of a CAMT

entity for any taxable year in which the

CAMT entity is a U.S. shareholder of one

or more controlled foreign corporations

(CFC). The amount of the adjustment generally would be determined by reference

to the CAMT entity’s pro rata share of

adjusted net income or loss of each such

CFC. Proposed § 1.56A-6(c)(1) generally would define the term “adjusted net

income or loss” with respect to any CFC,

for any taxable year of the CFC, as the FSI

of the CFC, adjusted for all AFSI adjustments provided under the CAMT Proposed Regulations, except as provided in

proposed § 1.56A-6(c)(2) through (5). For

this purpose, references to AFSI in other

sections of the CAMT Proposed Regulations, except for references to AFSI in

proposed § 1.56A-1(b)(1) and (e) (which

would provide the general definition of

AFSI and general rules for translating

AFSI to U.S. dollars, respectively), would

be treated as references to adjusted net

income or loss.

.04 Prior interim guidance issued subsequent to CAMT Proposed Regulations.

(1) Notice 2025-27 provides interim

guidance regarding an optional simplified

method for determining applicable corporation status and provides a limited waiver

of certain additions to tax under § 6655

with respect to a corporation’s CAMT lia-

Bulletin No. 2026–11

bility for taxable years beginning during

2025.

(2) Notice 2025-28 provides interim

guidance on determining a CAMT entity’s

AFSI with respect to an investment in a

partnership, reporting by partnerships of

information needed to compute AFSI, and

the treatment of partnership contributions

and distributions.

(3) Notice 2025-46 provides interim

guidance on the application of the CAMT

to domestic corporate transactions, financially troubled companies, tax consolidated groups, acquired financial statement

net operating losses, and certain built-in

items. Section 4.03 of Notice 2025-46 provides interim guidance on the treatment of

discharge of indebtedness income, including interim guidance addressing rules

related to attribute reduction.

(4) Notice 2025-49 provides interim

guidance on the application of the CAMT,

including adjustments to AFSI for (a) eligible regulatory assets, (b) certain items

measured at fair value, (c) CAMT entities

subject to the tonnage tax regime, (d) certain embedded depreciation deductions,

(e) nonlife insurance company net operating loss carrybacks, (f) eligible goodwill

amortization, and (g) accounting principle

changes and restatements of a prior year

AFS. In addition, Notice 2025-49 provides

that, for taxable years beginning before

the date the corresponding final regulation

is published in the Federal Register, a taxpayer may rely on a section of the CAMT

Proposed Regulations without also being

required to rely on any other sections of

the CAMT Proposed Regulations, provided the taxpayer consistently follows

that section in its entirety for all taxable

years beginning with the first taxable year

with respect to which the taxpayer relies

on that section.

Further, Notice 2025-49 provided that,

for taxable years beginning before the

date the forthcoming proposed regulations

are published in the Federal Register, a

taxpayer may rely on any section of the

CAMT Proposed Regulations, as modified by any guidance subsequently published in the Internal Revenue Bulletin,

provided the taxpayer consistently follows

that section (as so modified) in its entirety

for all taxable years beginning with the

first taxable year with respect to which the

taxpayer relies on that section. However, a

Bulletin No. 2026–11

taxpayer may rely on proposed § 1.56A-4

(AFSI adjustments and basis determinations with respect to foreign corporations)

or proposed § 1.56A-6 (AFSI adjustments

with respect to CFCs of the CAMT Proposed Regulations, as applicable, for

taxable years beginning before the date a

corresponding final regulation section is

published in the Federal Register only if

the taxpayer also follows certain other sections of the CAMT Proposed Regulations.

Finally, Notice 2025-49 reiterated that, for

a taxable year described in section 3.05

of Notice 2025-27, section 9 of Notice

2025-28, or section 9 of Notice 202546, as applicable, a taxpayer may rely on

the guidance described in section 3.03 of

Notice 2025-27, sections 3 through 7 of

Notice 2025-28, or sections 3 through 6

of Notice 2025-46, without being required

to follow any section, or part thereof, of

the CAMT Proposed Regulations (except

to the extent required by, or incorporated

into, these notices).

.05 Comments received on the CAMT

Proposed Regulations or prior interim

guidance relevant to interim guidance

provided in this notice.

(1) Tax repair and maintenance costs

attributable to section 168 property. Neither § 56A(c) nor the CAMT Proposed

Regulations provide an adjustment to

AFSI for repair and maintenance costs

with respect to section 168 property. However, section 4 of Notice 2025-49 provides

a limited adjustment to AFSI for repair

and maintenance costs that are capitalized

and depreciated for AFS purposes under

certain GAAP rules applicable to CAMT

entities with regulated operations. Comments submitted in response to the CAMT

Proposed Regulations and Notice 2025-49

recommended that an adjustment to AFSI

be provided for all CAMT entities for

repair or maintenance costs with respect

to section 168 property that are deducted

for regular tax purposes but capitalized

and depreciated for AFS purposes. Such

an adjustment to AFSI would include the

repair and maintenance costs for which

an adjustment to AFSI is permitted under

section 4 of Notice 2025-49 for CAMT

entities with regulated operations.

In addition to the comments described

in section 2.05(2) of Notice 2025-49,

commenters noted that the AFSI adjustments provided for covered book COGS

639

depreciation and covered book depreciation expense in proposed § 1.56A-15(d)

(1)(iii) require only that a CAMT entity

adjust AFSI to disregard such amounts

with respect to section 168 property.

Accordingly, if an item of section 168

property and its related repair and maintenance costs are treated as a single item

of property for AFS purposes, commenters noted that determining the amount

of these adjustments would require the

CAMT entity to determine the portion

of book depreciation expense in FSI that

is attributable to repair and maintenance

costs (incurred during the current taxable

year, as well as prior taxable years) with

respect to the section 168 property and to

remove such amount from book depreciation expense before making the adjustments to AFSI for covered book COGS

depreciation and covered book depreciation expense. Commenters noted that this

additional step would add undue complexity to the calculation of AFSI by requiring

that impacted CAMT entities create separate CAMT records for each item of AFS

property to track the portion of AFS basis

that corresponds to section 168 property

and the portion that corresponds to repair

and maintenance costs that are deducted

for regular tax purposes. Commenters

noted that one option to reduce compliance burden would be to allow CAMT

entities to disregard the entire amount

of covered book COGS depreciation

and covered book depreciation expense,

including amounts attributable to tax

repair and maintenance costs deducted for

regular tax purposes; however, the commenters also noted that such an approach

would overstate AFSI.

Accordingly, commenters suggested

that providing an adjustment to AFSI for

repair and maintenance costs with respect

to section 168 property that are deducted

for regular tax purposes, including a corresponding adjustment to disregard the

book depreciation expense attributable

to the repair or maintenance cost for AFS

purposes (if applicable), would reduce

compliance burdens as it would allow

a CAMT entity to disregard the entire

amount of covered book COGS depreciation or covered book depreciation expense

in those situations in which a single item

of AFS property corresponds to capitalized section 168 property and deducted

March 9, 2026

repair and maintenance costs for regular tax purposes. Commenters noted that

providing such an adjustment to AFSI

would eliminate the burden and expense

of separately tracking and bifurcating

book depreciation expense for an item of

AFS property, solely for CAMT purposes,

between the portion disregarded in determining AFSI (with respect to section 168

property) and the remaining portion (with

respect to repair and maintenance costs

deducted for regular tax purposes).

(2) Intangible amortization. Section 9

of Notice 2025-49 provides an adjustment

to AFSI for amortization under § 197

attributable to goodwill acquired in certain transactions announced or completed

on or before October 28, 2021. As discussed in section 2.05(7) of Notice 202549, for regular tax purposes, amounts paid

to another party to acquire goodwill are

generally capitalized in the taxable year

paid or incurred and amortized ratably

over a 15-year period beginning with the

month in which the goodwill is acquired.

See § 197(a), (c), and (d)(1)(A). For AFS

purposes, such amounts are capitalized

in the year incurred but, in general, are

not recoverable through amortization but

rather are recoverable to the extent the

goodwill is impaired (in which case an

impairment loss would be recognized) or

upon disposition of the goodwill. Accordingly, prior to the issuance of Notice 202549, commenters had requested an adjustment to AFSI for amortization deductions

under § 197 attributable to goodwill as,

to the extent the goodwill is not amortizable for AFS purposes, a CAMT liability

under § 55 could arise in the taxable year

such amortization is deducted for regular

tax purposes under § 197. Commenters

observed that CAMT entities could not

have considered the consequences of the

CAMT, including the treatment of goodwill under the CAMT, in their financial

modeling for business acquisitions or

in the allocation of the purchase price

among acquired assets for acquisitions

that occurred before the CAMT was in

effect and, therefore, should be allowed an

adjustment to AFSI for the amortization

of goodwill acquired prior to that time.

In addition, commenters indicated that,

absent an AFSI adjustment, the CAMT

consequences of transactions that result in

the acquisition of goodwill could discourage further domestic investment.

In response to Notice 2025-49, commenters noted that there are other intangibles subject to amortization under § 197,

the costs of which, for AFS purposes, are

(i) required to be capitalized in the year

incurred, and (ii) not permitted to be recovered through amortization but instead are

recoverable only to the extent the intangible asset is impaired or upon disposition

of the asset. Accordingly, commenters

have requested an adjustment to AFSI for

amortization deductions under § 197 with

respect to these other intangibles. Neither

§ 56A(c) nor the CAMT Proposed Regulations provide an adjustment to AFSI

for amortization under § 197 with respect

to these other intangibles. Commenters

requesting this adjustment for these other

intangibles explained that, as in the case

of goodwill, because these other intangibles are not amortizable for AFS purposes,

a CAMT liability under § 55 could arise

in taxable years in which amortization of

these other intangibles is deducted for regular tax purposes under § 197. In addition,

commenters argued that CAMT entities

could not have considered the consequences of the treatment of other intangibles subject to amortization under § 197

under the CAMT and, therefore, should

be allowed an adjustment to AFSI for the

amortization of other intangibles acquired

prior to that time. Finally, commenters

noted that the CAMT consequences of

transactions that result in the acquisition

of these other intangibles could deter further domestic investment.

(3) Domestic research and experimental expenditures. Under GAAP, research

and experimental costs generally are

expensed in the year in which they are

incurred. See, e.g., Accounting Standards

Codification (ASC) 730-10-25. For software developed to be sold, leased, or otherwise externally marketed, generally costs

incurred to establish technological feasi-

bility of the software are expensed in the

year in which they are incurred. However,

costs incurred after establishing technological feasibility and before the product

is available for general release are capitalized and amortized. Following general

release, costs of enhancements to extend

the life or significantly improve the marketability of the software product are capitalized and amortized and maintenance

costs are expensed in the year in which

they are incurred. See, e.g., ASC 98520. For software developed for internal

use, under current GAAP guidance, costs

incurred during the application development stage generally are capitalized and

amortized. All other costs incurred to

develop internal-use software generally

are expensed in the year in which they are

incurred. See, e.g., ASC 350-40.3

Public Law 119-21, 139 Stat. 72 (July

4, 2025), commonly known as the One,

Big, Beautiful Bill Act (OBBBA), added

to the Code § 174A, which provides that

a deduction is allowed for any domestic

research or experimental expenditures,

including domestic software development

expenditures, that are paid or incurred by

the taxpayer in a taxable year beginning

after December 31, 2024. In addition,

§ 174A(c) allows a taxpayer to make an

election to instead charge such expenditures to capital account and amortize the

expenditures ratably over a period of not

less than 60 months, beginning with the

month in which the taxpayer first realizes

benefits from such expenditures. Prior to

amendment by the OBBBA, under § 174,

as amended by Public Law 115-97, 131

Stat. 2054 (Dec. 22, 2017), commonly

known as the Tax Cuts and Jobs Act

(TCJA), specified research or experimental expenditures, including both foreign

and domestic expenditures, were required

to be charged to capital account and amortized ratably over a defined period (5

years for domestic research and 15 years

for foreign research) for amounts paid or

incurred in taxable years beginning after

December 31, 2021. Accordingly, for taxable years beginning after December 31,

2024, the enactment of § 174A as part of

The FASB issued updated guidance for internal-use software in September 2025. See Accounting Standards Update No. 2025-06, Intangibles—Goodwill and Other—Internal-Use Software

(Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This update to ASC 350-40 modifies the accounting for internal-use software to instead apply a

principles-based threshold. The update is effective for annual reporting periods beginning after December 15, 2027; however, early adoption is permitted as of the beginning of an annual

reporting period.

3

March 9, 2026

640

Bulletin No. 2026–11

the OBBBA created a transition period

during which both §§ 174 and 174A determine the treatment and timing of domestic research or experimental expenditures.

During this transition period, regular taxable income for a taxable year will take

into account two layers of recovery for

domestic research or experimental expenditures: the deduction of current year

expenditures under § 174A and the continued amortization of prior year expenditures under § 174.

Neither § 56A(c) nor the CAMT Proposed Regulations provide an adjustment

to AFSI for research or experimental

expenditures, including software development expenditures. Accordingly, such

amounts would be reflected in AFSI at

the same time, and in the same amount, as

when such amounts are reflected in FSI. In

addition, neither § 56A(c) nor the CAMT

Proposed Regulations provide an adjustment to AFSI to account for the transition to the § 174A regime. Commenters

requested that an adjustment to AFSI be

allowed for taxable years beginning after

December 31, 2024, equal to the amount

of amortization under § 174 attributable to

domestic expenditures taken in computing regular taxable income for such taxable years. Commenters noted that while

AFSI would otherwise remain unchanged

during the transition period, regular taxable income is decreased for the transition

period taxable years (compared to what

regular taxable income would have been

if only § 174, or only § 174A, was applicable) due to the dual layers of recovery

for domestic research and experimental

expenditures resulting from the simultaneous application of §§ 174 and 174A.

(4) Qualified production costs under

§ 181. Commenters requested that an

adjustment to AFSI be allowed for certain production costs paid or incurred by

a CAMT entity for qualified film or television productions, qualified live theatrical

productions, or qualified sound recordings

(collectively, eligible production property) allowed as a deduction under § 181.

Under § 181, taxpayers may elect to treat

production costs of eligible production

property as an expense deductible for

the taxable year in which the production

costs are paid or incurred, subject to dollar

limitations that vary based on the type of

production (defined in section 6 as quali-

Bulletin No. 2026–11

fied production costs). See § 181(a)(1) and

(2). Production costs of eligible production property that exceed the dollar limitation are charged to capital account and

depreciated for regular tax purposes once

the eligible production property is placed

in service (excess production costs). The

portion of basis eligible for first year

additional depreciation under § 168(k) is

depreciated under § 168 and any remaining basis is depreciated under § 167. See

§§ 167, 168(k), and 168(k)(2)(A)(i)(IV),

(V), and (VI). In general, for GAAP and

IFRS purposes, both the qualified production costs and excess production costs

attributable to an eligible production property generally are capitalized in the year

incurred and depreciated as a single asset

over its useful life once the asset is placed

in service.

Neither § 56A(c) nor the CAMT Proposed Regulations provide an adjustment

to AFSI for qualified production costs.

Accordingly, CAMT entities that elect to

deduct qualified production costs under

§ 181(a) would need to determine AFSI

by (i) including the amount of such costs

included in FSI for such taxable year (generally, the corresponding amount of book

depreciation for such year), and (ii) making adjustments under proposed § 1.56A15 for any excess production costs (as

excess production costs are charged to

capital account and depreciable under

§ 168, thus constituting section 168 property for CAMT purposes). Commenters

indicated that this bifurcated treatment

for CAMT purposes with respect to a single eligible production property leads to

compliance burdens as impacted CAMT

entities must bifurcate the single AFS

asset attributable to the eligible production property and (i) continue to track the

portion of AFS basis that corresponds to

the qualified production costs in order

to determine the appropriate amount of

book depreciation or other basis recovery

in FSI to include in AFSI, and (ii) track

the portion of AFS basis that corresponds

to excess production costs in order to

properly determine the amount of book

depreciation in FSI to disregard in making the adjustments under § 56A(c)(13).

Commenters indicated that an adjustment

to AFSI that (i) reduces AFSI by the qualified production costs deducted under

§ 181, and (ii) disregards the correspond-

641

ing depreciation or other basis recovery

included in FSI would reduce compliance

burden, resulting in consistent treatment

of the single AFS asset for CAMT purposes.

(5) Materials and supplies costs.

Amounts paid or incurred to acquire or produce materials and supplies, as defined in

§ 1.162-3(c)(1), are deductible only under

§ 162 in accordance with the applicable

timing rules provided in § 1.162-3. See

generally § 1.162-3(a). The definition of

“materials and supplies” includes amounts

paid or incurred to acquire certain tangible

property that has an acquisition or production cost of $200 or less. See § 1.162-3(c)

(1) and (c)(1)(iv). Thus, amounts paid or

incurred for such low acquisition cost tangible property are deductible only under

§ 162, notwithstanding that such property is used in the taxpayer’s business

and, absent the requirement to be treated

as materials and supplies under § 1.1623, would otherwise be tangible property

depreciable under § 168. For AFS purposes, amounts incurred for such tangible

property may be capitalized and depreciated depending on the useful life of the

property.

Neither § 56A(c) nor the CAMT Proposed Regulations provide an adjustment

to AFSI for deductions under § 162 with

respect to amounts paid or incurred for

materials and supplies. Accordingly, a

CAMT entity would include in its AFSI

for a taxable year the amounts attributable

to materials and supplies that are included

in the CAMT entity’s FSI for such taxable year. Commenters noted that CAMT

entities in certain industries for which

a majority of the core business assets

consist of low acquisition cost materials

are required to capitalize and depreciate

the costs of such materials and supplies

for AFS and FSI purposes. Commenters noted that these CAMT entities may

experience elevated AFSI compared to

other taxpayers for which the majority of

core business assets comprise section 168

property, because those other taxpayers

can adjust AFSI for the section 168 property under § 56A(c)(13). Accordingly,

commenters requested that an adjustment

to AFSI be provided for amounts deducted

under § 162 with respect to materials and

supplies described in § 1.162-3(c)(1)(iv)

that are, for AFS purposes, capitalized in

March 9, 2026

the year incurred and depreciated once the

corresponding asset is placed in service.

(6) Attribute reduction for, and income

from non-transactional bankruptcy emergences of, financially troubled companies. Commenters have asked whether

the rules in § 1.1502-28 (concerning the

application of § 108 to tax consolidated

groups) would apply for purposes of

the attribute reduction interim guidance

provided in sections 4.03(4) and (5) of

Notice 2025-46. Commenters also have

inquired about the intended application

of fresh start accounting upon the emergence from bankruptcy of a financially

troubled company as provided in section

4.04(2)(a) of Notice 2025-46, noting that

the approach under that section appears to

differ from the approach under proposed

§ 1.56A-21(d)(2).

(7) AFSI adjustments required under

proposed § 1.56A-4 in certain cases in

which basis in foreign stock is determined under § 358. The Treasury Department and the IRS received a comment

with respect to the per se application of

the proposed two-year rule described

in section 2.03(2) of this notice. The

commenter noted that the proposed rule

would require a full inclusion in AFSI

of the excess of regular basis over hypothetical CAMT basis if a single dollar of

basis in the stock received is “taken into

account” within two years. To address

this potential concern, the commenter

recommended converting the per se

aspect of the proposed rule into a rebuttable presumption.

The Treasury Department and the IRS

also received a comment with respect to

the application of the proposed two-year

rule to taxable years before publication of

the CAMT Proposed Regulations. Specifically, the commenter noted that taxpayers

could not have anticipated the proposed

rules for determining basis in assets,

including stock of foreign corporations

and, absent knowledge of the CAMT Proposed Regulations, would not have had

the necessary tools to evaluate the impact

of certain transactions for purposes of

determining applicable corporation status

or CAMT liability.

(8) AFSI adjustments with respect to

transactions involving intangible property

subject to § 367(d). One commenter noted

that proposed § 1.56A-4 effectively would

March 9, 2026

incorporate the rules of § 367(d) in the

case of a transaction involving intangible

property such that there would be adjustments to a U.S. transferor’s AFSI but

would be no corresponding adjustments

with respect to the adjusted net income or

loss of a transferee foreign corporation.

Accordingly, the commenter requested

that the transferee foreign corporation

in a § 367(d) transaction be permitted to

reduce its adjusted net income or loss by

the amount of the deemed royalty for regular tax purposes to eliminate the double

taxation result.

SECTION 3. AFSI ADJUSTMENT FOR

CERTAIN TAX REPAIR DEDUCTIONS

.01 Purpose. In response to comments

received on the CAMT Proposed Regulations and Notice 2025-49, this section

3 modifies the interim guidance provided

in section 4 of Notice 2025-49 to allow

a CAMT entity to adjust AFSI for certain tax repair deductions. The Treasury

Department and the IRS anticipate that

the forthcoming proposed regulations

will include proposed regulations under

§ 56A(c)(15) and (e) consistent with the

guidance provided in this section 3. In

addition, the Treasury Department and

the IRS anticipate that the forthcoming proposed regulations will propose a

modification to proposed § 1.59-2(c) to

provide that, for purposes of applying

the average annual AFSI test in § 59(k)

(1)(B) or proposed § 1.59-2(c), AFSI

would be determined without regard to

the AFSI adjustment provided in this

section 3.

.02 Definitions. For purposes of this

section 3:

(1) Book COGS repair depreciation.

The term book COGS repair depreciation

means any of the following items that are

taken into account as part of cost of goods

sold (or as part of the computation of gain

or loss from the sale or exchange of property held for sale) in FSI with respect to an

eligible repair asset—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which the

complete disposition of the eligible repair

asset occurs for AFS purposes, or

642

(ii) In the taxable year in which the

complete disposition of the eligible repair

asset occurs for AFS purposes; or

(c) Impairment loss reversal.

(2) Book repair depreciation expense.

The term book repair depreciation expense

means any of the following items, other

than book COGS repair depreciation, that

are taken into account in FSI with respect

to an eligible repair asset—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which the

complete disposition of the eligible repair

asset occurs for AFS purposes, or

(ii) In the taxable year in which the

complete disposition of the eligible repair

asset occurs for AFS purposes; or

(c) Impairment loss reversal.

(3) Book repair inventoriable depreciation. The term book repair inventoriable

depreciation means any of the following

items that are included in inventoriable

cost (or capitalized as part of the cost of

non-inventory property held for sale) in

the CAMT entity’s AFS with respect to an

eligible repair asset—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which the

complete disposition of the eligible repair

asset occurs for AFS purposes, or

(ii) In the taxable year in which the

complete disposition of the eligible repair

asset occurs for AFS purposes; or

(c) Impairment loss reversal.

(4) Deductible tax repair. The term

deductible tax repair means any amount

paid or incurred for regular tax purposes

for repairs and maintenance during a taxable year and allowed as a deduction in

computing taxable income for such taxable year under § 1.162-4 with respect to

an eligible repair asset, including amounts

deductible under § 1.162-4 that are capitalized (other than under § 263) and subsequently recovered as a deduction in

computing taxable income (even if the

deduction is allowed under a provision of

the Code other than § 162, for example

under §§ 616 and 617).

(5) Eligible repair asset. The term

eligible repair asset means any cost that

Bulletin No. 2026–11

meets the requirements in section 3.03 of

this notice.

(6) Tax COGS repair deduction. The

term tax COGS repair deduction means—

(a) Any amount deducted under

§ 1.162-4 with respect to an eligible repair

asset that is capitalized to inventory under

§ 263A and is recovered as part of cost of

goods sold in computing gross income;

and

(b) Any amount deducted under

§ 1.162-4 with respect to an eligible repair

asset that is capitalized under § 263A to the

basis of property described in § 1221(a)

(1) that is not inventory and is recovered

as part of the computation of gain or loss

from the sale or exchange of such property

in computing taxable income.

(7) Tax repair section 481(a) adjustment. The term tax repair section 481(a)

adjustment means an adjustment (or portion thereof) required under § 481(a) for

a change in method of accounting (other

than a change in method of accounting described in section 3.02(8) of this

notice) that impacts the timing of taking into account a deductible tax repair

with respect to an eligible repair asset

in computing taxable income (for example, a change in method of accounting

involving a change from deducting a

deductible tax repair to capitalizing such

deductible tax repair under § 263A or

another capitalization provision, or vice

versa).

(8) Tax repair capitalization method

change. The term tax repair capitalization

method change means a change in method

of accounting for regular tax purposes

involving a change from capitalizing and

depreciating a deductible tax repair under

§ 263 to deducting the deductible tax

repair under § 1.162-4 (or vice versa).

(9) Tax repair capitalization method

change AFSI adjustment.

(a) In general. The term tax repair capitalization method change AFSI adjustment means an adjustment to AFSI that

is required under section 3.04(6) of this

notice if a CAMT entity makes a tax repair

capitalization method change and previously made an adjustment to AFSI under

section 3 of this notice in a preceding

taxable year. The tax repair capitalization

method change AFSI adjustment is computed separately for each tax repair capitalization method change and equals the

Bulletin No. 2026–11

difference between the following amounts

computed as of the beginning of the tax

year of change—

(i) The cumulative amount of adjustments to AFSI under section 3.04 of this

notice with respect to the cost(s) subject

to the tax repair capitalization method

change that were made with respect to the

preceding taxable years beginning with

the first taxable year for which the CAMT

entity makes an adjustment to AFSI under

section 3 of this notice, and beginning

before the tax year of change; and

(ii) The cumulative amount of adjustments to AFSI under section 3.04 of this

notice with respect to the cost(s) subject to

the tax repair capitalization method change

that would have been made with respect

to the preceding taxable years beginning

with the first taxable year for which the

CAMT entity makes an adjustment to

AFSI under section 3 of this notice, and

beginning before the tax year of change,

if the new method of accounting for the

cost(s) had been applied for regular tax

purposes in those taxable years.

(b) Coordination with proposed

§ 1.56A-15. The amount of the tax repair

capitalization method change AFSI adjustment is adjusted, as necessary, to prevent

the duplication of any adjustment to AFSI

due to a tax repair capitalization method

change also constituting a tax capitalization method change (as described in proposed § 1.56A-15(b)(10)) with respect to

section 168 property.

.03 Eligible repair asset.

(1) In general. For purposes of section

3 of this notice, an eligible repair asset

means any cost that is—

(a) Attributable to repair or maintenance of section 168 property (as defined

in proposed § 1.56A-15(c));

(b) Capitalized and subject to depreciation for AFS purposes;

(c) Not capitalized as section 168 property under § 263 for regular tax purposes;

and

(d) Not capitalized to section 168 property under § 263A or another capitalization provision for regular tax purposes.

(2) Placed in service in any taxable

year. An eligible repair asset includes any

eligible repair asset placed in service by

the CAMT entity for AFS purposes in any

taxable year, including taxable years ending on or before December 31, 2019.

643

.04 AFSI adjustment for eligible repair

assets. The AFSI of a CAMT entity for a

taxable year may be adjusted as follows:

(1) Reduced by the tax COGS repair

deduction with respect to eligible repair

assets, but only to the extent of the amount

taken into account—

(a) As part of cost of goods sold in

computing gross income for the taxable

year; or

(b) As part of the computation of gain or

loss from the sale or exchange of non-inventory property described in § 1221(a)

(1) that is included in taxable income, or

deducted in computing taxable income,

respectively, for the taxable year;

(2) Reduced by deductible tax repairs

with respect to eligible repair assets, but

only to the extent of the amount taken as

a deduction in computing taxable income

for the taxable year;

(3) Adjusted to disregard book COGS

repair depreciation and book repair depreciation expense with respect to eligible

repair assets;

(4) Reduced by any tax repair section

481(a) adjustment with respect to eligible

repair assets that is negative, but only to

the extent of the amount of the adjustment

that is taken into account in computing

taxable income for the taxable year;

(5) Increased by any tax repair section

481(a) adjustment with respect to eligible

repair assets that is positive, but only to

the extent of the amount of the adjustment

that is taken into account in computing

taxable income for the taxable year; and

(6) Increased or decreased, as appropriate, by any tax repair capitalization

method change AFSI adjustment in accordance with section 3.06 of this notice.

.05 Determining the book COGS repair

depreciation and tax COGS repair deduction adjustments.

(1) In general. Except as provided in

section 3.05(2) of this notice, a CAMT

entity is required to—

(a) Apply the method(s) of accounting

the CAMT entity uses for AFS purposes to

determine the book COGS repair depreciation adjustment under section 3.04(3) of

this notice; and

(b) Apply the method(s) of accounting under § 263A that the CAMT entity

uses for regular tax purposes (and, in the

case of inventory property, the method(s)

of accounting that the CAMT entity uses

March 9, 2026

to identify and value inventories under

§§ 471 and 472) to determine the tax

COGS repair deduction adjustment under

section 3.04(1) of this notice.

(2) Reasonable method. A CAMT

entity is permitted to use any reasonable

method to determine book repair inventoriable depreciation in ending inventory

with respect to eligible repair assets for

AFS purposes, or to determine deductible tax repairs included in ending inventory for regular tax purposes, or both, for

purposes of determining the book COGS

repair depreciation adjustment under section 3.04(3) of this notice or the tax COGS

repair deduction adjustment under section

3.04(1) of this notice, provided that such

reasonable method is consistent with and

reflects the method(s) of accounting the

CAMT entity uses for AFS purposes or

regular tax purposes, respectively. A reasonable method would include a method

similar to the simplifying methods provided in proposed § 1.56A-15(d)(3)(ii)(A)

through (C).

(3) Reporting requirement. If a CAMT

entity makes the AFSI adjustment provided in section 3.04 of this notice for a

taxable year, it must attach a statement to

its Federal income tax return for such taxable year. The statement—

(a) Must be titled “AFSI adjustment for

tax repair deductions”,

(b) Must include the CAMT entity’s

name, address, and taxpayer identification

number, and

(c) If a CAMT entity uses a reasonable method under section 3.05(2) of

this notice, it must: include a statement

whether the CAMT entity is using such

reasonable method to determine (i) book

repair inventoriable depreciation in ending inventory with respect to eligible

repair assets for purposes of determining the book COGS repair depreciation

adjustment, or (ii) deductible tax repairs

in ending inventory for purposes of determining the tax COGS repair deduction

adjustment for the taxable year, or (iii)

both; describe such reasonable method(s)

used; and certify that such reasonable

method(s) used are consistent with, and

reflect, the method(s) of accounting the

CAMT entity uses for AFS purposes or

regular tax purposes, as applicable.

.06 Adjustment period for tax repair

capitalization method change AFSI

March 9, 2026

adjustments. The adjustment period for a

tax repair capitalization method change

AFSI adjustment is determined in a manner consistent with the proposed rules

provided in proposed § 1.56A-15(d)(4)

(adjustment period for tax capitalization

method change AFSI adjustments with

respect to section 168 property).

.07 Consistency requirement. If a

CAMT entity relies on section 3 of this

notice and makes the AFSI adjustment

provided in section 3 of this notice for a

taxable year, it must continue to make the

adjustment provided in section 3 of this

notice for all subsequent taxable years or

until such time as prescribed by the Treasury Department and the IRS in regulations or guidance published in the Internal

Revenue Bulletin.

.08 Determining applicable corporation status. For purposes of applying

the average annual AFSI test in § 59(k)

(1)(B) or proposed § 1.59-2(c), AFSI is

determined without regard to the AFSI

adjustment provided in section 3 of this

notice.

SECTION 4. AFSI ADJUSTMENT FOR

ELIGIBLE INTANGIBLES

.01 Purpose. In response to comments received on Notice 2025-49, this

section 4 modifies the interim guidance

provided in section 9 of Notice 202549 to allow a CAMT entity to adjust

AFSI for amortization under § 197

attributable to goodwill and certain

other intangibles. The Treasury Department and the IRS anticipate that the

forthcoming proposed regulations will

include proposed regulations under

§ 56A(c)(15) and (e) consistent with the

guidance provided in this section 4. In

addition, the Treasury Department and

the IRS anticipate that the forthcoming proposed regulations will propose

modifications to proposed § 1.59-2 to

provide that, for purposes of applying

the average annual AFSI test in § 59(k)

(1)(B) or proposed § 1.59-2(c), AFSI is

determined without regard to the AFSI

adjustments provided in sections 4.04

and 4.07 of this notice.

.02 Definitions. For purposes of this

section 4:

(1) Covered book intangible amortization expense. The term covered book

644

intangible amortization expense means

any of the following items, other than covered book intangible COGS amortization,

that are taken into account in FSI with

respect to an eligible intangible—

(a) Amortization expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs prior to the taxable year in which

the disposition of the eligible intangible

occurs for regular tax purposes; or

(c) Impairment loss reversal.

(2) Covered book intangible COGS

amortization. The term covered book

intangible COGS amortization means any

of the following items that are taken into

account as part of cost of goods sold (or

as part of the computation of gain or loss

from the sale or exchange of property held

for sale) in FSI with respect to an eligible

intangible—

(a) Amortization expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs prior to the taxable year in which

the disposition of the eligible intangible

occurs for regular tax purposes; or

(c) Impairment loss reversal.

(3) Covered book intangible expense.

The term covered book intangible expense

means an amount (if any), other than covered book intangible COGS amortization

and covered book intangible amortization

expense, that‑‑

(a) Reduces FSI; and

(b) Is reflected in the basis for depreciation, as defined in §§ 1.167(g)-1 and

1.197-2(f)(1)(ii) (determined without

regard to any basis adjustments described

in § 1016(a)(2) and (3)), of an eligible

intangible for regular tax purposes.

(4) Covered book inventoriable intangible expense. The term covered book

inventoriable intangible expense means

any of the following items that are

included in inventoriable cost (or capitalized as part of the cost of non-inventory

property held for sale) in the AFS of a

CAMT entity with respect to an eligible

intangible—

(a) Amortization expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs prior to the taxable year in which

the disposition of the eligible intangible

occurs for regular tax purposes; or

(c) Impairment loss reversal.

Bulletin No. 2026–11

(5) Deductible intangible tax amortization. The term deductible intangible tax

amortization means eligible intangible tax

amortization, as defined in section 4.02(7)

of this notice, that is allowed as a deduction in computing taxable income.

(6) Eligible intangible. The term eligible intangible means an intangible that

meets the requirements of section 4.03 of

this notice.

(7) Eligible intangible tax amortization. The term eligible intangible tax

amortization means amortization deductions allowed under § 197 with respect to

an eligible intangible.

(8) Eligible intangible tax COGS

amortization. The term eligible intangible

tax COGS amortization means:

(a) The eligible intangible tax amortization capitalized to inventory under § 263A

and recovered as part of cost of goods sold

in computing gross income; and

(b) The eligible intangible tax amortization capitalized under § 263A to the

basis of property described in § 1221(a)

(1) that is not inventory and is recovered

as part of the computation of gain or loss

from the sale or exchange of such property

in computing taxable income.

(9) Tax intangible amortization section

481(a) adjustment. The term tax intangible amortization section 481(a) adjustment

means an adjustment (or portion thereof)

required under § 481(a) for a change in

method of accounting that impacts the timing

of taking into account eligible intangible tax

amortization in computing taxable income

(for example, a change in method of accounting involving a change from deducting eligible tax amortization to capitalizing eligible

tax amortization under § 263A or another

capitalization provision, or vice versa).

.03 Eligible intangible.

(1) In general. For purposes of section 4 of this notice, an eligible intangible

means an amortizable section 197 intangible under § 197(c) that is either:

(a) Goodwill, or

(b) An intangible (other than an intangible described in § 56A(c)(14)(B)), the

AFS basis of which is not permitted to be

amortized or otherwise recovered for AFS

purposes other than by impairment or disposition.

(2) Intangibles that are not depreciable

under § 197 for regular tax purposes. Eligible intangibles do not include an intan-

Bulletin No. 2026–11

gible that is not subject to amortization

under § 197 for regular tax purposes.

.04 AFSI adjustment for eligible intangibles.

(1) In general. The AFSI of a CAMT

entity for a taxable year may be adjusted

as follows:

(a) Reduced by eligible intangible tax

COGS amortization, but only to the extent

of the amount recovered—

(i) As part of cost of goods sold in computing gross income for the taxable year;

or

(ii) As part of the computation of

gain or loss from the sale or exchange

of non-inventory property described in

§ 1221(a)(1) that is included in taxable

income, or deducted in computing taxable

income, respectively, for the taxable year;

(b) Reduced by deductible intangible

tax amortization with respect to an eligible intangible, but only to the extent of the

amount allowed as a deduction in computing taxable income for the taxable year;

(c) Adjusted to disregard covered book

intangible amortization expense, covered

book intangible COGS amortization, and

covered book intangible expense, and

amounts described in section 4.07(6)

of this notice with respect to an eligible

intangible, including an eligible intangible

placed in service for regular tax purposes

in a taxable year subsequent to the taxable

year the eligible intangible is treated as

placed in service for AFS purposes;

(d) Reduced by any tax intangible

amortization section 481(a) adjustment

that is negative, but only to the extent of

the amount of the adjustment that is taken

into account in computing taxable income

for the taxable year; and

(e) Increased by any tax intangible

amortization section 481(a) adjustment

that is positive, but only to the extent of

the amount of the adjustment that is taken

into account in computing taxable income

for the taxable year.

(2) Eligible intangibles held by a partnership. If an eligible intangible is held by

a partnership, the CAMT entity applies

rules similar to proposed § 1.56A-16(d)

(2). However, if the CAMT entity otherwise applies any proposed modifications

to the CAMT Proposed Regulations in

Notice 2025-28, the CAMT entity must

apply any applicable modifications in

determining the effect of the partnership’s

645

eligible intangible on AFSI for the taxable

year.

.05 Consistency requirement. If a

CAMT entity relies on section 4 of this

notice and makes the adjustment to AFSI

provided in section 4.04 of this notice for

a taxable year, the CAMT entity must

make the adjustment for all eligible intangibles held by the CAMT entity as of the

beginning of such taxable year. This is

the case regardless of whether the eligible intangibles are attributable to one or

multiple transactions. In addition, once a

CAMT entity makes the AFSI adjustment

provided in this section 4.04 for a taxable

year, such CAMT entity must continue

making such adjustment for all subsequent taxable years until all such eligible

intangibles are disposed of for regular tax

purposes or such time as prescribed by the

Treasury Department and the IRS in regulations or guidance published in the Internal Revenue Bulletin.

.06 Determining eligible intangible tax

COGS amortization adjustment and covered book intangible COGS amortization

adjustment.

(1) In general. Except as provided in

section 4.06(2) of this notice, a CAMT

entity is required to—

(a) Apply the method(s) of accounting

the CAMT entity uses for AFS purposes

to determine the covered book intangible

COGS amortization adjustment under section 4.04(1)(c) of this notice; and

(b) Apply the method(s) of accounting under § 263A that the CAMT entity

uses for regular tax purposes (and, in the

case of inventory property, the method(s)

of accounting that the CAMT entity uses

to identify and value inventories under

§§ 471 and 472) to determine the eligible

intangible tax COGS amortization adjustment under section 4.04(1)(a) of this

notice.

(2) Reasonable method. A CAMT entity

is permitted to use any reasonable method

to determine covered book inventoriable

intangible expense in ending inventory for

AFS purposes for purposes of determining the covered book intangible COGS

amortization adjustment under section

4.04(1)(c) of this notice, or to determine

the eligible intangible tax amortization

included in ending inventory for regular

tax purposes for purposes of determining

the eligible intangible tax COGS amorti-

March 9, 2026

zation adjustment under section 4.04(1)(a)

of this notice, or both, provided that such

reasonable method is consistent with and

reflects the method(s) of accounting the

CAMT entity uses for AFS purposes or

regular tax purposes, as applicable. A reasonable method would include a method

similar to the simplifying methods provided in proposed § 1.56A-15(d)(3)(ii)(A)

through (C).

(3) Reporting requirement. If a CAMT

entity makes the AFSI adjustment provided in section 4.04 of this notice for a

taxable year, it must attach a statement to

its Federal income tax return for such taxable year. The statement—

(a) Must be titled “AFSI adjustment for

eligible intangibles”,

(b) Must include the CAMT entity’s

name, address, and taxpayer identification

number, and

(c) If a CAMT entity uses a reasonable method under section 4.06(2) of this

notice, it must: include a statement whether

the CAMT entity is using such reasonable

method to determine (i) covered book

inventoriable intangible expense in ending inventory for AFS purposes for purposes of determining the covered book

intangible COGS amortization adjustment

under section 4.04(1)(c) of Notice 2026-7

for the taxable year, or (ii) eligible intangible tax amortization in ending inventory

for regular tax purposes for purposes of

determining the eligible tax COGS amortization adjustment under section 4.04(1)

(a) of Notice 2026-7, as applicable, for the

taxable year, or (iii) both.

.07 AFSI adjustment upon disposition

of eligible intangibles.

(1) In general. In the case of a CAMT

entity that makes the adjustment provided

in section 4.04 of this notice to determine

AFSI for any taxable year, except as otherwise provided in section 4.07(7) of this

notice, if such CAMT entity disposes of

an eligible intangible for regular tax purposes, the CAMT entity must adjust AFSI

for the taxable year in which the disposition occurs to redetermine any gain or loss

taken into account in the CAMT entity’s

FSI with respect to the disposition for the

taxable year (including a gain or loss of

zero) by reference to the CAMT basis (in

lieu of the AFS basis) of the eligible intangible as of the date of the disposition (disposition date), as determined under sec-

March 9, 2026

tion 4.07(2) of this notice. To the extent

the CAMT basis of the eligible intangible

is negative (for example, because of differences between regular tax basis and AFS

basis), this negative amount is required to

be recognized as AFSI gain upon disposition of the eligible intangible.

(2) Adjustments to the AFS basis of eligible intangible. For purposes of applying

section 4.07(1) of this notice, the CAMT

basis of the eligible intangible as of the

disposition date is the AFS basis of the

eligible intangible as of that date—

(a) Decreased by the full amount of

eligible intangible tax amortization with

respect to such eligible intangible as of

the disposition date (regardless of whether

any amount of eligible intangible tax

amortization was capitalized for regular tax purposes and not yet taken into

account as a reduction to AFSI through an

adjustment described in section 4.04(1)(a)

of this notice as of the disposition date);

(b) Increased by the amount of any

covered book intangible expense with

respect to the eligible intangible;

(c) Increased by the amount of any

covered book intangible amortization

expense and covered book intangible

COGS amortization that reduced the AFS

basis of such eligible intangible as of the

disposition date;

(d) Decreased by any reduction to the

CAMT basis of such eligible intangible

under proposed § 1.56A-21, taking into

account the proposed modifications to

proposed § 1.56A-21 contained in Notice

2025-46 if the CAMT entity otherwise

applies such modifications in determining

AFSI for the taxable year; and

(e) Increased or decreased, as appropriate, by the amount of any adjustments to

AFS basis that are disregarded for AFSI

and CAMT basis purposes under the

CAMT Proposed Regulations with respect

to such eligible intangible, taking into

account any proposed modifications to the

CAMT Proposed Regulations contained

in Notice 2025-46 if the CAMT entity

otherwise applies such modifications in

determining AFSI for the taxable year.

(3) Adjustments to the AFS basis of eligible intangibles. For purposes of determining the CAMT basis of the eligible

intangible under section 4.07(2) of this

notice, the CAMT entity applies rules

similar to proposed § 1.56A-16(e)(2)(ii).

646

(4) Disposition of eligible intangibles

by a partnership. If a partnership disposes of an eligible intangible, the CAMT

entity applies rules similar to proposed

§ 1.56A-16(e)(3). However, if the CAMT

entity otherwise applies any proposed

modifications to the proposed CAMT regulations in Notice 2025-28, the CAMT

entity must apply any applicable modifications in determining the effect of the

disposition on AFSI for the taxable year.

(5) Treatment of amounts recognized in

FSI upon the disposition of eligible intangibles. Except as otherwise provided in

the CAMT Proposed Regulations (or as

otherwise provided in Notice 2025-28 or

Notice 2025-46 if the CAMT entity applies

a proposed modification to the CAMT

Proposed Regulations contained in such

notices), if a CAMT entity disposes of

an eligible intangible for regular tax purposes and recognizes gain or loss from the

disposition in its FSI, the gain or loss (as

redetermined under section 4.07(1) of this

notice) is recognized for AFSI purposes in

the taxable year of disposition, regardless

of whether any gain or loss with respect

to the disposition is realized, recognized,

deferred, or otherwise taken into account

for regular tax purposes.

(6) Subsequent AFS dispositions. If an

eligible intangible is disposed of for regular tax purposes before it is treated as

disposed of for AFS purposes, any AFS

basis recovery with respect to such eligible intangible that is reflected in FSI following the date such eligible intangible

is disposed of for regular tax purposes is

disregarded in determining AFSI.

(7) Intercompany transactions. If a

member of a tax consolidated group disposes of an eligible intangible for regular

tax purposes in an intercompany transaction, the member determines its AFSI with

respect to such disposition by applying

proposed § 1.56A-16(e)(6) or, if the member relies on the guidance provided in section 5 of Notice 2025-46 in determining

AFSI for the taxable year, the guidance

contained in section 5 of Notice 2025-46.

.08 Determining applicable corporation status. For purposes of applying the

average annual AFSI test in § 59(k)(1)(B)

or proposed § 1.59-2(c), AFSI is determined without regard to the AFSI adjustments provided in sections 4.04 and 4.07

of this notice.

Bulletin No. 2026–11

SECTION 5. AFSI ADJUSTMENT

FOR DOMESTIC RESEARCH

AMORTIZATION

.01 Purpose. In response to comments

received, the Treasury Department and the

IRS anticipate that forthcoming proposed

regulations will include proposed regulations issued under § 56A(c)(15) and (e)

consistent with the guidance in this section 5, which provides an adjustment to

AFSI for certain domestic research amortization for taxable years beginning after

December 31, 2024. In addition, the Treasury Department and the IRS anticipate

that the forthcoming proposed regulations

will propose modifications to proposed

§ 1.59-2 to provide that, for purposes of

applying the average annual AFSI test in

§ 59(k)(1)(B) or proposed § 1.59-2(c),

AFSI is determined without regard to the

AFSI adjustment provided in section 5.03

of this notice.

.02 Definitions. For purposes of this

section 5:

(1) Book research or software development amortization. The term book

research or software development amortization means amortization taken into

account in determining FSI for a taxable

year beginning after December 31, 2024,

with respect to:

(a) Amounts incurred for AFS purposes

in a taxable year beginning after December 31, 2021, and before January 1, 2025;

(b) That are attributable to domestic

research or experimental expenditures (as

defined in section 5.02(2) of this notice);

and

(c) That are taken into account as TCJA

domestic § 174 amortization for regular

tax purposes.

(2) Domestic research or experimental expenditures. The term domestic

research or experimental expenditures

has the meaning provided in § 174A(b).

In addition, the term domestic research or

experimental expenditures also includes

any amount paid or incurred in connection with the development of any software

that is treated as a research or experimental expenditure under § 174A(d)(3) if

such amount is not an expenditure that is

attributable to foreign research (within the

meaning of § 41(d)(4)(F)).

(3) TCJA domestic § 174 amortization.

The term TCJA domestic § 174 amorti-

Bulletin No. 2026–11

zation means amortization taken under

TCJA § 174(a)(2)(B) in a taxable year

beginning after December 31, 2024, with

respect to domestic research or experimental expenditures that were paid or

incurred for regular tax purposes and capitalized under TCJA § 174 in a taxable year

beginning after December 31, 2021, and

before January 1, 2025. TCJA domestic

§ 174 amortization also includes amortization taken under § 70302(f)(2)(A) of the

OBBBA with respect to domestic research

or experimental expenditures that were

paid or incurred for regular tax purposes

and capitalized under TCJA § 174 in a

taxable year beginning after December 31,

2021, and before January 1, 2025.

(4) TCJA § 174. The term TCJA § 174

means § 174, as in effect after amendment

by § 13206(a) of the TCJA, and prior

to amendment by § 70302(b)(1) of the

OBBBA.

(5) Tax research capitalization method

change. The term tax research capitalization method change means a change

in method of accounting for regular tax

purposes involving a change from capitalizing and amortizing a cost as a domestic research or experimental expenditure under TCJA § 174 to capitalizing or

deducting the cost under another section

of the Code (or vice versa), or a change

in the treatment of costs that were capitalized and amortized as domestic research

or experimental expenditures under TCJA

§ 174 (such as a change from amortizing

such costs over a recovery period inconsistent with TCJA § 174(a)(2)(B) to amortizing such costs over a recovery period

consistent with TCJA § 174(a)(2)(B)).

(6) Tax research capitalization method

change AFSI adjustment. The term tax

research capitalization method change

AFSI adjustment means an adjustment to

AFSI that is required under section 5.03(3)

of this notice if a CAMT entity makes a

tax research capitalization method change

for a taxable year beginning after December 31, 2025, and previously made an

adjustment to AFSI under section 5 of this

notice in a preceding taxable year. The

tax research capitalization method change

AFSI adjustment is computed separately

for each tax research capitalization method

change and equals the difference between

the following amounts computed as of the

beginning of the tax year of change—

647

(a) The cumulative amount of adjustments to AFSI under section 5.03 of this

notice with respect to the cost(s) subject

to the tax research capitalization method

change that were made with respect to the

preceding taxable years beginning with

the first taxable year for which the CAMT

entity makes an adjustment to AFSI under

section 5 of this notice, and beginning

before the tax year of change; and

(b) The cumulative amount of adjustments to AFSI under section 5.03 of this

notice with respect to the cost(s) subject

to the tax research capitalization method

change that would have been made with

respect to the preceding taxable years

beginning with the first taxable year for

which the CAMT entity makes an adjustment to AFSI under section 5 of this

notice, and beginning before the tax year

of change, if the new method of accounting

for the cost(s) had been applied for regular

tax purposes in those taxable years.

.03 AFSI adjustment for domestic

research amortization. For taxable years

beginning after December 31, 2024, the

AFSI of a CAMT entity for a taxable year

may be adjusted as follows:

(1) Reduced by TCJA domestic § 174

amortization, but only to the extent of the

amount taken into account in computing

taxable income for the taxable year;

(2) Adjusted to disregard book research

or software development amortization;

and

(3) Increased or decreased, as appropriate, by any tax research capitalization

method change AFSI adjustment in accordance with section 5.04 of this notice.

.04 Adjustment period for tax research

capitalization method change AFSI

adjustment. The adjustment period for a

tax research capitalization method change

AFSI adjustment is determined consistent with the proposed rules provided in

proposed § 1.56A-15(d)(4) (adjustment

period for tax capitalization method

change AFSI adjustments with respect to

section 168 property).

.05 Consistency requirement. If a

CAMT entity relies on section 5 of this

notice and makes the AFSI adjustment

provided in section 5 of this notice for a

taxable year, it must continue to make the

adjustment provided in section 5 of this

notice for all relevant subsequent taxable

years or until such time as prescribed by

March 9, 2026

the Treasury Department and the IRS in

regulations or guidance published in the

Internal Revenue Bulletin.

.06 Determining applicable corporation status. For purposes of applying

the average annual AFSI test in § 59(k)

(1)(B) or proposed § 1.59-2(c), AFSI is

determined without regard to the AFSI

adjustment provided in section 5.03 of

this notice.

SECTION 6. AFSI ADJUSTMENT FOR

QUALIFIED PRODUCTION COSTS

UNDER SECTION 181

.01 Purpose. In response to comments

received on the CAMT Proposed Regulations, the Treasury Department and the

IRS anticipate that the forthcoming proposed regulations will include proposed

regulations under § 56A(c)(15) and (e)

consistent with the guidance provided

in this section 6 to allow a CAMT entity

owner to adjust AFSI for qualified production costs under § 181. In addition,

the Treasury Department and the IRS

anticipate that the forthcoming proposed

regulations will propose a modification to

proposed § 1.59-2(c) to provide that, for

purposes of applying the average annual

AFSI test in § 59(k)(1)(B) or proposed

§ 1.59-2(c), AFSI is determined without

regard to the AFSI adjustment provided in

this section 6.

.02 Definitions. For purposes of this

section 6:

(1) CAMT entity owner. The term

CAMT entity owner means the CAMT

entity that is the owner of a qualified production, as defined in section 6.02(4) of

this notice, determined consistent with the

rules provided in § 1.181-1(a)(2).

(2) Deductible qualified production

costs. The term deductible qualified production costs means the qualified production costs, as defined in section 6.02(8) of

this notice, that are allowed as a deduction

in computing taxable income.

(3) Production costs. In the case of a

qualified film or television production, as

defined in § 1.181-3(a), the term production costs has the same meaning as provided in § 1.181-1(a)(3). In the case of

a qualified live theatrical production, as

defined in § 181(e), and a qualified sound

recording, as defined in § 181(f), the term

production costs means the costs attribut-

March 9, 2026

able to a qualified live theatrical production and qualified sound recordings determined consistent with the rules provided

in § 1.181-1(a)(3).

(4) Qualified production. The term

qualified production means a qualified

film or television production (as defined

in § 1.181-3(a)), a qualified live theatrical

production (as defined in § 181(e)), or a

qualified sound recording production (as

defined in § 181(f)).

(5) Qualified production book COGS

depreciation. The term qualified production book COGS depreciation means any

of the following items that are taken into

account as part of cost of goods sold (or

as part of the computation of gain or loss

from the sale or exchange of property held

for sale) in FSI with respect to qualified

production costs—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which the

complete disposition of the asset corresponding to the qualified production costs

occurs for AFS purposes, or

(ii) In the taxable year in which the

complete disposition of the asset corresponding to the qualified production costs

occurs for AFS purposes; or

(c) Impairment loss reversal.

(6) Qualified production book expense.

The term qualified production book

expense means any of the following items,

other than qualified production book

COGS depreciation, that are taken into

account in FSI with respect to qualified

production costs—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which the

complete disposition of the asset corresponding to the qualified production costs

occurs for AFS purposes, or

(ii) In the taxable year in which the

complete disposition of the asset corresponding to the qualified production costs

occurs for AFS purposes; or

(c) Impairment loss reversal.

(7) Qualified production book inventoriable expense. The term qualified

production book inventoriable expense

means any of the following items that are

648

included in inventoriable cost (or capitalized as part of the cost of non-inventory

property held for sale) in the AFS of a

CAMT entity owner with respect to qualified production costs—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which the

complete disposition of the asset corresponding to the qualified production costs

occurs for AFS purposes, or

(ii) In the taxable year in which the

complete disposition of the asset corresponding to the qualified production costs

occurs for AFS purposes; or

(c) Impairment loss reversal.

(8) Qualified production costs. The

term qualified production costs means

the production costs of any qualified

production allowed as a deduction under

§ 181(a).

(9) Qualified production tax COGS.

The term qualified production tax COGS

means:

(a) The qualified production costs capitalized to inventory under § 263A and

recovered as part of cost of goods sold in

computing gross income; and

(b) Qualified production costs capitalized under § 263A to the basis of property described in § 1221(a)(1) that is not

inventory and is recovered as part of the

computation of gain or loss from the sale

or exchange of such property in computing taxable income.

(10) Tax qualified production costs

section 481(a) adjustment. The term tax

qualified production costs section 481(a)

adjustment means an adjustment (or portion thereof) required under § 481(a) for

a change in method of accounting (other

than a change in method of accounting described in section 6.02(11) of this

notice) that impacts the timing of taking

into account qualified production costs in

computing taxable income (for example, a

change in method of accounting involving

a change from deducting qualified production costs to capitalizing such costs under

§ 263A or another capitalization provision, or vice versa).

(11) Tax qualified production costs capitalization method change. The term tax

qualified production costs capitalization

method change means a change in method

Bulletin No. 2026–11

of accounting for regular tax purposes

involving a change from capitalizing and

depreciating qualified production costs to

deducting such costs (or vice versa). This

term also includes a change in the treatment of qualified production costs due to a

recapture event described in § 1.181-4(a)

(1) and (2).

(12) Tax qualified production costs

capitalization method change AFSI

adjustment.

(a) In general. The term tax qualified

production costs capitalization method

change AFSI adjustment means an adjustment to AFSI that is required under section 6.03(1)(f) of this notice if a CAMT

entity owner makes a tax qualified production costs capitalization method change

and previously made an adjustment to

AFSI under section 6 of this notice in a

preceding taxable year. The tax qualified

production costs capitalization method

change AFSI adjustment is computed separately for each tax qualified production

costs capitalization method change and

equals the difference between the following amounts computed as of the beginning

of the tax year of change:

(i) The cumulative amount of adjustments to AFSI under section 6.03 of this

notice with respect to the cost(s) subject

to the tax qualified production costs capitalization method change that were made

with respect to the preceding taxable years

beginning with the first taxable year for

which the CAMT entity owner makes an

adjustment to AFSI under section 6 of this

notice, and beginning before the tax year

of change; and

(ii) The cumulative amount of adjustments to AFSI under section 6.03 of

this notice with respect to the cost(s)

subject to the tax qualified production

costs capitalization method change that

would have been made with respect to

the preceding taxable years beginning

with the first taxable year for which the

CAMT entity owner makes an adjustment to AFSI under section 6 of this

notice, and beginning before the tax year

of change, if the new method of accounting, or treatment, for the cost(s) had been

applied for regular tax purposes in those

taxable years.

(b) Coordination with proposed

§ 1.56A-15. The amount of the tax

qualified production costs capitaliza-

Bulletin No. 2026–11

tion method change AFSI adjustment

is adjusted, as necessary, to prevent the

duplication of any adjustment to AFSI due

to the tax qualified production costs capitalization method change also constituting a tax capitalization method change (as

described in proposed § 1.56A-15(b)(10)).

.03 AFSI adjustment for qualified production costs.

(1) In general. The AFSI of a CAMT

entity owner for a taxable year may be

adjusted as follows—

(a) Reduced by qualified production

tax COGS, but only to the extent of the

amount recovered—

(i) As part of cost of goods sold in computing gross income for the taxable year,

or

(ii) As part of the computation of

gain or loss from the sale or exchange

of non-inventory property described in

§ 1221(a)(1) that is included in taxable

income, or deducted in computing taxable

income, respectively, for the taxable year;

(b) Reduced by the amount of deductible qualified production costs, but only

to the extent allowed as a deduction in

computing taxable income for the taxable

year; and

(c) Adjusted to disregard qualified

production book COGS depreciation and

qualified production book expense with

respect to any qualified production costs

paid or incurred in any taxable year,

including taxable years ending on or

before December 31, 2019.

(d) Reduced by any tax qualified production costs section 481(a) adjustment

that is negative, but only to the extent of

the amount of the adjustment that is taken

into account in computing taxable income

for the taxable year;

(e) Increased by any tax qualified production costs section 481(a) adjustment

that is positive, but only to the extent of

the amount of the adjustment that is taken

into account in computing taxable income

for the taxable year; and

(f) Increased or decreased, as appropriate, by any tax qualified production

costs capitalization method change AFSI

adjustment in accordance with section

6.05 of this notice.

.04 Determining qualified production

tax COGS adjustment and qualified production book COGS depreciation adjustment.

649

(1) In general. Except as provided in

section 6.04(2) of this notice, a CAMT

entity owner is required to—

(a) Apply the method(s) of accounting

the CAMT entity owner uses for AFS purposes to determine the qualified production book COGS depreciation adjustment

under section 6.03(1)(c) of this notice; and

(b) Apply the method(s) of accounting

under § 263A that the CAMT entity owner

uses for regular tax purposes (and, in the

case of inventory property, the method(s)

of accounting that the CAMT entity owner

uses to identify and value inventories

under §§ 471 and 472) to determine the

qualified production tax COGS adjustment under section 6.03(1)(a) of this

notice.

(2) Reasonable method. A CAMT

entity owner is permitted to use any reasonable method to determine qualified

production book inventoriable expense

in ending inventory for AFS purposes for

purposes of determining the qualified production book COGS depreciation adjustment under section 6.03(1)(c) of this

notice, or to determine the qualified production costs included in ending inventory

for regular tax purposes for purposes of

determining the qualified production tax

COGS adjustment under section 6.03(1)

(a) of this notice, or both, provided that

such reasonable method is consistent with

and reflects the method(s) of accounting

the CAMT entity owner uses for AFS purposes or regular tax purposes, as applicable. A reasonable method would include a

method similar to the simplifying methods

provided in proposed § 1.56A-15(d)(3)(ii)

(A) through (C).

(3) Reporting requirement. If a CAMT

entity owner makes the AFSI adjustment

provided in section 6.03 of this notice for

a taxable year, it must attach a statement

to its Federal income tax return for such

taxable year. The statement—

(a) Must be titled “AFSI adjustment for

qualified production costs under § 181”,

(b) Must include the CAMT entity

owner’s name, address, and taxpayer

identification number, and

(c) If a CAMT entity owner uses a reasonable method under section 6.04(2) of

this notice, it must: include a statement

whether the CAMT entity owner is using

such reasonable method to determine (i)

qualified production book inventoriable

March 9, 2026

expense in ending inventory for AFS

purposes for purposes of determining the

qualified production book COGS depreciation adjustment under section 6.03(1)(c)

of Notice 2026-7 for the taxable year, or

(ii) qualified production costs in ending

inventory for regular tax purposes for purposes of determining the qualified production tax COGS adjustment under section

6.03(1)(a) of Notice 2026-7 for the taxable year, or (iii) both; describe such reasonable method(s) used; and certify that

such reasonable method(s) used are consistent with, and reflect, the method(s) of

accounting the CAMT entity owner uses

for AFS purposes or regular tax purposes,

as applicable.

.05 Adjustment period for tax qualified

production costs capitalization method

change AFSI adjustment. The adjustment period for a tax qualified production

costs capitalization method change AFSI

adjustment is determined consistent with

the proposed rules provided in proposed

§ 1.56A-15(d)(4) (adjustment period for

tax capitalization method change AFSI

adjustments with respect to section 168

property).

.06 Consistency requirement. If a

CAMT entity owner relies on section 6

of this notice and makes the adjustment

to AFSI provided in section 6.03 of this

notice for a taxable year, it must continue

to make the adjustment provided in section 6.03 of this notice for all subsequent

taxable years until all AFS assets corresponding to any qualified production costs

are disposed of for AFS purposes or such

time as prescribed by the Treasury Department and the IRS in regulations or guidance published in the Internal Revenue

Bulletin.

.07 Determining applicable corporation status. For purposes of applying

the average annual AFSI test in § 59(k)

(1)(B) or proposed § 1.59-2(c), AFSI is

determined without regard to the AFSI

adjustments provided in section 6.03 of

this notice.

SECTION 7. AFSI ADJUSTMENT

FOR ELIGIBLE MATERIALS AND

SUPPLIES

.01 Purpose. In response to comments

received on the CAMT Proposed Regulations, the Treasury Department and the

March 9, 2026

IRS anticipate that the forthcoming proposed regulations will include proposed

regulations under § 56A(c)(15) and (e)

consistent with the guidance provided

in this section 7 to allow a CAMT entity

to adjust AFSI for eligible materials

and supplies. In addition, the Treasury

Department and the IRS anticipate that

the forthcoming proposed regulations

will propose a modification to proposed

§ 1.59-2(c) to provide that, for purposes

of applying the average annual AFSI test

in § 59(k)(1)(B) or proposed § 1.59-2(c),

AFSI is determined without regard to the

AFSI adjustment provided in this section

7.

.02 Definitions. For purposes of this

section 7:

(1) Deductible eligible materials and

supplies. The term deductible eligible

materials and supplies means the eligible materials and supplies, as defined in

section 7.02(2) of this notice, that are

allowed as a deduction in computing taxable income.

(2) Eligible materials and supplies.

The term eligible materials and supplies

means amounts paid or incurred by a

CAMT entity—

(a) To acquire tangible property that

is described in § 1.162-3(c)(1)(iv) if such

amounts otherwise meet the definition of

materials and supplies in § 1.162-3(c)(1),

(b) That the CAMT entity treats as

deductible in accordance with the applicable rules in § 1.162-3, and

(c) That are capitalized and depreciated

over the useful life of the property for AFS

purposes.

(3) Eligible materials and supplies

book COGS depreciation. The term eligible materials and supplies book COGS

depreciation means any of the following

items that are taken into account as part

of cost of goods sold (or as part of the

computation of gain or loss from the sale

or exchange of property held for sale) in

FSI with respect to eligible materials and

supplies—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which

the complete disposition of the eligible

materials and supplies occurs for AFS

purposes, or

650

(ii) In the taxable year in which the

complete disposition of the eligible materials and supplies occurs for AFS purposes; or

(c) Impairment loss reversal.

(4) Eligible materials and supplies

book expense. The term eligible materials

and supplies book expense means any of

the following items, other than eligible

materials and supplies book COGS depreciation, that are taken into account in FSI

with respect to eligible materials and supplies—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which

the complete disposition of the eligible

materials and supplies occurs for AFS

purposes, or

(ii) In the taxable year in which the

complete disposition of the eligible materials and supplies occurs for AFS purposes; or

(c) Impairment loss reversal.

(5) Eligible materials and supplies

book inventoriable expense. The term eligible materials and supplies book inventoriable expense means any of the following

items that are included in inventoriable

cost (or capitalized as part of the cost of

non-inventory property held for sale) in

the AFS of a CAMT entity with respect to

eligible materials and supplies—

(a) Depreciation expense;

(b) Other recovery of AFS basis

(including from an impairment loss) that

occurs either:

(i) Prior to the taxable year in which

the complete disposition of the eligible

materials and supplies occurs for AFS

purposes, or

(ii) In the taxable year in which the

complete disposition of the eligible materials and supplies occurs for AFS purposes; or

(c) Impairment loss reversal.

(6) Eligible materials and supplies tax

COGS. The term eligible materials and

supplies tax COGS means:

(a) The eligible materials and supplies

capitalized to inventory under § 263A and

recovered as part of cost of goods sold in

computing gross income; and

(b) The eligible materials and supplies

capitalized under § 263A to the basis of

Bulletin No. 2026–11

property described in § 1221(a)(1) that is

not inventory and is recovered as part of

the computation of gain or loss from the

sale or exchange of such property in computing taxable income.

(7) Tax eligible materials and supplies section 481(a) adjustment. The

term tax eligible materials and supplies

section 481(a) adjustment means an

adjustment (or portion thereof) required

under § 481(a) for a change in method of

accounting (other than a change in method

of accounting described in section 7.02(8)

of this notice) that impacts the timing of

taking eligible materials and supplies into

account in computing taxable income (for

example, a change in method of accounting involving a change from deducting

eligible materials and supplies to capitalizing such costs under § 263A or another

capitalization provision, or vice versa).

(8) Tax eligible materials and supplies

capitalization method change. The term

tax eligible materials and supplies capitalization method change means a change

in method of accounting for regular tax

purposes involving a change in the classification of eligible materials and supplies

(for example, a change from treating eligible materials and supplies as inventory

to treating the items as materials and supplies under § 1.162-3, or a change from

capitalizing and depreciating eligible

materials and supplies to deducting such

eligible materials and supplies).

(9) Tax eligible materials and supplies capitalization method change AFSI

adjustment.

(a) In general. The term tax eligible

materials and supplies capitalization

method change AFSI adjustment means an

adjustment to AFSI that is required under

section 7.03(6) of this notice if a CAMT

entity makes a tax eligible materials and

supplies capitalization method change and

previously made an adjustment to AFSI

under section 7 of this notice in a preceding taxable year. The tax eligible materials

and supplies capitalization method change

AFSI adjustment is computed separately

for each tax eligible materials and supplies capitalization method change and

equals the difference between the following amounts computed as of the beginning

of the tax year of change:

(i) The cumulative amount of adjustments to AFSI under section 7.03 of this

Bulletin No. 2026–11

notice with respect to the cost(s) subject

to the tax eligible materials and supplies

capitalization method change that were

made with respect to the preceding taxable years beginning with the first taxable

year for which the CAMT entity makes an

adjustment to AFSI under section 7 of this

notice, and beginning before the tax year

of change; and

(ii) The cumulative amount of adjustments to AFSI under section 7.03 of this

notice with respect to the cost(s) subject

to the tax eligible materials and supplies

capitalization method change that would

have been made with respect to the preceding taxable years beginning with the

first taxable year for which the CAMT

entity makes an adjustment to AFSI under

section 7 of this notice, and beginning

before the tax year of change, if the new

method of accounting for the cost(s) had

been applied for regular tax purposes in

those taxable years.

(b) Coordination with proposed

§ 1.56A-15. The amount of the tax eligible materials and supplies capitalization method change AFSI adjustment

is adjusted, as necessary, to prevent the

duplication of any adjustment to AFSI due

to the tax materials and supplies capitalization method change also constituting

a tax capitalization method change (as

described in proposed § 1.56A-15(b)(10)).

.03 AFSI adjustment for eligible materials and supplies costs. The AFSI of a

CAMT entity for a taxable year may be

adjusted as follows—

(1) Reduced by eligible materials and

supplies tax COGS, but only to the extent

of the amount recovered—

(a) As part of cost of goods sold in

computing gross income for the taxable

year, or

(b) As part of the computation of gain or

loss from the sale or exchange of non-inventory property described in § 1221(a)

(1) that is included in taxable income, or

deducted in computing taxable income,

respectively, for the taxable year;

(2) Reduced by deductible eligible

materials and supplies, but only to the

extent of the amount allowed as a deduction in computing taxable income for the

taxable year;

(3) Adjusted to disregard eligible materials and supplies book COGS depreciation and eligible materials and supplies

651

book expense with respect to eligible

materials and supplies acquired in any

taxable year, including in taxable years

ending on or before December 31, 2019;

(4) Reduced by any tax eligible materials and supplies section 481(a) adjustment

that is negative, but only to the extent of

the amount of the adjustment that is taken

into account in computing taxable income

for the taxable year;

(5) Increased by any tax eligible materials and supplies section 481(a) adjustment that is positive, but only to the extent

of the amount of the adjustment that is

taken into account in computing taxable

income for the taxable year; and

(6) Increased or decreased, as appropriate, by any tax eligible materials and supplies capitalization method change AFSI

adjustment in accordance with section

7.05 of this notice.

.04 Determining eligible materials and

supplies tax COGS adjustment and eligible materials and supplies book COGS

depreciation adjustment.

(1) In general. Except as provided in

section 7.04(2) of this notice, a CAMT

entity is required to—

(a) Apply the method(s) of accounting

the CAMT entity uses for AFS purposes to

determine the eligible materials and supplies book COGS depreciation adjustment

under section 7.03(3) of this notice; and

(b) Apply the method(s) of accounting under § 263A that the CAMT entity

uses for regular tax purposes (and, in the

case of inventory property, the method(s)

of accounting that the CAMT entity uses

to identify and value inventories under

§§ 471 and 472) to determine the eligible

materials and supplies tax COGS adjustment under section 7.03(1) of this notice.

(2) Reasonable method. A CAMT

entity is permitted to use any reasonable

method to determine the eligible materials

and supplies book inventoriable expense

in ending inventory for AFS purposes for

purposes of determining the eligible materials and supplies book COGS depreciation adjustment under section 7.03(3) of

this notice, or to determine the eligible

materials and supplies included in ending

inventory for regular tax purposes for purposes of determining the eligible materials

and supplies tax COGS adjustment under

section 7.03(1) of this notice, or both, provided that such reasonable method is con-

March 9, 2026

sistent with and reflects the method(s) of

accounting the CAMT entity uses for AFS

purposes or regular tax purposes, as applicable. A reasonable method would include

a method similar to the simplifying methods provided in proposed § 1.56A-15(d)

(3)(ii)(A) through (C).

(3) Reporting requirement. If a CAMT

entity makes the AFSI adjustment provided in section 7 of this notice for a taxable year, it must attach a statement to its

Federal income tax return for such taxable

year. The statement—

(a) Must be titled “AFSI adjustment for

eligible materials and supplies”,

(b) Must include the CAMT entity’s

name, address, and taxpayer identification

number, and

(c) If a CAMT entity uses a reasonable

method under section 7.04(2) of this notice,

it must: include a statement whether the

CAMT entity is using such a reasonable

method to determine (i) eligible materials

and supplies book inventoriable expense

in ending inventory for AFS purposes for

purposes of determining the eligible materials and supplies book COGS depreciation

adjustment under section 7.03(3) of Notice

2026-7 for the taxable year, or (ii) eligible

materials and supplies in ending inventory

for regular tax purposes for purposes of

determining the eligible materials and supplies tax COGS adjustment under section

7.03(1) of Notice 2026-7 for the taxable

year, or (iii) both; describe such reasonable

method(s) used; and certify that such reasonable method(s) used are consistent with,

and reflect, the method(s) of accounting the

CAMT entity uses for AFS purposes or

regular tax purposes, as applicable.

.05 Adjustment period for tax eligible materials and supplies capitalization

method change AFSI adjustment. The

adjustment period for a tax eligible materials and supplies capitalization method

change AFSI adjustment is determined

consistent with the proposed rules provided in proposed § 1.56A-15(d)(4)

(adjustment period for tax capitalization

method change AFSI adjustments with

respect to section 168 property).

.06 Consistency requirement. If a

CAMT entity relies on section 7 of this

notice and makes the adjustment to AFSI

provided in section 7.03 of this notice for

a taxable year, it must continue to make

the adjustment provided in section 7.03 of

March 9, 2026

this notice for all subsequent taxable years

until all eligible materials and supplies are

disposed of for AFS purposes or such time

as prescribed by the Treasury Department

and the IRS in regulations or guidance published in the Internal Revenue Bulletin.

.07 Determining applicable corporation status. For purposes of applying

the average annual AFSI test in § 59(k)

(1)(B) or proposed § 1.59-2(c), AFSI is

determined without regard to the AFSI

adjustments provided in section 7.03 of

this notice.

SECTION 8. TROUBLED COMPANIES

.01 Purpose. In response to comments

received on Notice 2025-46, this section

8 clarifies the attribute reduction interim

guidance for financially troubled companies provided in section 4.03 of Notice

2025-46 and clarifies and modifies the

interim guidance provided in section

4.04(2)(a) of Notice 2025-46 regarding

fresh start accounting gain and loss on

non-transactional bankruptcy emergences.

The Treasury Department and the IRS

anticipate that the forthcoming proposed

regulations will include proposed regulations under § 56A(c)(15) and (e) consistent with the guidance provided in this

section 8.

.02 Application of § 1.1502-28. For

purposes of applying the attribute reduction interim guidance provided in sections 4.03(4) and (5) of Notice 2025-46,

§ 1.1502-28 applies.

.03 AFSI consequences resulting from

emergence from bankruptcy. Solely with

regard to the emergence from bankruptcy

of a CAMT entity, the CAMT entity determines its CAMT consequences resulting

from that emergence (and not from a

discharge of indebtedness or a domestic

covered asset transaction, as provided in

sections 4.03 and 4.04(3)(a) of Notice

2025-46, respectively) by—

(1) Disregarding any resulting gain

or loss that is reflected in the FSI of the

CAMT entity; and

(2) Determining the CAMT basis of

any assets (other than the regular tax

basis in the stock of a foreign corporation) of the CAMT entity by disregarding

any adjustment to the AFS basis of those

assets resulting from the emergence from

bankruptcy.

652

SECTION 9. PROPOSED COVERED

ASSET TRANSACTION SECTION 358

ANTI-AVOIDANCE RULE

.01 Purpose. The Treasury Department

and the IRS anticipate that the forthcoming proposed regulations will modify

the proposed two-year rule in proposed

§ 1.56A-4(f)(1)(ii) consistent with the

guidance described in this section 9.

.02 Proposed two-year rule rebuttable

presumption. For purposes of proposed

§ 1.56A-4(f)(1), if within two years of the

date the stock of a foreign corporation is

received in a covered asset transaction, the

basis in such stock is taken into account, in

whole or in part, in determining the AFSI

of the recipient CAMT entity or another

CAMT entity, the covered asset transaction would be presumed to have a principal

purpose to avoid treatment of such CAMT

entity as an applicable corporation or to

reduce or otherwise avoid a liability under

§ 55(a). The presumption described in the

preceding sentence may be rebutted by

facts and circumstances clearly establishing

that the covered asset transaction was not

undertaken with such a principal purpose.

.03 Procedure for rebutting presumption.

In order to rebut the proposed two-year rule

rebuttable presumption described in section 9.02 of this notice, a CAMT entity that

would otherwise be required to take into

account the increase to AFSI under proposed § 1.56A-4(f) for the taxable year in

which the stock of the foreign corporation

is received must attach a statement rebutting the presumption to the Form 4626,

Alternative Minimum Tax – Corporations,

filed with the CAMT entity’s return for the

taxable year in which the event triggering

application of the proposed two-year rule

(as modified by this notice) occurs. The

statement must describe the facts and circumstances supporting the rebuttal and

be in accordance with any procedures set

forth in forms, instructions, or guidance

published in the Internal Revenue Bulletin.

SECTION 10. AFSI ADJUSTMENT

WITH RESPECT TO TRANSACTIONS

INVOLVING INTANGIBLE

PROPERTY SUBJECT TO SECTION

367(d)

.01 Purpose. The Treasury Department

and the IRS anticipate that the forthcom-

Bulletin No. 2026–11

ing proposed regulations will address certain CAMT consequences of transactions

involving intangible property subject to

§ 367(d) consistent with the guidance

described in this section 10.

.02 AFSI adjustment for transactions

involving the transfer of intangible property subject to § 367(d).

(1) Shareholder-level adjustment. A

CAMT entity that is required to include

an amount in gross income under § 367(d)

for regular tax purposes for a taxable year

increases its AFSI for such year by such

amount. If regular tax basis is relevant in

determining an amount included in gross

income under § 367(d), CAMT basis is

substituted for regular tax basis in determining the amount included in AFSI.

This would be the case, for example, if an

election is made under § 1.367(d)-1(g)(2)

or 1.367(d)-1T(g)(2) to treat a transfer of

intangible property to a foreign corporation as a sale, or if there is a disposition

of the intangible property by the foreign

corporation described in § 1.367(d)-1(f)

(4)(i)(A).

(2) Foreign corporation-level adjustment. A foreign corporation that properly

treats a deemed payment as an allowable

deduction under § 1.367(d)-1(c)(2)(ii)

or (e)(2)(ii) or reduces its gross income

under § 1.367(d)-1(f)(2)(i) for regular

tax purposes for a taxable year reduces

its adjusted net income or loss (or AFSI,

if the foreign corporation is an applicable

corporation and the deduction or reduction

reduces income described in § 882(b)) for

such year by the amount of the deemed

payment or the amount of the reduction

in gross income. The preceding sentence

applies only to the extent such amounts

increase the AFSI of a CAMT entity under

proposed § 1.56A-4 as described in this

section 10.

SECTION 11. APPLICABILITY DATES

AND RELIANCE

.01 Applicability dates. It is anticipated

that the forthcoming proposed regulations

will propose rules consistent with the

guidance described in sections 3 through

10 of this notice that will apply for taxable years beginning on or after the date

the final regulation addressing the AFSI

adjustment or other modification to the

CAMT Proposed Regulations described in

Bulletin No. 2026–11

a respective section of this notice is published in the Federal Register.

.02 Reliance.

(1) In general. Subject to section

11.02(2), (3), and (4) of this notice, for

all taxable years beginning before the

date such forthcoming proposed regulations are published in the Federal Register, taxpayers may rely on the guidance in this notice. In addition, reliance

on section 3, 4, 5, 6 or 7 of this notice

is conditioned on the taxpayer meeting

the consistency requirement set forth in

that section. A taxpayer’s reliance on

any of the guidance in this notice for a

taxable year will not cause the taxpayer

to become subject to, or to violate, the

proposed reliance rules, including the

consistency requirements, provided in

section 3.02(1) of Notice 2025-49 for

such taxable year.

(2) Sections 9 and 10 of this notice.

(a) A taxpayer that relies on proposed

§ 1.56A-4 may rely on section 9 of this

notice for taxable years beginning before

the date the forthcoming proposed regulations are published in the Federal

Register, provided that the requirements

described in section 3.02(1)(b) of Notice

2025-49 are satisfied for all such taxable

years beginning with the first taxable year

with respect to which the taxpayer relies

on section 9 of this notice.

(b) A taxpayer that relies on proposed

§ 1.56A-4 may rely on section 10 of this

notice for taxable years beginning before

the date the forthcoming proposed regulations are published in the Federal

Register, provided that the requirements

described in section 3.02(1)(b) of Notice

2025-49 are satisfied for all such taxable

years beginning with the first taxable year

with respect to which the taxpayer relies

on section 10 of this notice. A taxpayer

that does not rely on section 10 of this

notice may continue to rely on proposed

§§ 1.56A-4 or 1.56A-6, as applicable, subject to the requirements of section 3.02(1)

of Notice 2025-49.

(3) Section 4 of Notice 2025-49. As

an alternative to relying on section 4

of Notice 2025-49 as modified by section 3 of this notice for all taxable years

beginning before the date the forthcoming proposed regulations are published

in the Federal Register, a taxpayer may

instead choose to rely on section 4 of

653

Notice 2025-49 as originally published

for taxable years beginning before February 18, 2026, and rely on section 4 of

Notice 2025-49 as modified by section 3

of this notice for taxable years beginning

on or after February 18, 2026, and before

the date that the forthcoming proposed

regulations are published in the Federal

Register. A taxpayer who chooses to rely

on section 4 of Notice 2025-49 for taxable

years beginning on or after February 18,

2026, may do so only if the taxpayer follows such section as modified by section 3

of this notice.

(4) Section 9 of Notice 2025-49. As

an alternative to relying on section 9

of Notice 2025-49 as modified by section 4 of this notice for all taxable years

beginning before the date the forthcoming proposed regulations are published

in the Federal Register, a taxpayer may

instead choose to rely on section 9 of

Notice 2025-49 as originally published

for taxable years beginning before February 18, 2026, and rely on section 9 of

Notice 2025-49 as modified by section 4

of this notice for taxable years beginning

on or after February 18, 2026, and before

the date that the forthcoming proposed

regulations are published in the Federal

Register. A taxpayer who chooses to rely

on section 9 of Notice 2025-49 for taxable

years beginning on or after February 18,

2026, may do so only if the taxpayer follows such section as modified by section 4

of this notice.

SECTION 12. EFFECT ON OTHER

DOCUMENTS

Section 4 of Notice 2025-46 is clarified

and modified. Sections 4 and 9 of Notice

2025-49 are modified.

SECTION 13. PAPERWORK

REDUCTION ACT

The Paperwork Reduction Act of 1995

(44 U.S.C. §§ 3501-3520) (PRA) requires

that a Federal agency obtain the approval

of the Office of Management and Budget (OMB) before collecting information

from the public, whether such collection

of information is mandatory, voluntary, or

required to obtain or retain a benefit. An

agency may not conduct or sponsor, and a

person is not required to respond to, a col-

March 9, 2026

lection of information unless the collection of information displays a valid OMB

control number.

The collections of information in this

notice are in sections 3.05(3), 4.06(3),

6.04(3), 7.04(3), and 9.03 of this notice.

Section 3.05(3) of this notice requires

a CAMT entity to file a statement with its

Federal income tax return if it makes the

AFSI adjustment provided in section 3.04

of this notice for a taxable year. The information requested in section 3.05(3) of this

notice is required to obtain the benefit of

making the AFSI adjustment described in

section 3 of this notice. This information

will be used by the IRS to confirm compliance with the guidance in section 3 of

this notice. The likely respondents are corporations.

Section 4.06(3) of this notice requires

a CAMT entity to file a statement with its

Federal income tax return if it makes the

AFSI adjustment provided in section 4.04

of this notice for a taxable year. The information requested in section 4.06(3) of this

notice is required to obtain the benefit of

making the AFSI adjustment described in

section 4 of this notice. This information

will be used by the IRS to confirm compliance with the guidance in section 4 of

this notice. The likely respondents are corporations.

Section 6.04(3) of this notice requires

a CAMT entity owner to file a statement

with its Federal income tax return if it

makes the AFSI adjustment provided in

section 6.03 of this notice for a taxable

year. The information requested in section

6.04(3) of this notice is required to obtain

the benefit of making the AFSI adjustment

described in section 6 of this notice. This

information will be used by the IRS to

confirm compliance with the guidance in

section 6 of this notice. The likely respondents are corporations.

Section 7.04(3) of this notice requires

a CAMT entity to file a statement with its

Federal income tax return if it makes the

AFSI adjustment provided in section 7 of

this notice for a taxable year. The information requested in section 7.04(3) of this

notice is required to obtain the benefit of

making the AFSI adjustment described in

section 7 of this notice. This information

will be used by the IRS to confirm compliance with the guidance in section 7 of

this notice. The likely respondents are corporations.

Section 9.03 of this notice requires a

CAMT entity to file a statement with its

Form 4626 if it chooses to rebut the twoyear rebuttable presumption described

in section 9.02 of this notice. The information requested in section 9.03 of this

notice is required to obtain the benefit of

the two-year rebuttable presumption and

will be used by the IRS to confirm compliance with the guidance in section 9 of

this notice. The likely respondents are corporations.

The reporting requirements in this

notice will be included within OMB control number 1545-0123 in accordance

with the PRA procedures under 5 CFR

§ 1320.10. The recordkeeping requirements are considered general tax records

under § 1.6001-1(e). For PRA purposes,

general tax records are already approved

by OMB under 1545-0123 for business

filers.

Books or records relating to a collection of information must be retained as

long as their contents may become material in the administration of any internal

revenue law. Generally, tax returns and

tax return information are confidential, as

required by § 6103.

SECTION 14. EFFECTIVE DATE

This notice is effective on February 18,

2026.

SECTION 15. DRAFTING AND

CONTACT INFORMATION

The principal authors of this notice are

personnel from the Office of Associate

Chief Counsel (Income Tax & Accounting) and the Office of Associate Chief

Counsel (International). Other personnel

from the Treasury Department and the

IRS participated in its development. For

further information regarding this notice,

contact the Office of the Associate Chief

Counsel (Income Tax & Accounting),

Branch 7, at (202) 317-7005 (not a tollfree number). For further information

regarding section 8 of this notice, contact

the Office of the Associate Chief Counsel

(Corporate), Branch 5, at (202) 317-5363

(not a toll-free number). For further information regarding sections 9 and 10 of this

notice, contact the Office of Associate

Chief Counsel (International), Branch 4,

at (202) 317-6937 (not a toll-free number).

Update for Weighted

Average Interest Rates,

Yield Curves, and Segment

Rates

Notice 2026-14

This notice provides guidance on the

corporate bond monthly yield curve, the

corresponding spot segment rates used

under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the

Internal Revenue Code. In addition, this

notice provides guidance as to the interest rate on 30-year Treasury securities

under § 417(e)(3)(A)(ii)(II) as in effect for

plan years beginning before 2008 and the

30-year Treasury weighted average rate

under § 431(c)(6)(E)(ii)(I).

YIELD CURVE AND SEGMENT

RATES

Section 430 specifies the minimum

funding requirements that apply to single-employer plans (except for CSEC plans

under § 414(y)) pursuant to § 412. Section

430(h)(2) specifies the interest rates that

must be used to determine a plan’s target

normal cost and funding target. Under

this provision, present value is generally

determined using three 24-month average

interest rates (“segment rates”), each of

which applies to cash flows during specified periods. To the extent provided under

§ 430(h)(2)(C)(iv), these segment rates

are adjusted by the applicable percentage

of the 25-year average segment rates for

the period ending September 30 of the

year preceding the calendar year in which

the plan year begins.1 However, an elec-

Pursuant to § 433(h)(3)(A), the third segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount

of the full funding limitation under § 433(c)(7)(C)).

1

March 9, 2026

654

Bulletin No. 2026–11

tion may be made under § 430(h)(2)(D)

(ii) to use the monthly yield curve in place

of the segment rates.

Section 1.430(h)(2)-1(d) provides

rules for determining the monthly corporate bond yield curve, and § 1.430(h)

(2)-1(c) provides rules for determining

the 24-month average corporate bond

segment rates used to compute the target

normal cost and the funding target. Consistent with the methodology specified in

§ 1.430(h)(2)-1(d), the monthly corporate

bond yield curve derived from January

2026 data is in Table 2026-1 at the end

of this notice. The spot first, second, and

Applicable Month

February 2026

third segment rates for the month of January 2026 are, respectively, 4.03, 5.20, and

6.12.

The 24-month average segment rates

determined under § 430(h)(2)(C)(i)

through (iii) must be adjusted pursuant to

§ 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates. Those percentages are

95% and 105% for plan years beginning

in 2025 and 2026. For this purpose, any

25-year average segment rate that is less

than 5% is deemed to be 5%. The 25-year

average segment rates for plan years

beginning in 2025 and 2026 were published in Notice 2024-67, 2024-41 I.R.B.

726 and Notice 2025-47, 2025-40 I.R.B.

441, respectively.

24-MONTH AVERAGE CORPORATE

BOND SEGMENT RATES

The three 24-month average corporate

bond segment rates applicable for February 2026 without adjustment for the

25-year average segment rate limits are as

follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment

First Segment

Second Segment

Third Segment

4.54

5.26

5.78

The adjusted 24-month average segment rates set forth in the chart below

reflect § 430(h)(2)(C)(iv) of the Code. The

24-month averages applicable for February 2026, adjusted to be within the applicable minimum and maximum percent-

ages of the corresponding 25-year average

segment rates in accordance with § 430(h)

(2)(C)(iv), are as follows:

Adjusted 24-Month Average Segment Rates

For Plan Years

Beginning In

Applicable Month

First Segment

Second Segment

Third Segment

2025

February 2026

4.75

5.26

5.78

2026

February 2026

4.75

5.25

5.78

30-YEAR TREASURY SECURITIES

INTEREST RATES

Section 431 specifies the minimum funding requirements that apply

to multiemployer plans pursuant to

§ 412. Section 431(c)(6)(B) specifies

a minimum amount for the full-funding limitation described in § 431(c)(6)

(A), based on the plan’s current liability. Section 431(c)(6)(E)(ii)(I) provides

that the interest rate used to calculate

current liability for this purpose must

be no more than 5 percent above and

no more than 10 percent below the

weighted average of the rates of interest

on 30-year Treasury securities during

the four-year period ending on the last

day before the beginning of the plan

year. Notice 88-73, 1988-2 C.B. 383,

provides guidelines for determining the

weighted average interest rate. The rate

of interest on 30-year Treasury securities for January 2026 is 4.84 percent.

The Service determined this rate as

the average of the daily determinations

of yield on the 30-year Treasury bond

maturing in November 2055. For plan

years beginning in February 2026, the

weighted average of the rates of interest

on 30-year Treasury securities and the

permissible range of rates used to calculate current liability are as follows:

For Plan Years Beginning In

Treasury Weighted Average Rates

30-Year Treasury Weighted Average

Permissible Range 90% to 105%

February 2026

4.40

3.96 to 4.62

Bulletin No. 2026–11

655

March 9, 2026

MINIMUM PRESENT VALUE

SEGMENT RATES

In general, the applicable interest rates

Month

January 2026

imum present value segment rates. Pursuant to that section, the minimum present

value segment rates determined for January 2026 are as follows:

Minimum Present Value Segment Rates

First Segment

Second Segment

4.03

5.20

DRAFTING INFORMATION

The principal author of this notice

is Tom Morgan of the Office of Associ-

March 9, 2026

under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month

average. Section 1.417(e)-1(d)(3) provides guidelines for determining the min-

ate Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes). However, other personnel from

the IRS participated in the development

656

Third Segment

6.12

of this guidance. For further information

regarding this notice, contact Mr. Morgan

at 202-317-6700 or Tony Montanaro at

626-927-1475 (not toll-free number).

Bulletin No. 2026–11

Table 2026-1

Monthly Yield Curve for January 2026

Derived from January 2026 Data

Maturity

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

Yield

3.79

3.84

3.89

3.94

3.99

4.05

4.11

4.17

4.23

4.30

4.37

4.44

4.52

4.59

4.66

4.73

4.80

4.87

4.94

5.00

5.06

5.11

5.17

5.22

5.27

5.31

5.35

5.39

5.43

5.47

5.50

5.54

5.57

5.60

5.62

5.65

5.67

5.70

5.72

5.74

Maturity

20.5

21.0

21.5

22.0

22.5

23.0

23.5

24.0

24.5

25.0

25.5

26.0

26.5

27.0

27.5

28.0

28.5

29.0

29.5

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5

34.0

34.5

35.0

35.5

36.0

36.5

37.0

37.5

38.0

38.5

39.0

39.5

40.0

Bulletin No. 2026–11

Yield

5.76

5.78

5.80

5.82

5.83

5.85

5.87

5.88

5.89

5.91

5.92

5.93

5.94

5.95

5.97

5.98

5.99

6.00

6.01

6.01

6.02

6.03

6.04

6.05

6.06

6.07

6.07

6.08

6.09

6.09

6.10

6.11

6.11

6.12

6.13

6.13

6.14

6.14

6.15

6.15

Maturity

40.5

41.0

41.5

42.0

42.5

43.0

43.5

44.0

44.5

45.0

45.5

46.0

46.5

47.0

47.5

48.0

48.5

49.0

49.5

50.0

50.5

51.0

51.5

52.0

52.5

53.0

53.5

54.0

54.5

55.0

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

60.0

Yield

6.16

6.16

6.17

6.17

6.18

6.18

6.19

6.19

6.20

6.20

6.20

6.21

6.21

6.22

6.22

6.22

6.23

6.23

6.23

6.24

6.24

6.24

6.25

6.25

6.25

6.26

6.26

6.26

6.26

6.27

6.27

6.27

6.27

6.28

6.28

6.28

6.28

6.29

6.29

6.29

657

Maturity

60.5

61.0

61.5

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

67.0

67.5

68.0

68.5

69.0

69.5

70.0

70.5

71.0

71.5

72.0

72.5

73.0

73.5

74.0

74.5

75.0

75.5

76.0

76.5

77.0

77.5

78.0

78.5

79.0

79.5

80.0

Yield

6.29

6.30

6.30

6.30

6.30

6.30

6.31

6.31

6.31

6.31

6.32

6.32

6.32

6.32

6.32

6.32

6.33

6.33

6.33

6.33

6.33

6.33

6.34

6.34

6.34

6.34

6.34

6.34

6.35

6.35

6.35

6.35

6.35

6.35

6.35

6.36

6.36

6.36

6.36

6.36

Maturity

80.5

81.0

81.5

82.0

82.5

83.0

83.5

84.0

84.5

85.0

85.5

86.0

86.5

87.0

87.5

88.0

88.5

89.0

89.5

90.0

90.5

91.0

91.5

92.0

92.5

93.0

93.5

94.0

94.5

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

Yield

6.36

6.36

6.36

6.37

6.37

6.37

6.37

6.37

6.37

6.37

6.37

6.38

6.38

6.38

6.38

6.38

6.38

6.38

6.38

6.38

6.39

6.39

6.39

6.39

6.39

6.39

6.39

6.39

6.39

6.39

6.39

6.40

6.40

6.40

6.40

6.40

6.40

6.40

6.40

6.40

March 9, 2026

Guidance to Apply

Interim Safe Harbors for

Purposes of Determining

a Taxpayer’s Material

Assistance from a

Prohibited Foreign Entity;

Other Prohibited Foreign

Entity Guidance

Notice 2026-15

SECTION 1. PURPOSE

This notice describes interim guidance

regarding restrictions to certain energy

credits under the Internal Revenue Code

(Code),1 with respect to status as, and

sourcing from, a prohibited foreign entity

(PFE). These restrictions were enacted by

Public Law 119-21, 139 Stat. 72 (July 4,

2025), commonly known as the One, Big,

Beautiful Bill Act (OBBBA). Section 3 of

this notice describes rules addressing material assistance from a PFE that the Department of the Treasury (Treasury Department) and the Internal Revenue Service

(IRS) intend to include in proposed regulations (forthcoming proposed regulations).

Section 4 of this notice describes interim

safe harbor guidance under §§ 45X, 45Y,

and 48E for determining a qualified facility’s, energy storage technology’s (EST),

or eligible component’s material assistance cost ratio (MACR) for purposes of

determining whether there was material

assistance from a PFE. Section 5 of this

notice addresses certain PFE restrictions

that the Treasury Department and the IRS

intend to include in the forthcoming proposed regulations. Sections 6, 7, and 8 of

this notice, respectively, provides a glossary of certain defined terms; a request for

comments; and guidance on substantiation

and the ability of taxpayers to rely on the

guidance provided in sections 3 through 5

of this notice. The Treasury Department

and the IRS intend to issue more compre-

hensive proposed regulations and other

guidance with respect to the definitions of

a PFE and material assistance from a PFE.

SECTION 2. BACKGROUND

.01 Overview of §§ 45Y, 48E, and

45X and OBBBA Amendments Related to

PFEs.

Sections 45Y, 48E, and 45X were added

to the Code by §§ 13701(a), 13702(a),

and 13502(a), respectively, of Public

Law 117-169, 136 Stat. 1818, 1971-1997

(August 16, 2022), commonly known

as the Inflation Reduction Act of 2022

(IRA). Sections 70512(b)(1), 70513(b)

(1), and 70514(c)(1) of the OBBBA added

new §§ 45Y(b)(1)(E);2 48E(b)(6)3 and (c)

(3); and 45X(c)(1)(C), respectively, to the

Code to provide that the terms qualified

facility, EST, and eligible component do

not include items that include material

assistance from a PFE.4 The OBBBA also

amended § 7701 to add the definitions of

the terms “prohibited foreign entity” and

“material assistance from a prohibited

foreign entity.”5 In addition, the OBBBA

created § 6695B and amended §§ 45Q,

45U, 45X, 45Y, 45Z, 48E, 50, 139L, 6417,

6418, 6501, and 6662 to add provisions

relating to PFEs.6

(1) Section 45Y: Clean Electricity Production Credit

Section 45Y(a)(1) provides a production credit for kilowatt hours of electricity

produced by the taxpayer at a qualified

facility and either (1) sold by the taxpayer

to an unrelated party during the taxable

year or, (2) in the case of a qualified facility equipped with a metering device which

is owned or operated by an unrelated person, sold, consumed, or stored by the taxpayer during the taxable year.

Section 45Y(b)(1)(A) generally defines

the term “qualified facility” for purposes

of § 45Y as a facility which is used for the

generation of electricity, which is placed

in service after December 31, 2024, and

for which the greenhouse gas emissions

rate is not greater than zero.

Section 45Y(b)(1)(C) provides that a

qualified facility includes a new unit or

additions of capacity placed in service

after December 31, 2024, in connection

with an existing facility used for the generation of electricity with a greenhouse

gas emissions rate not greater than zero,

which was placed in service before January 1, 2025, but only to the extent of the

increased amount of electricity produced

at the facility by reason of such new unit

or additions of capacity (Incremental Production Rule).

Section 45Y(b)(1)(E), as added by the

OBBBA, provides that a qualified facility

does not include any facility for which

construction begins after December 31,

2025, if the construction of such facility

includes any material assistance from a

PFE (as defined in § 7701(a)(52)).

Sections 1.45Y-4(d)(1) provides that a

facility may qualify as originally placed

in service even if it contains some used

components of property within the unit

of qualified facility, provided the fair

market value of the used components of

the unit of qualified facility is not more

than 20 percent of the total value of the

unit of qualified facility (80/20 Rule). The

total value of the unit of qualified facility

includes the cost of the new components

of property plus the fair market value of

the used components of property within

the unit of qualified facility.

(2) Section 48E: Clean Electricity

Investment Credit

Section 48E provides an investment

credit for any taxable year in which a qualified investment is made with respect to

any qualified facility and any EST under

§ 48E, determined as a percentage of the

qualified investment in any qualified facility and any EST.

Sections 48E(b)(1)(A) and (B) provide

that a taxpayer’s qualified investment with

respect to a qualified facility is the sum of

the basis of any qualified property placed

in service by the taxpayer during the taxable year, which is part of the qualified

facility, plus the amount of expenditures

Unless otherwise specified, all “section” or “§” references are to sections of the Code or the Income Tax Regulations (26 CFR part 1).

There are two § 45Y(b)(1)(E) in the Code. All references in this notice to § 45Y(b)(1)(E) are to the subparagraph titled, “Material Assistance from Prohibited Foreign Entities.”

3

OBBBA § 70513(b)(1)(A) also redesignated former § 48E(b)(6) as § 48E(b)(7).

4

Consistent with the usage in § 7701(a)(52), this notice uses the terms qualified facility, qualified interconnection property, energy storage technology, and eligible component throughout to

mean items that are within the definitions of those terms without regard to whether the “material assistance from a PFE” rules are satisfied.

5

See OBBBA § 70512(c).

6

See OBBBA §§ 70512(k)-(l); 70522(a), (d); 70510(a)-(b); 70514(c)(2) and (f); 70512(b)(2), (l); 70521(k); 70513(b)(2), (g); 70513(b)(3)(A)(ii), (g); 70435(a)-(c); 70512(j)(2), (l); 70512(h),

(l); 70512(i), (l); and 70512(j)(1), (l).

1

2

March 9, 2026

658

Bulletin No. 2026–11

that are paid or incurred by the taxpayer

for qualified interconnection property,

properly chargeable to the capital account

of the taxpayer, in connection with a qualified facility that has a maximum net output of not greater than 5 megawatts (as

measured in alternating current) and is

placed in service during the taxable year.

Section 48E(b)(3)(A) defines the

term “qualified facility” for purposes of

§ 48E as a facility which is used for the

generation of electricity, which is placed

in service after December 31, 2024, and

for which the anticipated greenhouse gas

emissions rate is not greater than zero.

Sections 48E(b)(3)(B)(i) provides that

rules similar to the rules of § 45Y(b)(1)

(C) (regarding the Incremental Production

Rule) apply for purposes of § 48E(b)(3).

Section 1.48E-4(c)(1) provides that a retrofitted qualified facility or EST may qualify as originally placed in service even if it

contains some used components of property within the unit of qualified facility

or unit of EST, provided the fair market

value of the used components of the unit

of qualified facility or unit of EST is not

more than 20 percent of the total value of

the unit of qualified facility (that is, the

80/20 Rule).

Section 48E(c)(2) defines the term

“energy storage technology” by reference

to § 48(c)(6), excepting the application of

§ 48(c)(6)(D) (regarding a beginning of

construction limitation). Section 48(c)(6)

defines energy storage technology as, in

general, property (other than property primarily used in the transportation of goods

or individuals and not for the production

of electricity) that receives, stores, and

delivers energy for conversion to electricity (or, in the case of hydrogen, which

stores energy), and has a nameplate capacity of not less than 5 kilowatt hours, and

thermal energy storage property.7

Section 48E(b)(2) provides that the

term “qualified property” means property

which is tangible personal property, or

other tangible property (not including a

building or its structural components), but

only if such property is used as an integral

part of the qualified facility; with respect

to which depreciation (or amortization in

lieu of depreciation) is allowable; and the

construction, reconstruction, or erection

of which is completed by the taxpayer, or

which is acquired by the taxpayer, provided the original use of such property

commences with the taxpayer.

Section 48E(b)(4) defines the term

“qualified interconnection property” by

reference to § 48(a)(8)(B) to mean any

tangible property which is part of an addition, modification, or upgrade to a transmission or distribution system which is

required at or beyond the point at which

the qualified facility interconnects to such

transmission or distribution system in

order to accommodate such interconnection; is either constructed, reconstructed,

or erected by the taxpayer or the cost with

respect to the construction, reconstruction,

or erection of which is paid or incurred

by such taxpayer; and the original use

of which, pursuant to an interconnection

agreement, commences with a utility. Section 1.48E-4(a)(2) provides that qualified

interconnection property is not part of a

qualified facility.

Section 48E(b)(6), as added by the

OBBBA, provides that qualified facility

and qualified interconnection property

do not include any facility or property

the construction, reconstruction, or erection of which begins after December 31,

2025, if the construction, reconstruction,

or erection of such facility or property

includes any material assistance from a

PFE (as defined in § 7701(a)(52)).

Section 48E(c)(3), as added by the

OBBBA, provides that energy storage

technology does not include any property

the construction of which begins after

December 31, 2025, if the construction of

such property includes any material assistance from a PFE (as defined in § 7701(a)

(52)).

(3) Section 45X: Advanced Manufacturing Production Credit

Section 45X provides a production

credit for eligible components produced

and sold by a taxpayer to an unrelated

party, as determined under § 45X(b)(1)

for the different eligible components. Section 45X(c)(1)(A) defines the term “eligible component” to mean any solar energy

component, any wind energy component,

any inverter described in § 45X(c)(2)

(B) through (G), any qualifying battery

component, and any applicable critical

mineral. Section 1.45X-3 and 1.45X-4

define eligible components for purposes

of § 45X.

Section 45X(c)(1)(C), as added by the

OBBBA, provides that for taxable years

beginning after July 4, 2025, the date of

the OBBBA’s enactment, the term “eligible component” does not include any

property which includes any material

assistance from a PFE (as defined in

§ 7701(a)(52), as applied by substituting

“used in a product sold before January 1,

2027” for “used in a product sold before

January 1, 2030” in § 7701(a)(52)(D)(iv)

(II)(bb) (relating to existing, binding written contracts)).

.02 Overview of § 7701: Definitions.

Section 7701 was enacted as part of

the Internal Revenue Code of 1954, Public Law 83-591, Ch. 736, 68A Stat. 3,

911 (Aug. 16, 1954), and provides definitions for terms used in the Code. Section 70512(c) of the OBBBA added new

§§ 7701(a)(51) and (52) to the Code.

(1) Section 7701(a)(51): Prohibited

Foreign Entity.

Section 7701(a)(51) includes detailed

rules defining a PFE. Section 7701(a)(51)

(A) defines PFE as a specified foreign

entity or a foreign-influenced entity.

Section 7701(a)(51)(B) provides that

for purposes of the PFE restrictions, the

term “specified foreign entity” means (i) a

foreign entity of concern described in subparagraph (A), (B), (D), or (E) of section

9901(8) of the William M. (Mac) Thornberry National Defense Authorization Act

for Fiscal Year 2021 (Public Law 116283; 15 U.S.C. 4651) (2021 NDAA),8 (ii)

an entity identified as a Chinese military

company operating in the United States

in accordance with section 1260H of the

2021 NDAA (10 U.S.C. 113 note), (iii) an

Section 48(c)(6)(B) and (C) also define energy storage technology in the case of modifications of certain property and thermal energy storage property.

As enacted, § 9901(6) of the 2021 NDAA defined the term “foreign entity of concern.” Section 103(a)(2) of the CHIPS Act of 2022, Public Law 117-167, 136 Stat. 1366, 1379 (August 9,

2022), amended the 2021 NDAA by redesignating § 9901(6) as § 9901(8). Accordingly, the Treasury Department and the IRS interpret § 7701(a)(51)(B)(i)’s reference to § 9901(8) of the

2021 NDAA to be to the 2021 NDAA as amended by the CHIPS Act of 2022.

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entity included on a list required by clause

(i), (ii), (iv), or (v) of section 2(d)(2)(B) of

Public Law 117-78 (135 Stat. 1527), (iv)

an entity specified under section 154(b) of

the National Defense Authorization Act

for Fiscal Year 2024 (Public Law 118-31;

10 U.S.C. note prec. 4651), or (v) a foreign-controlled entity.9

Section 7701(a)(51)(D) provides that

for purposes of defining a PFE, a “foreign-influenced entity” includes two categories of entities. In the first category,

under § 7701(a)(51)(D)(i)(I), an entity is

a “foreign-influenced entity” if, during the

taxable year (aa) a specified foreign entity

has the direct authority to appoint a covered officer of such entity, (bb) a single

specified foreign entity owns at least 25

percent of such entity, (cc) one or more

specified foreign entities own in the aggregate at least 40 percent of such entity, or

(dd) at least 15 percent of the debt of such

entity has been issued, in the aggregate, to

1 or more specified foreign entities. In the

second category, under § 7701(a)(51)(D)

(i)(II), an entity is a “foreign-influenced

entity” if, during the previous taxable

year, the entity made a payment to a specified foreign entity pursuant to a contract,

agreement, or other arrangement which

entitles such specified foreign entity (or

an entity related to such specified foreign

entity) to exercise effective control over

(aa) any qualified facility or EST of the

taxpayer (or any person related to the taxpayer), or (bb) with respect to any eligible

component produced by the taxpayer (or

any person related to the taxpayer), (AA)

the extraction, processing, or recycling of

any applicable critical mineral, or (BB)

the production of an eligible component

which is not an applicable critical mineral.

For purposes of § 7701(a)(51)(D)(i)

(II), the term “effective control” is defined

generally in § 7701(a)(51)(D)(ii)(I).

However, § 7701(a)(51)(D)(ii)(II) provides that during any period prior to the

issuance of guidance by the Secretary of

the Treasury or the Secretary’s delegate

(Secretary), the term, “effective control”

means the unrestricted contractual right

of a contractual counterparty to (aa) determine the quantity or timing of production

of an eligible component produced by the

taxpayer, (bb) determine the amount or

timing of activities related to the production of electricity undertaken at a qualified

facility of the taxpayer or the storage of

electrical energy in EST of the taxpayer,

(cc) determine which entity may purchase

or use the output of a production unit of

the taxpayer that produces eligible components, (dd) determine which entity may

purchase or use the output of a qualified

facility of the taxpayer, (ee) restrict access

to data critical to production or storage of

energy undertaken at a qualified facility of

the taxpayer, or to the site of production or

any part of a qualified facility or EST of

the taxpayer, to the personnel or agents of

such contractual counterparty, or (ff) on an

exclusive basis, maintain, repair, or operate any plant or equipment which is necessary to the production by the taxpayer of

eligible components or electricity.

Section 7701(a)(51)(D)(ii)(III)(aa)

adds that, in general, effective control

also includes, with respect to a licensing

agreement for the provision of intellectual

property (or any other contract, agreement

or other arrangement entered into with a

contractual counterparty related to such

licensing agreement) with respect to a

qualified facility, EST, or the production

of an eligible component, any of the following: (AA) a contractual right retained

by the contractual counterparty to specify

or otherwise direct one or more sources of

components, subcomponents, or applicable critical minerals utilized in a qualified

facility, EST, or in the production of an

eligible component; (BB) a contractual

right retained by the contractual counterparty to direct the operation of any qualified facility, any EST, or any production

unit that produces an eligible component;

(CC) a contractual right retained by the

contractual counterparty to limit the tax-

payer’s utilization of intellectual property

related to the operation of a qualified facility or EST, or in the production of an eligible component; (DD) a contractual right

retained by the contractual counterparty

to receive royalties under the licensing

agreement or any similar agreement (or

payments under any related agreement)

beyond the tenth year of the agreement

(including modifications or extensions

thereof); (EE) a contractual right retained

by the contractual counterparty to direct

or otherwise require the taxpayer to enter

into an agreement for the provision of services for a duration longer than two years

(including any modifications or extensions

thereof); (FF) such contract, agreement,

or other arrangement does not provide

the licensee with all the technical data,

information, and know-how necessary to

enable the licensee to produce the eligible

component or components subject to the

contract, agreement, or other arrangement

without further involvement from the contractual counterparty or a specified foreign

entity; (GG) such contract, agreement, or

other arrangement was entered into (or

modified) on or after July 4, 2025.10

Section 7701(a)(51)(E)(i)(I) provides that § 7701(a)(51)(C)(v) (defining

a specified foreign entity as including a

foreign-controlled entity) does not apply

in the case of any entity the securities

of which are regularly traded on (aa) a

national securities exchange which is registered with the Securities and Exchange

Commission; (bb) the national market

system established pursuant to section

11A of the Securities and Exchange Act of

1934; or (cc) any other exchange or other

market which the Secretary has determined in guidance issued under § 1296(e)

(1)(A)(ii) has rules adequate to carry out

the purposes of part VI of subchapter P of

chapter 1 of subtitle A of the Code.

Section 7701(a)(51)(E)(i)(II) provides

that § 7701(a)(51)(D)(i)(I) does not apply

in the case of any entity (aa) the securities

of which are regularly traded in a man-

The definition of the term “foreign-controlled entity” includes an agency or instrumentality of the government (including any level of government below the national level) of a covered

nation. § 7701(a)(51)(C)(ii). Federal tax determinations of whether an entity is an agency or instrumentality of any government typically are analyzed on a facts and circumstances basis.

In determining whether an entity is an agency or instrumentality of a U.S. State for Federal tax purposes, Federal courts have applied a test similar to the six-factor test in Rev. Rul. 57-128,

1957-1 CB 311, which generally provides guidance on whether an entity is an instrumentality for purposes of the exemptions from employment taxes under §§ 3121(b)(7) and 3306(c)(7) of

the Code. See, e.g., Bernini v. Federal Reserve Bank of St. Louis, Eighth District, 420 F. Supp. 2d 1021 (E.D. Mo. 2005); Michigan v. United States, 40 F.3d 817 (6th Cir. 1994); and Rose v.

Long Island Railroad Pension Plan, 828 F.2d 910 (2d Cir. 1987), cert. denied, 485 U.S. 936 (1988). However, whether an entity is an agency or instrumentality of any government is outside

the scope of this notice.

10

Section 7701(a)(51)(D)(ii)(III)(bb) provides an exception to the general rule under § 7701(a)(51)(D)(ii)(III)(aa), in the case of a bona fide purchase or sale of intellectual property.

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ner described in § 7701(a)(51)(E)(i)(I);

or (bb) for which not less than 80 percent

of the equity securities of such entity are

owned directly or indirectly by an entity

which is described in § 7701(a)(51)(E)(i)

(II)(aa).

Section 7701(a)(51)(E)(iii) provides

that, in the case of an entity described

in § 7701(a)(51)(E)(i)(II), such entity is

deemed to be a foreign-influenced entity

under § 7701(a)(51)(D)(i)(I) if one of four

conditions are met. The first three conditions are provided in § 7701(a)(51)(E)

(iii)(I), which provides that an entity is

deemed to be a foreign-influenced entity

if, during the taxable year: (aa) a specified

foreign entity has the authority to appoint

a covered officer of such entity; (bb) a

single specified foreign entity required to

report its beneficial ownership under Rule

13d-3 of the Securities and Exchange Act

of 1934 (or, in the case of an exchange or

market described in § 7701(a)(51)(E)(i)

(I)(cc), an equivalent rule) owns not less

than 25 percent of such entity, or; (cc) one

or more specified foreign entities that are

required to report their beneficial ownership under Rule 13d-3 of the Securities

and Exchange Act of 1934 own, in the

aggregate, not less than 40 percent of such

entity. For the fourth condition, § 7701(a)

(51)(E)(iii)(II) provides that an entity is

deemed to be a foreign-influenced entity

if such entity has issued debt, as part of an

original issuance, in excess of 15 percent

of its publicly-traded debt to one or more

specified foreign entities.

Section 7701(a)(51)(J) provides that

for purposes of applying any provision

under § 7701(a)(51), the beginning of

construction with respect to any property

is determined pursuant to rules similar to

the rules under Notice 2013-29 and Notice

2018-59 (as well as any subsequently

issued guidance clarifying, modifying, or

updating either such Notice), as in effect

on January 1, 2025.11

(2) Section 7701(a)(52): Material

assistance from a PFE.

Section 7701(a)(52) provides rules

for determining whether a qualified facility, EST, or eligible component includes

material assistance from a PFE.

Section 7701(a)(52)(A) provides that

the term “material assistance from a

prohibited foreign entity” means, with

respect to any qualified facility or EST,

a MACR which is less than the threshold

percentage applicable under § 7701(a)(52)

(B); or, with respect to any facility which

produces eligible components, a MACR

which is less than the threshold percentage

applicable under § 7701(a)(52)(C). Section 7701(a)(52)(B) provides applicable

threshold percentages for a qualified facility and EST based on the calendar year

during which construction of the qualified

facility or EST begins. Section 7701(a)

(52)(C) provides applicable threshold percentages for eligible components (solar

energy component, wind energy component, inverter, qualifying battery component, applicable critical mineral) based on

the calendar year during which the eligible component is sold.

Section 7701(a)(52)(D) provides rules

for determining the MACR for a qualified

facility, EST, or eligible component.

Section 7701(a)(52)(D)(i) applies

to any qualified facility (as defined in

§ 7701(a)(52)(E)(iv)) or EST (as defined

in § 7701(a)(52)(E)(ii)). Section 7701(a)

(52)(D)(i) provides that for purposes of

§ 7701(a)(52)(A)(i), the term “material

assistance cost ratio” means the amount

(expressed as a percentage) equal to the

quotient of (I) an amount equal to (aa) the

total direct costs to the taxpayer attributable to all manufactured products (MPs)

(including components) which are incorporated into the qualified facility or EST

upon completion of construction, minus

(bb) the total direct costs to the taxpayer

attributable to all MPs (including components) which are (AA) incorporated into

the qualified facility or EST upon completion of construction, and (BB) mined,

produced, or manufactured by a PFE,

divided by (II) the amount described in

§ 7701(a)(52)(D)(i)(I)(aa) (for purposes

of this notice, the term “Clean Electricity

MACR” means the MACR for a qualified

facility or an EST).

Section 7701(a)(52)(D)(ii) applies

to any eligible component (as defined in

§ 7701(a)(52)(E)(i)). With respect to any

facility that produces eligible components

for purposes of § 7701(a)(52)(A)(ii),

§ 7701(a)(52)(D)(ii) provides that the term

“MACR” means the amount (expressed as

a percentage) equal to the quotient of (I)

an a

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