# Bulletin No. 2025–44

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URL: https://www.frixlaw.com/law-library/documents/agency%3Airs%3A82b62bbf4abd2508

## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2025–44
October 27, 2025

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

INCOME TAX

Rev. Proc. 2025-27, page 646.

Notice 2025-49, page 627.

General Rules and Specifications for Substitute Forms and
Schedules.
This procedure provides guidelines and general requirements for the development, printing, and approval of the
2025 substitute tax forms. This procedure will be reproduced as the next revision of Publication 1167. Rev. Proc.
2024-33 is superseded.

Finding Lists begin on page ii.

This notice provides additional interim guidance to reduce
the compliance burdens and costs associated with the application of the corporate alternative minimum tax (CAMT). Specifically, this notice provides rules for certain adjustments to
adjusted financial statement income and rules for proposed
applicability dates and reliance on the CAMT Proposed Regulations.

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.

October 27, 2025 

Bulletin No. 2025–44

Part III
Additional Interim Guidance
for the Application of the
Corporate Alternative
Minimum Tax
Notice 2025-49
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 partially withdraw the CAMT Proposed
Regulations (as defined in section 2.03 of
this notice) and to issue revised proposed
regulations (forthcoming proposed regulations) that, in part, are anticipated to
include rules similar to the interim guidance described in sections 3 through 10
of this notice, Notice 2025-27, 2025-26
I.R.B. 1611 (June 23, 2025), Notice 202528, 2025-34 I.R.B. 316 (August 18, 2025),
and Notice 2025-46, 2025-43 I.R.B. ____
(October 20, 2025).
Section 3 of this notice addresses the
applicability dates and reliance rules provided in the CAMT Proposed Regulations. Section 4 of this notice addresses an
adjustment to adjusted financial statement
income (AFSI)2 for a taxpayer with regulated operations that capitalizes certain
costs as regulatory assets under Accounting Standards Codification (ASC) 980 in its
applicable financial statement (AFS). Section 5 of this notice addresses adjustments
to AFSI for certain items measured at fair
value. Section 6 of this notice addresses an
adjustment to AFSI for CAMT entities that
are subject to the tonnage tax regime. Section 7 of this notice addresses an adjustment to AFSI for certain depreciation
deductions that previously gave rise to a
carryover of a net operating loss (NOL),

1
2

as defined in § 172(c), for regular tax purposes. Section 8 of this notice addresses
an adjustment to AFSI for nonlife insurance companies that carry back an NOL
for regular tax purposes. Section 9 of this
notice addresses an adjustment to AFSI
for § 197 amortization attributable to tax
goodwill acquired in certain transactions.
Section 10 of this notice addresses adjustments to AFSI for accounting principle
change adjustments and restatements of a
prior-year AFS. Section 11 of this notice
requests comments on the issues relating
to section 5 of 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 AFS
for that taxable year, adjusted as provided
in § 56A. Section 56A(c) provides general
adjustments to be made to AFSI.
(2) Provisions under § 56A relevant to
the items described in this notice.
(a) Adjustments under § 56A(c) disregarding certain financial statement gains
and losses for certain items measured at
fair value.

(i) With respect to investment(s) in
certain corporations, § 56A(c)(2)(C) generally provides that a taxpayer’s AFSI
with respect to another corporation that
is not included on the taxpayer’s consolidated return is determined by taking into
account only the dividends received from
such other corporation and certain other
amounts includible in income or deductible as a loss with respect to such corporation.
(ii) With respect to investment(s) in a
partnership, § 56A(c)(2)(D)(i) generally
provides that, except as provided by the
Secretary of the Treasury or the Secretary’s delegate (Secretary), a taxpayer
that is a partner in a partnership adjusts its
AFSI with respect to such partnership to
take into account only the taxpayer’s distributive share of such partnership’s AFSI.
(iii) With respect to investment(s) in a
controlled foreign corporation (as defined
in § 957 or, if applicable, § 953(c)(1)(B))
(CFC), § 56A(c)(3)(A) generally provides
that a taxpayer that is a United States
shareholder of one or more CFCs adjusts
its AFSI with respect to the CFC to take
into account the taxpayer’s pro rata share
of items taken into account in computing
the net income or loss set forth on the AFS
of each such CFC.
(b) Authority of the Secretary to provide
necessary adjustments. Section 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.
(c) Adjustment for financial statement
net operating losses (FSNOLs). Section
56A(d)(1) provides that AFSI is reduced
by an amount equal to the lesser of (i) the
aggregate amount of FSNOL carryovers to
the taxable year, or (ii) 80 percent of AFSI
computed without regard to the adjustment under § 56A(d)(1) (FSNOL adjustment). Section 56A(d)(2) provides that an
FSNOL for any taxable year is a FSNOL
carryover to each taxable year following

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. 2025–44

627

October 27, 2025

the taxable year of the loss. The portion of
the FSNOL carried to subsequent taxable
years is the amount of the FSNOL remaining after subtracting the adjustments to
AFSI made under § 56A(d)(1) for previous years. Section 56A(d)(3) defines an
“FSNOL” as the amount of the net loss (if
any) set forth on a corporation’s AFS as
adjusted by § 56A(c), and without regard
to the FSNOL deduction, for taxable years
ending after December 31, 2019.
(d) 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) Overview. 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 CAMT Proposed
Regulations, which the Treasury Department and the IRS continue to consider and
study.
(2) Provisions of the CAMT Proposed Regulations relevant to the items
described in this notice.
(a) AFSI adjustments for changes in
accounting principles and AFS restatements in proposed § 1.56A-17.
(i) Overview of proposed § 1.56A-17.
Under the authority provided in § 56A(c)
(15)(A), proposed § 1.56A-17 would provide rules regarding AFSI adjustments
to prevent the duplication or omission of
income, including rules under proposed
§ 1.56A-17(c) for adjusting AFSI to prevent duplications or omissions arising
from a change in accounting principle
and proposed § 1.56A-17(d) for adjusting
AFSI to prevent duplications or omissions
arising from the restatement of a prior
year’s AFS (AFS restatement).

October 27, 2025

(ii) Accounting principle changes. Proposed § 1.56A-17(c)(1) generally would
require a CAMT entity that implements a
change in accounting principle in its AFS
for a taxable year to adjust its AFSI by the
accounting principle change amount, as
described in proposed § 1.56A-17(c)(2)
(i), subject to the adjustment spread period
rules under proposed § 1.56A-17(c)(3) and
(4) that prescribe the taxable year in which
the accounting principle change amount
is taken into account to determine AFSI.
Under proposed § 1.56A-17(c)(2)(i),
the accounting principle change amount
would be equal to the net cumulative
adjustment to the CAMT entity’s beginning retained earnings for the taxable year
that results from the change in accounting
principle. Under proposed § 1.56A-17(c)
(2)(i)(A), the accounting principle change
amount would be adjusted to disregard
any portion of the cumulative retained
earnings adjustment attributable to taxable years ending on or before December
31, 2019. Under proposed § 1.56A-17(c)
(2)(i)(B), the accounting principle change
amount also would be adjusted to reflect
any AFSI adjustments provided elsewhere
in the CAMT Proposed Regulations, to
the extent the retained earnings difference
is attributable to FSI items to which those
AFSI adjustments apply.
Proposed § 1.56A-17(c)(2)(ii) would
provide rules for determining the accounting principle change amount when a
CAMT entity is treated as implementing
a change in accounting principle under
proposed § 1.56A-17(c)(5) because the
priority of the CAMT entity’s AFS (as
determined under proposed § 1.56A-2(c))
for the taxable year is different from the
priority of the CAMT entity’s AFS for the
immediately preceding taxable year. In
this case, the accounting principle change
amount would be equal to the difference
between the CAMT entity’s beginning
retained earnings reflected in the CAMT
entity’s current AFS as of the beginning
of the taxable year and the CAMT entity’s ending retained earnings reflected in
its former AFS as of the end of the immediately preceding taxable year (retained
earnings difference). Under § 1.56A-17(c)
(2)(ii)(A), the accounting principle
change amount would be adjusted to
disregard any portion of the cumulative
adjustment attributable to taxable years

628

ending on or before December 31, 2019.
Under proposed § 1.56A-17(c)(2)(ii)(B),
the accounting principle change amount
also would be adjusted to reflect any
AFSI adjustments provided elsewhere in
the CAMT Proposed Regulations, to the
extent the retained earnings difference is
attributable to FSI items to which those
AFSI adjustments apply.
(iii) AFS restatements. Proposed
§ 1.56A-17(d) would provide an adjustment to AFSI when a CAMT entity issues
a restated AFS and the CAMT entity’s FSI
for a taxable year ending after December
31, 2019, is restated on or after the date
that the CAMT entity files its original
Federal income tax return for such taxable year (restatement year). Proposed
§ 1.56A-17(d)(1)(i) would require the
CAMT entity to adjust its AFSI for the
taxable year in which the restated AFS
is issued (AFSI restatement adjustment).
The AFSI restatement adjustment would
be equal to the cumulative effect of the
restatement on the CAMT entity’s FSI
for the restatement year, including any
restatement of the CAMT entity’s beginning retained earnings for the restatement
year. However, under § 1.56A-17(d)(1)(i),
the AFSI restatement adjustment would
not take into account any retained earnings restatement attributable to taxable
years ending on or before December 31,
2019. Under proposed § 1.56A-17(d)
(1)(ii), the AFSI restatement adjustment
also would be adjusted to reflect any
AFSI adjustments provided elsewhere in
the CAMT Proposed Regulations, to the
extent the retained earnings difference is
attributable to FSI items to which those
AFSI adjustments apply.
(b) AFSI adjustments for FSNOLs in
proposed § 1.56A-23. Consistent with
§ 56A(d), proposed § 1.56A-23 would
provide that, if the AFSI of a corporation
for a taxable year is positive (determined
after application of all other CAMT Proposed Regulations), the corporation’s
AFSI is reduced by an amount equal to
the lesser of (i) the aggregate amount of
FSNOL carryovers to the taxable year,
or (ii) 80 percent of the AFSI of the corporation (determined after application
of the CAMT Proposed Regulations
except proposed § 1.56A-23). Proposed
§ 1.56A-23(d)(1) would provide that an
FSNOL for any taxable year is carried

Bulletin No. 2025–44

forward to each taxable year following
the taxable year of the loss, and that any
remaining FSNOL is carried forward to
the subsequent taxable year.
(c) AFSI adjustments for hedging transactions and hedged items in proposed
§ 1.56A-24. Under the authority provided in § 56A(c)(15) and (e), proposed
§ 1.56A-24 would provide adjustments to
AFSI for certain hedging transactions and
hedged items to address distortions in the
determination of AFSI as a result of mismatches between the timing of inclusion
of gain or loss on the hedging transaction
and the hedged item. Under proposed
§ 1.56A-24(c)(2), if a CAMT entity has
a fair value measurement adjustment for
either an AFSI hedge or the hedged item,
but not both, the fair value measurement
adjustment generally would be disregarded if neither the AFSI hedge nor the
hedged item is marked to market for regular tax purposes. However, under proposed
§ 1.56A-24(e)(1), if a fair value measurement adjustment that is disregarded in
a taxable year includes amounts corresponding to items of income, gain, deduction, or loss under chapter 1 of the Code in
that taxable year, the CAMT entity would
include those amounts in AFSI in that taxable year. Under proposed § 1.56A-24(e)
(2), the inclusion in AFSI of a fair value
measurement adjustment that is disregarded under proposed § 1.56A-24(c)(2)
generally would be delayed until the AFSI
hedge or hedged item, or its corresponding hedged item or AFSI hedge (as applicable), matures or is sold, disposed of,
or otherwise terminated. Under proposed
§ 1.56A-24(d), to the extent a CAMT
entity marks to market a net investment
hedge for regular tax purposes, the CAMT
entity would include in AFSI the gain or
loss resulting from marking to market the
net investment hedge for regular tax purposes.
(3) Proposed applicability dates and
reliance on the CAMT Proposed Regulations.
(a) Proposed applicability dates. The
sections of the CAMT Proposed Regulations that are “specified regulations”
(as defined in the Proposed Applicability Dates and Reliance on the Proposed
Regulations section of the preamble to
the CAMT Proposed Regulations) were
proposed to apply to taxable years ending

Bulletin No. 2025–44

after September 13, 2024. The sections of
the CAMT Proposed Regulations that are
not specified regulations were proposed
to apply to taxable years ending after the
date final regulations are published in the
Federal Register. Proposed §§ 1.15022, 1.1502-53, and 1.1502-56A were proposed to apply to consolidated return
years for which the date of the income
tax return (without extensions) is after the
date final regulations are published in the
Federal Register.
(b) Reliance on the CAMT Proposed
Regulations.
(i) Reliance on the specified regulations. The CAMT Proposed Regulations
provided that a taxpayer may rely on the
specified regulations for any taxable year
ending on or before September 13, 2024,
provided that the taxpayer and each member of its test group determined under proposed § 1.59-2 consistently follow all of
the specified regulations (and other enumerated proposed rules) in their entirety
for that taxable year and each subsequent
taxable year until the first taxable year that
the final regulations are applicable.
(ii) Reliance on non-specified regulations. The CAMT Proposed Regulations
provided that taxpayers may rely on one
or more sections of the CAMT Proposed
Regulations that are not specified regulations for any taxable year ending on or
before the date final regulations are published in the Federal Register, provided
that the taxpayer and each member of
its test group determined under proposed
§ 1.59-2 consistently follow that section
and all of the specified regulations (and
other enumerated proposed rules) in their
entirety in that taxable year and each subsequent taxable year until the first taxable
year that the final regulations are applicable.
.04 Notices 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 liability 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

629

partnership, reporting by partnerships of
information needed to compute AFSI, and
the treatment of partnership contributions
and distributions. Notice 2025-28 also
announced that the Treasury Department
and the IRS anticipate that forthcoming
proposed regulations will provide that, for
taxable years beginning before the applicability date of final regulations addressing §§ 56A(c)(2)(D) and 56A(c)(15)(B)
as applied to partnership investments, a
taxpayer may rely on proposed § 1.56A-5
(excluding proposed § 1.56A-5(l)(2)
(ii) and (iii)) as contained in the CAMT
Proposed Regulations without also being
required to rely on proposed § 1.56A20 as contained in the CAMT Proposed
Regulations, or vice versa, subject to
certain requirements. In addition, for taxable years beginning before the date the
forthcoming proposed regulations are
published in the Federal Register, Notice
2025-28 provides that a taxpayer may
rely on proposed § 1.56A-5 (excluding
proposed § 1.56A-5(l)(2)(ii) and (iii)) as
contained in the CAMT Proposed Regulations without also being required to rely
on proposed § 1.56A-20 as contained in
the CAMT Proposed Regulations, or vice
versa, subject to certain requirements.
(3) Notice 2025-46 provides interim
guidance on the application of the CAMT
to domestic corporate transactions, troubled companies, tax consolidated groups,
acquired FSNOLs, and certain built-in
items.
.05 Comments received on the CAMT
Proposed Regulations relevant to items in
this notice.
(1) Proposed applicability dates and
reliance on the CAMT Proposed Regulations. Commenters stated that having different applicability dates for the specified
regulations and non-specified regulations
is confusing and inappropriately burdens
taxpayers by proposing that certain complex rules contained in the specified regulations would apply based on the date the
CAMT Proposed Regulations were published in the Federal Register as opposed
to the date final regulations are published
in the Federal Register. In addition, commenters stated that the rules for relying on
the CAMT Proposed Regulations, which,
among other requirements, generally prohibit a taxpayer from relying on a particular section of the CAMT Proposed Regu-

October 27, 2025

lations unless the taxpayer also applies all
of the specified regulations, impose additional compliance burdens and costs on
taxpayers seeking to apply relevant sections of the CAMT Proposed Regulations
for taxable years ending on or before final
regulations are published in the Federal
Register. Commenters requested guidance
providing that, for taxable years ending
on or before the date the final regulations
are published in the Federal Register, a
taxpayer may rely on any section of the
CAMT Proposed Regulations without
also being required to apply the specified regulations or any additional sections
of the CAMT Proposed Regulations, as
applicable.
(2) CAMT entities with regulated operations. Commenters recommended that
an adjustment to AFSI be allowed for
certain repair or maintenance costs of
CAMT entities with regulated operations
because those CAMT entities are subject
to special financial accounting rules under
U.S. generally accepted accounting principles (GAAP). As defined in proposed
§ 1.56A-1(b)(27), GAAP are a common
set of accounting rules, standards, and
procedures that are generally issued by
the Financial Accounting Standards Board
(FASB) and, where applicable, the U.S.
Securities and Exchange Commission.
ASC 980 contains the FASB’s financial
accounting rules and principles applicable
to regulated operations.
ASC 980-10-15-2 provides that an
entity is required to apply the ASC 980
financial accounting rules to any regulated
operations that meet certain criteria. First,
the entity’s rates for regulated services
or products provided to its customers are
established by or are subject to approval
by an independent, third-party regulator
or by its own governing board empowered
by statute or contract to establish rates
that bind customers. Second, the regulated
rates are designed to recover the specific
entity’s costs of providing the regulated
services or products. Third, based on the
demand for the regulated services or products and the level of competition (direct
and indirect), it is reasonable to assume
that rates set at levels that will recover the
entity’s costs can be charged to and collected from customers. Companies with
regulated operations may include utilities
regulated by a state public utility commis-

October 27, 2025

sion or energy companies regulated by the
Federal Energy Regulatory Commission.
An entity that is required to apply ASC
980 to its regulated operations must capitalize for AFS purposes all or part of an
incurred cost (including a repair expenditure) that otherwise would be expensed
when incurred under GAAP, if the cost
meets the following criteria of ASC 980340-25-1 (regulatory asset): (i) it is probable that future revenue in an amount that
equals or exceeds the capitalized cost
will result from inclusion of that cost in
allowable costs for rate-making purposes;
and (ii) based on available evidence, that
future revenue will be provided to permit the recovery of that cost, rather than
to provide for expected levels of similar,
future costs.
Neither § 56A(c) nor the CAMT Proposed Regulations provide an adjustment to AFSI for costs capitalized to, and
included in the basis of, a regulatory asset,
unless that asset also constitutes property
to which § 168 applies for purposes of
§ 56A(c)(13) and proposed § 1.56A-15.
Comments submitted in response to the
CAMT Proposed Regulations recommended that an adjustment to AFSI be
allowed for repair or maintenance costs
with respect to tangible property that are
capitalized under ASC 980-340-25-1 as
regulatory assets. The commenters indicated that regulated utilities have elevated
AFSI compared to non-regulated companies because ASC 980 requires entities
with regulated operations to capitalize and
depreciate the cost of repair or maintenance costs that are regulatory assets for
AFS purposes to spread the rate impact
of such costs for their customers. The
commenters explained that CAMT entities that do not have regulated operations
under ASC 980-10-15-2 are not subject
to ASC 980, and, thus, generally expense
such costs when incurred under GAAP.
The commenters observed that this elevated AFSI for regulated utilities due to
the application of ASC 980 may result in
increased CAMT liability for such taxpayers and, thus, an increased tax expense that
would be includible in allowable costs for
rate-making purposes.
(3) Items measured at fair value for FSI
purposes. Section 56A provides for adjustments to AFSI to disregard certain financial statement gains and losses for certain

630

items that are measured at fair value. For
example, § 56A(c)(2)(C), (c)(2)(D)(i) and
(c)(3)(A) provide adjustments to AFSI to
disregard certain financial statement gains
and losses attributable to certain investments in domestic corporations, partnerships, and CFCs that are measured at fair
value. Further, the CAMT Proposed Regulations contain additional adjustments
to AFSI for certain other items measured
at fair value for FSI purposes, including
adjustments under proposed § 1.56A-24.
Comments submitted in response to
the CAMT Proposed Regulations, including proposed § 1.56A-24, generally recommended expanding the scope of the
rules governing adjustments to items
measured at fair value for FSI purposes.
For example, one commenter recommended expanding the scope of the rule
disregarding FSI resulting from the equity
or fair value methods for certain stock
investments to apply to all investment
assets, including debt, debt-like securities, warrants, and options. In addition,
commenters recommended expanding the
scope of proposed § 1.56A-24 to disregard a fair value measurement adjustment
when either the hedged item or the AFSI
hedge (but not both) is reflected in FSI at
fair value, but both the hedged item and
the AFSI hedge are marked to market for
regular tax purposes. One commenter recommended expanding the scope to disregard a fair value measurement adjustment
when an item is marked to market for
regular tax purposes but a deferral rule
applies to the mark-to-market gain or loss,
such as due to § 1092. Commenters also
recommended guidance that would clarify
and modify the definitions, rules related to
the application to prior years, subsequent
adjustment rules, and net investment
hedge rules in proposed § 1.56A-24.
Other commenters made broader recommendations. Three commenters recommended disregarding fair value measurement adjustments for additional items
that are reflected in FSI at fair value and
that are not marked to market for regular
tax purposes, including digital assets. Two
commenters stated that Congress did not
intend for fair value measurement adjustments on assets held by a CAMT entity
to be taken into account in determining
AFSI. Two commenters indicated that
including in AFSI unrealized gains and

Bulletin No. 2025–44

losses attributable to the fair value measurements would lead to distortions that
should be alleviated with an adjustment to
FSI to avoid the non-economic results that
would arise absent such an adjustment.
Two commenters stated that requiring
fair value measurement adjustments to be
taken into account in determining AFSI
would disadvantage domestic corporations compared to foreign corporations
as a result of different financial accounting rules. One commenter also noted that
the proposed regulations would disregard
fair value measurement adjustments for
some assets and stated that it would be
good policy to treat all assets in the same
manner. Commenters suggested issuing
guidance that would disregard fair value
measurement adjustments for AFSI purposes unless the gains and losses attributable to the adjustments are taken into
account for regular tax purposes. One
commenter requested guidance that would
allow CAMT entities to elect out of the
rules disregarding fair value measurement
adjustments and instead follow FSI.
(4) CAMT and tonnage tax regime.
The CAMT Proposed Regulations did
not propose rules addressing the provisions of subchapter R of chapter 1 of the
Code (tonnage tax regime). However, the
preamble to the CAMT Proposed Regulations requested comments on the interaction between the CAMT and the tonnage
tax regime, including comments on how
best to provide AFSI adjustments for
CAMT entities that are subject to the tonnage tax regime to meet the United States
national security policy goals of the tonnage tax regime and the Maritime Security Program (MSP), while appropriately
imposing the CAMT with respect to other
AFSI of such entities.
Under § 1354(a), any corporation
that is a “qualifying vessel operator,” as
defined in § 1355(a)(3), may elect to be
subject to the tonnage tax imposed under
§ 1352. An election made by a member of
a controlled group, as defined in § 1355(a)
(2)(B), applies to all qualifying vessel
operators that are members of that group.
See § 1354(c). Any corporation subject to
this election (electing corporation) is subject to tax on a notional amount of income
from qualifying shipping activities in lieu
of the Federal income tax that otherwise
would be imposed under § 11 on the tax-

Bulletin No. 2025–44

able income from those activities. See
H.R. No. 108-548 Part 1 (2004) at 177.
The notional amount of shipping income
is determined under § 1353(b) based on
the net tonnage of qualifying vessels (as
defined in § 1355(a)(4)) that the electing
corporation operates in United States foreign trade during the taxable year. Section
1358(b) prevents an electing corporation
from claiming any deductions against
notional shipping income and limits the
use of an NOL attributable to qualifying
shipping activities in certain instances.
As a result of an election under § 1354,
an electing corporation does not include
income from qualifying shipping activities in its gross income for regular tax purposes. See § 1357(a). Further, a member of
an electing group (as defined in § 1355(a)
(2)) that is not an electing corporation
(and, thus, is not subject to tax on notional
shipping income under § 1352(2)) does
not include its income from qualifying
shipping activities in gross income for
regular tax purposes. See § 1357(b). In
addition, and subject to special rules for
depreciation and interest in § 1357(c)(2)
and (3), respectively, § 1357(c)(1) disallows each item of loss, deduction (other
than for interest expense), or credit of any
taxpayer with respect to any activity that
generates income excluded under § 1357.
The disallowance for interest expense is
based on the ratio of the fair market value
of the corporation’s qualifying vessels to
the fair market value of the corporation’s
total assets or, in the case of a member
of an electing group, the electing group’s
total assets. See § 1357(c)(3)(A) and (B).
For purposes of determining gain of any
qualifying vessel, § 1357(c)(2) provides
that the adjusted basis of a qualifying
vessel is determined as if a deduction for
depreciation had been allowed.
The Treasury Department and the IRS
received comments noting that, without further guidance addressing how the
CAMT interacts with the tonnage tax
regime, the CAMT would result in both
tax regimes applying simultaneously,
which could undermine the national security purposes of the tonnage tax regime.
Commenters further noted that this outcome could decrease the global competitiveness of U.S.-flag vessels. Commenters
requested that AFSI be adjusted for corporations subject to the tonnage tax regime

631

so as not to undermine the tonnage tax
regime’s purpose.
(5) Depreciation deductions and NOL
carryovers. Depreciation deductions
allowed under § 167 with respect to section 168 property for a taxable year that
give rise to an NOL (embedded depreciation deductions) for that taxable year
generally are carried forward as part of
the corresponding NOL carryover. The
embedded depreciation deductions ultimately reduce a CAMT entity’s regular
tax liability in the taxable year in which
the corresponding NOL carryover is
allowed as a deduction under § 172(a).
See § 172(a) and 172(b)(1)(A)(ii).
Neither § 56A(c) nor the CAMT Proposed Regulations provide an adjustment
to AFSI for embedded depreciation deductions in the taxable year such amounts are
allowed as a deduction under § 172(a).
Commenters requested that an adjustment
be allowed to reduce AFSI by embedded
depreciation deductions attributable to an
NOL arising in a taxable year ending on
or before December 31, 2019 (pre-2020
embedded depreciation deductions), in the
taxable year the NOL carryover containing those embedded depreciation deductions is allowed as a deduction under
§ 172(a). Commenters noted that a CAMT
liability under § 55 could arise in a taxable
year in which an NOL carryover containing embedded depreciation deductions is
allowed as a deduction under § 172, given
that (i) neither § 56A(c) nor the CAMT
Proposed Regulations provide a corresponding adjustment to AFSI for embedded depreciation deductions, and (ii) no
corresponding AFSI adjustment is available under § 56A(d) or proposed § 1.56A23 given that the AFSI adjustment under
§ 56A(d) and proposed § 1.56A-23 is limited to FSNOLs arising in taxable years
ending after December 31, 2019.
(6) Application of FSNOL rules to
nonlife insurance companies. The preamble to the CAMT Proposed Regulations
noted that the § 56A(d) rules regarding
the adjustment to AFSI for FSNOLs generally matches the rules regarding the use
of NOLs applicable to most corporations
for regular tax purposes under § 172, in
that both FSNOLs and NOLs generally
(i) may be carried forward for an indefinite number of years but may not be carried back, and (ii) may be used to reduce

October 27, 2025

only 80 percent of AFSI (as provided in
§ 56A(d)(1)) or taxable income (as provided in § 172(a)(2)), respectively. However, § 172 provides exceptions to the
general rule for nonlife insurance companies that are not found in § 56A(d). In
particular, § 172 provides that a nonlife
insurance company’s NOLs (i) may be
carried back for two years and carried forward 20 years, and (ii) are not subject to
the 80-percent limit provided in § 172(a)
(2). See § 172(b)(1)(C) and (f). The preamble to the CAMT Proposed Regulations noted that this disparity could create
a mismatch between AFSI and regular
taxable income for CAMT entities that
are nonlife insurance companies that does
not exist for other CAMT entities. In the
preamble to the CAMT Proposed Regulations, the Treasury Department and the
IRS requested comments on how substantial this mismatch may be and the severity
of the economic effects of such mismatch,
whether rules should be provided to
address this potential mismatch, and how
the rules might operate.
Commenters confirmed that a mismatch between regular tax NOLs and
FSNOLs (book-tax NOL mismatch) may
arise for nonlife insurance companies.
Commenters asserted that this mismatch
could cause nonlife insurance companies to have higher CAMT liability in a
carryback year, and that this outcome is
contrary to Congress’s objective in preserving NOL carrybacks for nonlife insurance companies. Commenters further
noted that nonlife insurers provide relief
to the economy from catastrophic losses,
and that regular tax NOL carrybacks give
these companies timely access to capital
(via tax refunds for the carryback year)
to help pay claims and replenish capital quickly after loss years. Commenters
requested that adjustments be made in
the final regulations to address the booktax NOL mismatch for nonlife insurance
companies.
(7) Goodwill amortization. Commenters requested that an adjustment to AFSI
be allowed for amortization of goodwill
under § 197. In general, amounts paid
to another party to acquire goodwill are
required to be capitalized in the taxable
year paid or incurred. See § 1.263(a)-4(c)
(1)(x). Once capitalized, such amounts are
generally recovered through amortization

October 27, 2025

deductions ratably over a 15-year period
beginning with the month in which the
goodwill is acquired (§ 197 amortization).
See § 197(a), (c) and (d)(1)(A).
In general, amounts paid or incurred
to acquire goodwill are capitalized for
AFS purposes in the year paid or incurred.
Once capitalized, those amounts generally
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. See ASC
350-20-35-1; IAS 36. However, goodwill
may be recoverable through amortization
for AFS purposes under certain circumstances. See, e.g., ASC 350-20-35-63,
which allows certain private companies
and not-for-profit entities to amortize
goodwill on a straight-line basis over a
10-year period.
Neither § 56A(c) nor the CAMT Proposed Regulations provide an adjustment
to AFSI for § 197 amortization of goodwill. Commenters requesting an adjustment to AFSI for § 197 amortization of
goodwill explained that goodwill may not
be amortizable under IFRS or GAAP and,
as a consequence, a CAMT liability under
§ 55 could arise in taxable years in which
amortization of goodwill is deducted for
regular tax purposes under § 197. In addition, 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.
(8) AFSI adjustments to retained earnings for accounting principle changes.
Commenters expressed concerns with
the rules in proposed § 1.56A-17(c)(2)
(i)(A), (c)(2)(ii)(A), and (d)(1)(i) that
would require CAMT entities to disregard any portion of the adjustment to
retained earnings attributable to taxable
years ending on or before December 31,
2019. Commenters indicated that bifurcating the adjustments between amounts
attributable to pre-2020 taxable years and
amounts attributable to subsequent tax-

632

able years could create higher compliance
costs and increased compliance burdens
if such amounts were not already bifurcated for AFS purposes. Commenters recommended permitting CAMT entities to
calculate these adjustments based on the
entire cumulative adjustment to retained
earnings rather than based on only the portion of the retained earnings adjustment
attributable to taxable years ending on or
after January 1, 2020.
SECTION 3. PROPOSED
APPLICABILITY DATES AND
RELIANCE ON THE CAMT
PROPOSED REGULATIONS AND
FORTHCOMING PROPOSED
REGULATIONS
.01 Purpose. In response to numerous
comments received with respect to the
CAMT Proposed Regulations outlining
the concerns described in section 2.05(1)
of this notice, the Treasury Department
and the IRS have reconsidered the proposed applicability dates and reliance
rules set forth in the “Proposed Applicability Dates and Reliance on the Proposed
Regulations” section of the CAMT Proposed Regulations (see 89 F.R. 75127).
The Treasury Department and the IRS
anticipate that the notice of proposed
rulemaking that will partially withdraw
the CAMT Proposed Regulations and contain the forthcoming proposed regulations
will include a new “Proposed Applicability Dates and Reliance on the Proposed
Regulations” section providing that no
section (for example, proposed § 1.56A1) of the CAMT Proposed Regulations
and the forthcoming proposed regulations
would be applicable for any taxable year
beginning before the date a corresponding
section of a final regulation is published
in the Federal Register. Accordingly, once
published as final regulations in the Federal Register, no section of the CAMT
Proposed Regulations will apply, and no
section of the forthcoming proposed regulations will apply, to any taxable year
beginning before the date a corresponding
section of a final regulation is published in
the Federal Register.
.02 Taxable years beginning before
final regulations.
(1) Reliance on CAMT Proposed Regulations.

Bulletin No. 2025–44

(a) In general. Except as provided in
section 3.02(1)(b) of this notice, a taxpayer may rely on any section of the
CAMT Proposed Regulations for a taxable year beginning before the date the
corresponding final regulation is published in the Federal Register, provided
the taxpayer consistently follows that
section in its entirety for all such taxable
years beginning with the first taxable year
with respect to which the taxpayer relies
on that section. In addition, a taxpayer
may rely on any section of the CAMT
Proposed Regulations, as modified by any
guidance (including the interim guidance
in this notice) subsequently published in
the Internal Revenue Bulletin, for a taxable year beginning before the date the
forthcoming proposed regulations are
published in the Federal Register, provided the taxpayer consistently follows
such section (as so modified) in its entirety
for all such taxable years beginning with
the first taxable year with respect to which
the taxpayer relies on such section.
(b) Certain related sections.
(i) In general. A taxpayer may rely on
proposed § 1.56A-4 (AFSI adjustments
and basis determinations with respect to
foreign corporations) or 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,
provided the taxpayer (A) consistently follows proposed
§§ 1.56A-8 (AFSI adjustments for certain Federal and foreign income taxes)
and 1.59-4 (CAMT foreign tax credit) of
the CAMT Proposed Regulations for such
taxable years, and
(B) consistently follows each of proposed § 1.56A-4 or 1.56A-6 (as applicable), proposed § 1.56A-8, and proposed
§ 1.59-4 in their entirety for all such taxable years beginning with the taxable year
with respect to which the taxpayer relies
on proposed § 1.56A-4 or 1.56A-6 (as
applicable).
(ii) Special rule in determining eligible taxes. A taxpayer that relies on proposed § 1.59-4 may treat a tax that would
otherwise not qualify as an eligible tax
solely due to the applicability of section
3

245A(d) as an eligible tax for purposes of
proposed § 1.59-4 if the tax is a foreign
income tax paid or accrued by the taxpayer with respect to a dividend received
(or treated as received for purposes of section 245A) from a CFC in which the taxpayer is a United States shareholder. This
is the case notwithstanding that a section
245A deduction is allowed with respect to
the dividend for regular tax purposes and
therefore for CAMT purposes.
(c) Coordination with proposed
§ 1.56A-6(c)(1). If a taxpayer relies on
proposed § 1.56A-6 of the CAMT Proposed Regulations pursuant to section
3.02(1)(b) of this notice, for purposes of
relying on proposed § 1.56A-6(c)(1), the
term “section 56A regulations” means the
CAMT Proposed Regulations, as modified
by any guidance (including the interim
guidance in this notice) published in the
Internal Revenue Bulletin subsequent
to the CAMT Proposed Regulations that
the taxpayer has relied on for purposes of
making AFSI adjustments.
(2) Reliance on interim guidance provided in Notice 2025-27, Notice 2025-28,
and Notice 2025-46. For a taxable year
described in section 3.05 of Notice 202527, section 9 of Notice 2025-28, or section
9 of Notice 2025-46, 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). Consequently, a taxpayer’s reliance on any of the guidance provided in
section 3.03 of Notice 2025-7, sections 3
through 7 of Notice 2025-28, or sections 3
through 6 of Notice 2025-46 for a taxable
year described in this section 3.02(2) will
not cause the taxpayer to become subject
to, or to violate, the reliance rules, including the consistency requirements, provided in section 3.02(1) of this notice for
such taxable year and any other relevant
taxable years.
(3) Statement of guidance applied on
Form 4626. In addition to any reporting
required by a form, publication, or other
guidance, a corporation must include

with its Form 4626, Alternative Minimum Tax—Corporations, for a particular
taxable year a statement describing the
approach taken in completing Form 4626
for such taxable year and the guidance it
relied upon for such taxable year. See page
2 of the instructions to Form 4626.3
SECTION 4. AFSI ADJUSTMENT FOR
ELIGIBLE REGULATORY ASSETS
.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 4 to allow a CAMT entity subject to ASC 980 to adjust AFSI for eligible
regulatory assets. 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
4.
.02 Definitions. For purposes of this
section 4:
(1) CAMT entity subject to ASC 980.
The term CAMT entity subject to ASC 980
means a CAMT entity that has regulated
operations that meet the criteria of ASC
980-10-15-2 and has an AFS prepared in
accordance with GAAP, including ASC
980.
(2) Eligible regulatory asset. The term
eligible regulatory asset means any cost
attributable to tangible property repairs or
maintenance that is capitalized under ASC
980-340-25-1 and subject to depreciation
for AFS purposes. An eligible regulatory
asset does not include any other costs
capitalized for AFS purposes under ASC
980 or any other provision of GAAP, as
defined in proposed § 1.56A-1(b)(27).
The term eligible regulatory asset includes
costs attributable to tangible property
repairs or maintenance that are capitalized
under ASC 980-340-25-01 and placed in
service by a CAMT entity subject to ASC
980 in any taxable year, including taxable

https://www.irs.gov/forms-pubs/about-form-4626

Bulletin No. 2025–44

633

October 27, 2025

years ending on or before December 31,
2019.
(3) Regulatory asset book COGS
depreciation. The term regulatory asset
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 an eligible
regulatory 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 regulatory asset occurs for AFS purposes, or
(ii) In the taxable year in which the complete disposition of the eligible regulatory
asset occurs for AFS purposes to determine
any FSI gain or loss from the disposition of
the eligible regulatory asset; or
(c) Impairment loss reversal.
(4) Regulatory asset book depreciation expense. The term regulatory asset
book depreciation expense means any of
the following items other than regulatory
asset book COGS depreciation that are
taken into account in FSI with respect to
an eligible regulatory 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 regulatory asset occurs for AFS purposes, or
(ii) In the taxable year in which the complete disposition of the eligible regulatory
asset occurs for AFS purposes to determine
any FSI gain or loss from the disposition of
the eligible regulatory asset; or
(c) Impairment loss reversal.
(5) Regulatory asset book inventoriable depreciation. The term regulatory
asset book 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 AFS of a
CAMT entity subject to ASC 980 with
respect to an eligible regulatory asset-(a) Depreciation expense;
(b) Other recovery of AFS basis
(including from an impairment loss) that
occurs either:

October 27, 2025

(i) Prior to the taxable year in which the
complete disposition of the eligible regulatory asset occurs for AFS purposes, or
(ii) In the taxable year in which the
complete disposition of the eligible regulatory asset occurs for AFS purposes to
determine any FSI gain or loss from the
disposition of the eligible regulatory asset;
or
(c) Impairment loss reversal.
.03 AFSI adjustment for eligible regulatory assets. The AFSI of a CAMT entity
subject to ASC 980 for a taxable year may
be adjusted as follows:
(1) Reduced by the amount of costs
incurred under GAAP and capitalized
under ASC 980-340-25-1 as eligible regulatory assets during such taxable year, but
only to the extent that such amounts are-(a) Not otherwise required to be capitalized for AFS purposes under any other
GAAP rule, standard, or procedure, and
(b) Not required to be capitalized under
§ 263(a) for regular tax purposes; and
(2) Adjusted to disregard any regulatory asset book COGS depreciation
and regulatory asset book depreciation
expense with respect to any eligible regulatory asset.
.04 Determining regulatory asset book
COGS depreciation adjustment.
(1) Except as provided in section
4.04(2) of this notice, a CAMT entity subject to ASC 980 is required to apply the
method(s) of accounting the CAMT entity
uses for AFS purposes to determine regulatory asset book inventoriable depreciation for purposes of determining the
regulatory asset book COGS depreciation
adjustment under section 4.03(2) of this
notice.
(2) A CAMT entity subject to ASC 980
is permitted to use any reasonable method
to determine regulatory asset book inventoriable depreciation for purposes of determining the regulatory asset book COGS
depreciation adjustment under section
4.03(2) 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. In
the case of a CAMT entity subject to ASC
980 that uses the Last-In-First-Out (LIFO)
method to identify inventories for AFS
purposes, a reasonable method includes a
method similar to the method provided in
proposed § 1.56A-15(d)(3)(ii)(C).

634

(3) Reporting requirement. If a CAMT
entity makes the AFSI adjustment provided in section 4 of this notice for a
taxable year and is using a reasonable
method to determine regulatory asset
book inventoriable depreciation under
section 4.04(2) of this notice, it must
attach a statement to its Federal income
tax return for such taxable year. The statement must be titled “AFSI adjustment for
eligible regulatory assets” and include the
CAMT entity’s name, address, and taxpayer identification number, and a statement that the CAMT entity is using a reasonable method to determine regulatory
asset book inventoriable depreciation for
purposes of determining the regulatory
asset book COGS depreciation adjustment under section 4.03(2) of Notice
2025-49 for the taxable year. In addition,
the statement must describe the method
used to determine regulatory asset book
inventoriable depreciation and include a
declaration that the method used is consistent with and reflects the method(s)
of accounting the CAMT entity uses for
AFS purposes.
.05 Consistency requirement. If a
CAMT entity subject to ASC 980 makes
the AFSI adjustment provided in section
4.03 of this notice for a taxable year, it
must continue to make the adjustment
provided in section 4.03 of this notice for
all subsequent taxable years until all eligible regulatory assets are disposed of for
regular tax purposes or such time as prescribed by the Treasury Department and
IRS in regulations or other guidance.
.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 4.03 of
this notice.
.07 Coordination with CAMT Proposed
Regulations. For purposes of coordinating
with relevant provisions of the CAMT
Proposed Regulations (for example, proposed § 1.56A-15), the reduction to AFSI
described in section 4.03(1) of this notice
is treated as if it were an expense for
FSI purposes. For example, the amount
described in section 4.03(1) may be
considered a covered book expense, as
defined in proposed § 1.56A-15(b)(4), if
applicable.

Bulletin No. 2025–44

.08 Applicability date and reliance. It
is anticipated that the forthcoming proposed regulations will provide that rules
consistent with the guidance described in
this section 4 will apply for taxable years
beginning on or after the date the final regulations addressing the AFSI adjustment
for eligible regulatory assets are published
in the Federal Register. For taxable years
beginning before the date such forthcoming proposed regulations are published
in the Federal Register, CAMT entities
may rely on the guidance in this section
4. A CAMT entity’s reliance on any of the
guidance in this section 4 for a taxable
year will not cause the CAMT entity to
become subject to, or to violate, the proposed reliance rules, including the consistency requirements, provided in section
3.02(1) of this notice.
SECTION 5. AFSI ADJUSTMENTS
FOR CERTAIN ITEMS MEASURED AT
FAIR VALUE
.01 Purpose. In response to comments,
the Treasury Department and the IRS
anticipate that the forthcoming proposed
regulations will propose modifications to
the rules in proposed § 1.56A-24, other
than the rules for net investment hedges,
that would be consistent with the interim
guidance provided in this section 5. The
Treasury Department and the IRS are providing this interim guidance prior to the
issuance of the forthcoming proposed
regulations to provide taxpayers with an
alternative approach to determine AFSI
with respect to certain gains and losses
that are included in FSI but generally are
not included in gross income for regular
tax purposes. Instead of being limited to
AFSI hedges and hedged items as in proposed § 1.56A-24, this interim guidance
applies more broadly to certain items that
are measured at fair value for FSI purposes. For example, depending on the
applicable financial accounting principles,
this interim guidance may apply to (1)
holdings of digital assets, (2) debt securities that are classified as trading securities, and (3) derivatives that are not part of
a hedging transaction, if those items are
measured at fair value for FSI purposes
but are not marked to market for regular tax purposes. However, this interim
guidance does not apply to a partnership

Bulletin No. 2025–44

investment, stock in a domestic corporation that is not a member of a tax consolidated group of which the CAMT entity is
a member, stock in a foreign corporation,
a net investment hedge, an asset or liability entered into as a hedging transaction
by a covered insurance company in certain circumstances, a covered insurance
company’s assets in a covered investment
pool, or a covered insurance company’s
covered obligations.
In general, the interim guidance in this
section 5 provides that for certain items
that are measured at fair value, a CAMT
entity may adjust AFSI to disregard gains
and losses that are unrealized for regular tax purposes (see section 5.03 of this
notice, which describes the FVI exclusion
option). The interim guidance in this section 5 also provides that a CAMT entity
may adjust AFSI to disregard certain
gains and losses for certain AFSI hedges
and hedged items (see section 5.04 of this
notice, which describes the hedge coordination option).
.02 Definitions. For purposes of this
section 5:
(1) Fair value item. The term fair value
item means an asset or liability of a CAMT
entity for which there are fair value measurement adjustments. The term fair value
item does not include-(a) Items subject to § 56A(c)(2)(C), (c)
(2)(D), or (c)(3) and the guidance thereunder, including the CAMT Proposed Regulations, Notice 2025-28, and Notice 202546 (for example, the term fair value item
does not include a partnership investment,
stock in a domestic corporation that is not
a member of a tax consolidated group of
which the CAMT entity is a member, or
stock in a foreign corporation);
(b) Assets or liabilities entered into as
a hedging transaction, as described in proposed § 1.56A-24(b)(1)(ii), by a covered
insurance company;
(c) A covered insurance company’s
assets in a covered investment pool; or
(d) A covered insurance company’s
covered obligations.
(2) Fair value measurement adjustment. The term fair value measurement
adjustment means a change in the value
of an asset or a liability due to required
periodic determinations at least annually of the increases or decreases in fair
value of that asset or liability included

635

in a CAMT entity’s FSI, regardless of
whether the determinations are required
due to the type of asset or liability or due
to an election by the CAMT entity. The
term fair value measurement adjustment
includes changes in value resulting from
the application of the lower of cost or market accounting method under GAAP or
the lower of cost and net realizable value
accounting method under IFRS. The term
fair value measurement adjustment does
not include an impairment loss or impairment loss reversal.
(3) Subsequent adjustment date. The
term subsequent adjustment date means
the earliest day the fair value item matures
or is sold, exchanged, terminated, or otherwise disposed of for regular tax purposes. For purposes of the hedge coordination option, a subsequent adjustment
date also includes the earliest day on
which the AFSI hedge or the hedged item
(as applicable) that corresponds to the
hedged item or the AFSI hedge with the
fair value measurement adjustment that
was disregarded under section 5.04 of
this notice matures or is sold, exchanged,
terminated, or otherwise disposed of for
regular tax purposes. In addition, a subsequent adjustment date includes the first
day of the taxable year in which the FVI
exclusion option or hedge coordination
option, as applicable, is no longer applied
by a CAMT entity that previously applied
the FVI exclusion option or hedge coordination option, as applicable.
.03 FVI exclusion option. Provided the
requirements described in section 5.03(1)
through (4) and section 5.05 of this notice
are satisfied, a CAMT entity may adjust
AFSI for a taxable year to disregard a
fair value measurement adjustment for a
fair value item for that taxable year if the
CAMT entity does not mark to market the
fair value item for regular tax purposes.
For purposes of the FVI exclusion option,
a CAMT entity marks to market the fair
value item for regular tax purposes to the
extent that the CAMT entity recognizes
unrealized gain or loss in a taxable year
for the fair value item and takes such gain
or loss into account in the taxable year.
For example, a CAMT entity may mark a
fair value item to market for tax purposes
due to the application of § 475, § 1256,
or a similar provision. The determination
regarding whether a CAMT entity rec-

October 27, 2025

ognizes unrealized gain or loss in a taxable year and takes such gain or loss into
account in the taxable year is made after
taking into account any elections made
by the CAMT entity and the application
of other applicable provisions that may
result in unrealized gain or loss not being
recognized.
(1) Consistency requirement. A CAMT
entity must consistently apply the FVI
exclusion option to all fair value items,
except for a hedged item or AFSI hedge
to which the hedge coordination option in
section 5.04 of this notice applies.
(2) Application of FVI exclusion option.
(a) In general. Except as provided in
section 5.03(2)(b) of this notice, a CAMT
entity (or a controlling domestic shareholder of a CFC under section 5.03(4) of
this notice) must indicate in a statement
attached to its Federal income tax return
that the CAMT entity intends to apply
the FVI exclusion option for purposes of
determining AFSI. The statement must be
titled “FVI Exclusion Option for CAMT”
and include the CAMT entity’s name,
address, taxpayer identification number,
and a statement that the CAMT entity is
choosing the FVI exclusion option under
section 5.03 of Notice 2025-49. The FVI
exclusion option will apply for the taxable
year beginning after the date on which the
CAMT entity files an original or amended
Federal income tax return containing that
statement.
(b) Transition period. A CAMT entity
may apply the FVI exclusion option for
purposes of determining AFSI for its first
taxable year beginning on any day during
2024, if the CAMT entity indicates in the
statement described in section 5.03(2)(a)
of this notice, attached to its original or
amended Federal income tax return for that
taxable year, that the CAMT entity intends
to apply the FVI exclusion option for that
taxable year. Alternatively, a CAMT entity
may apply the FVI exclusion option for
purposes of determining AFSI for its first
taxable year beginning on any day during
2025, if the CAMT entity indicates in the
statement described in section 5.03(2)
(a) of this notice attached to its Federal
income tax return for that taxable year that
the CAMT entity intends to apply the FVI
exclusion option for that taxable year.
(3) Duration of FVI exclusion option.
A CAMT entity applying the FVI exclu-

October 27, 2025

sion option for a taxable year must continue to apply the FVI exclusion option
for purposes of determining AFSI for
all subsequent taxable years beginning
before the date the forthcoming proposed
regulations addressing AFSI adjustments
for certain items measured at fair value
are published in the Federal Register or
until the CAMT entity (or a controlling
domestic shareholder of a CFC under section 5.03(4) of this notice) indicates in a
statement attached to its Federal income
tax return that the CAMT entity intends to
no longer apply the FVI exclusion option.
The statement must be titled “Cessation
of FVI Exclusion Option for CAMT” and
include the CAMT entity’s name, address,
taxpayer identification number, and a
statement that the CAMT entity intends to
no longer apply the FVI exclusion option
under section 5.03 of Notice 2025-49. The
FVI exclusion option ceases to apply for
the taxable year beginning after the date
on which the CAMT entity files an original or amended Federal income tax return
containing that statement.
(4) CFCs. In the case of a CAMT entity
that is a CFC, the controlling domestic
shareholders (as defined in § 1.964-1(c)
(5)) of the CFC must file a statement
described in section 5.03(2)(a), (2)(b), or
(3) of this notice on behalf of the CFC
in accordance with the procedures set
forth in § 1.964-1(c)(3). The statement
described in § 1.964-1(c)(3)(ii) must be
titled “FVI Exclusion Option for CAMT
on Behalf of CFC” or “Cessation of FVI
Exclusion Option for CAMT on Behalf of
CFC,” as applicable, and, in addition to
the information set forth in § 1.964-1(c)
(3)(ii), must include a statement that the
CFC intends to apply or cease to apply the
FVI exclusion option under Notice 202549. Applying or ceasing to apply the FVI
exclusion option on behalf of a CFC is
binding on all United States shareholders
(as defined in § 951(b) or, if applicable,
§ 953(c)(1)(A)) of the CFC.
.04 Hedge coordination option. Provided the requirements described in section 5.04(1) through (4) and 5.05 of this
notice are satisfied, if a CAMT entity has
a hedged item and a corresponding AFSI
hedge that are each marked to market for
regular tax purposes, as defined in section
5.03 of this notice, but either the hedged
item or the AFSI hedge (but not both)

636

does not have a fair value measurement
adjustment, the CAMT entity may adjust
AFSI for a taxable year to disregard the
fair value measurement adjustment on the
AFSI hedge or hedged item with the fair
value measurement adjustment.
(1) Consistency requirement. A CAMT
entity that applies the hedge coordination
option must apply the option to all transactions involving a hedged item and a
corresponding AFSI hedge that are each
marked to market for regular tax purposes
but either the hedged item or the AFSI
hedge (but not both) does not have a fair
value measurement adjustment.
(2) Application of hedge coordination
option.
(a) In general. Except as provided
in section 5.04(2)(b) of this notice, a
CAMT entity (or a controlling domestic shareholder of a CFC under section
5.04(4) of this notice) must indicate in a
statement attached to its Federal income
tax return that the CAMT entity intends
to apply the hedge coordination option
for purposes of determining AFSI. The
statement must be titled “Hedge Coordination Option for CAMT” and include
the CAMT entity’s name, address, taxpayer identification number, and a statement that the CAMT entity is choosing
the hedge coordination option under section 5.04 of Notice 2025-49. The hedge
coordination option will apply for the
taxable year beginning after the date on
which the CAMT entity files an original
or amended Federal income tax return
containing that statement.
(b) Transition period. A CAMT entity
may apply the hedge coordination option
for purposes of determining AFSI for its
first taxable year beginning on any day
during 2024, if the CAMT entity indicates in the statement described in section
5.04(2)(a) of this notice attached to its
original or amended Federal income tax
return for that taxable year that the CAMT
entity intends to apply the hedge coordination option for that taxable year. Alternatively, a CAMT entity may apply the
hedge coordination option for purposes of
determining AFSI for its first taxable year
beginning on any day during 2025, if the
CAMT entity indicates in the statement
described in section 5.04(2)(a) of this
notice attached to its Federal income tax
return for that taxable year that the CAMT

Bulletin No. 2025–44

entity intends to apply the hedge coordination option for that taxable year.
(3) Duration of hedge coordination
option. A CAMT entity applying the hedge
coordination option for a taxable year must
continue to apply the hedge coordination
option for purposes of determining AFSI
for all subsequent taxable years beginning
before the date the forthcoming proposed
regulations addressing AFSI adjustments
for certain items measured at fair value
are published in the Federal Register or
until the CAMT entity (or a controlling
domestic shareholder of a CFC under section 5.04(4) of this notice) indicates in a
statement attached to its Federal income
tax return that the CAMT entity intends
to no longer apply the hedge coordination option. The statement must be titled
“Cessation of Hedge Coordination Option
for CAMT” and include the CAMT entity’s name, address, taxpayer identification
number, and a statement that the CAMT
entity intends to no longer apply the hedge
coordination option under section 5.04 of
Notice 2025-49. The hedge coordination
option ceases to apply for the taxable year
beginning after the date on which the
CAMT entity files an original or amended
Federal income tax return containing that
statement.
(4) CFCs. In the case of a CAMT entity
that is a CFC, the controlling domestic
shareholders of the CFC must file a statement described in section 5.04(2)(a), (2)
(b), or (3) of this notice on behalf of the
CFC in accordance with the procedures
set forth in § 1.964-1(c)(3). The statement
described in § 1.964-1(c)(3)(ii) must be
titled “Hedge Coordination Option for
CAMT on Behalf of CFC” or “Cessation of Hedge Coordination Option for
CAMT on Behalf of CFC,” as applicable, and, in addition to the information set
forth in § 1.964-1(c)(3)(ii), must include
a statement that the CFC intends to apply
or cease to apply the hedge coordination
option under Notice 2025-49. Applying or
ceasing to apply the hedge coordination
option on behalf of a CFC is binding on
all United States shareholders (as defined
in § 951(b) or, if applicable, § 953(c)(1)
(A)) of the CFC.
.05 Adjustments for disregarded fair
value measurement adjustments. A CAMT
entity that disregards a fair value measurement adjustment under the FVI exclusion

Bulletin No. 2025–44

option or the hedge coordination option
must apply the guidance provided in this
section 5.05.
(1) Other adjustments to a CAMT
entity’s FSI. If a fair value measurement
adjustment disregarded by a CAMT entity
under section 5.03 or 5.04 of this notice
for a taxable year includes amounts corresponding to items of income, gain, deduction, or loss under chapter 1 of the Code in
that taxable year (other than gain or loss
from marking to market an item for regular tax purposes), then the CAMT entity
includes those amounts in AFSI in that
taxable year. See proposed § 1.56A-24(f)
(5) (Example 5) for an example of a disregarded fair value measurement adjustment
that includes taxable income from original
issue discount.
(2) Appropriate adjustments. If a
CAMT entity disregards a fair value
measurement adjustment from AFSI for
a taxable year under section 5.03 or 5.04
of this notice, appropriate adjustments
are made to any relevant CAMT attributes (for example, the CAMT basis of
the fair value item) to reflect that such fair
value measurement adjustment has not
been included in AFSI and to reflect any
amounts included in AFSI under section
5.05(1) of this notice.
(3) Inclusion of disregarded fair value
measurement adjustment. In the taxable
year of a subsequent adjustment date, the
CAMT entity includes in AFSI the cumulative fair value measurement adjustments
previously disregarded in determining
AFSI under section 5.03 or 5.04 of this
notice, net of any amounts included in
AFSI under section 5.05(1) of this notice.
The CAMT basis and any other relevant CAMT attributes of the fair value
item that was subject to section 5.03 or
5.04 of this notice are adjusted to reflect
the amounts included in AFSI under this
section 5.05(3). Following a subsequent
adjustment date, the CAMT entity uses
the CAMT basis of the fair value item that
was subject to section 5.03 or 5.04 of this
notice immediately following the subsequent adjustment date in order to determine any further income, gain, deduction,
and loss included in AFSI with respect to
the fair value item.
.06 Examples. The following examples
illustrate the application of the guidance
in section 5.03(2) and (3) of this notice.

637

For purposes of these examples, X is an
applicable corporation and uses the calendar year for its taxable year. The analysis in these examples similarly applies to
situations involving the application of the
guidance in section 5.04(2) and (3) of this
notice.
(1) Example 1: Application of FVI exclusion
option.
(a) Facts. X files its 2026 Federal income tax
return on April 15, 2027. X indicates in a statement
satisfying the requirements of section 5.03(2)(a) of
this notice attached to its 2026 Federal income tax
return that X intends to apply the FVI exclusion
option for purposes of determining AFSI.
(b) Analysis. For purposes of determining the
AFSI of X, X will begin to apply the FVI exclusion
option for its taxable year beginning January 1, 2028,
because this is the taxable year that begins after April
15, 2027, the date on which X filed a Federal income
tax return containing a statement indicating its intent
to apply the FVI exclusion option.
(2) Example 2: No longer applying the FVI
exclusion option.
(a) Facts. X previously indicated in a valid statement attached to its Federal income tax return its
intent to apply the FVI exclusion option and has continued to apply the FVI exclusion option. X files its
2027 Federal income tax return on April 15, 2028. X
indicates in a statement satisfying the requirements
of section 5.03(3) of this notice attached to its 2027
Federal income tax return that X intends to no longer apply the FVI exclusion option for purposes of
determining AFSI.
(b) Analysis. For purposes of determining the
AFSI of X, X will cease to apply the FVI exclusion
option for its taxable year beginning January 1, 2029,
because this is the taxable year that begins after April
15, 2028, the date on which X filed its Federal income
tax return containing a statement indicating its intent
to no longer apply the FVI exclusion option.

.07 Applicability date and reliance. It
is anticipated that the forthcoming proposed regulations will provide that rules
consistent with the guidance described in
this section 5 will apply for taxable years
beginning on or after the date the final regulations addressing AFSI adjustments for
certain items measured at fair value are
published in the Federal Register. For taxable years beginning before the date those
forthcoming proposed regulations are
published in the Federal Register, taxpayers may rely on the guidance described in
this section 5. A CAMT entity’s reliance
on the FVI exclusion option or the hedge
coordination option to determine AFSI for
a taxable year will not cause the CAMT
entity to become subject to, or to violate,
the reliance rules, including the consistency requirements, provided in section
3.02(1) of this notice for that taxable year.
A CAMT entity that does not rely on the

October 27, 2025

FVI exclusion option or hedge coordination option may continue to rely on proposed § 1.56A-24 until the first taxable
year in which the forthcoming proposed
regulations are published in the Federal
Register.
SECTION 6. AFSI ADJUSTMENTS
FOR CAMT ENTITIES SUBJECT TO
THE TONNAGE TAX REGIME
.01 Purpose. In response to comments, 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 6, which provides adjustments to AFSI for CAMT entities subject to subchapter R of chapter 1 of the
Code (tonnage tax regime). 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 this section 6.
.02 Coordination of the CAMT rules
with the tonnage tax regime.
(1) CAMT entities to which this section applies. The guidance in this section applies only to a CAMT entity that
is an electing corporation as defined in
§ 1355(a)(1) or a corporation that is a
member of an electing group as defined in
§ 1355(a)(2).
(2) Gross income excluded under the
tonnage tax regime. The AFSI of a CAMT
entity is adjusted to disregard all or a portion of any item of income on the CAMT
entity’s AFS that corresponds to all or
a portion of any item of income that is
excluded from the CAMT entity’s gross
income under § 1357(a) or (b) for regular
tax purposes.
(3) Deductions, credits, and losses disallowed under the tonnage tax regime.
The AFSI of a CAMT entity is adjusted
to disregard all or a portion of any item
of expense, loss, or other reduction or
increase on the CAMT entity’s AFS that
corresponds to all or a portion of any item
of deduction, credit, or loss (including an
NOL deduction) that is disallowed under

October 27, 2025

§ 1357(c)(1) or 1358(b) for regular tax
purposes.
(4) Interest expense disallowed under
the tonnage tax regime. The AFSI of a
CAMT entity is adjusted to disregard the
portion of any item on the CAMT entity’s AFS that corresponds to an item of
interest expense that is disallowed under
§ 1357(c)(3) for regular tax purposes.
(5) Determination of gain or loss on
the disposition of a qualifying vessel. The
AFSI of a CAMT entity is adjusted to disregard any gain or loss on the CAMT entity’s AFS from the disposition of a qualifying vessel (as defined by § 1355(a)(4)).
The AFSI of a CAMT entity is further
adjusted to include any gain or loss, for
regular tax purposes, resulting from the
CAMT entity’s disposition of such qualifying vessel, taking into account the rules
of § 1357(c)(2).
(6) Increase to AFSI for notional shipping income. The AFSI of a CAMT entity
is increased by an amount equal to the
CAMT entity’s notional shipping income
for the taxable year as determined under
§ 1353.
.03 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 6.02 of
this notice.
.04 Applicability date and reliance. It is
anticipated that the forthcoming proposed
regulations will provide that rules consistent with the guidance described in section
6 of this notice will apply for taxable years
beginning on or after the date the final regulations addressing AFSI adjustments for
CAMT entities subject to the tonnage tax
regime are published in the Federal Register. A CAMT entity that is subject to the
tonnage tax regime may rely on the guidance described in this section 6 for taxable
years ending before the date the final regulations addressing the coordination of the
CAMT rules with the tonnage tax regime
are published in the Federal Register. A
CAMT entity that relies on the guidance
described in this section 6 must apply
section 6 in its entirety. A CAMT entity’s
reliance on any of the guidance in this
section 6 for a taxable year will not cause
the CAMT entity to become subject to,
or to violate, the proposed reliance rules,

638

including the consistency requirements,
provided in section 3.02(1) of this notice
for such taxable year.
SECTION 7. AFSI ADJUSTMENT
FOR CERTAIN EMBEDDED
DEPRECIATION DEDUCTIONS
.01 Purpose. In response to comments
provided 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 7 to allow a CAMT entity to
reduce AFSI for a taxable year by the portion of an NOL carryover attributable to
pre-2020 embedded depreciation deductions that is allowed as an NOL deduction
for such taxable year under § 172(a). 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 section 7.03 of this notice.
.02 Definitions. For purposes of this
section 7:
(1) Applicable depreciation percentage. The term applicable depreciation
percentage means the fraction determined
under section 7.03(4) of this notice.
(2) Deductible tax depreciation. The
term deductible tax depreciation has the
same meaning as provided in proposed
§ 1.56A-15(b)(5).
(3) Eligible NOL deduction. The term
eligible NOL deduction means, with
respect to any pre-CAMT NOL(s), the
amount of the pre-CAMT NOL(s) carried
forward and allowed as a deduction under
§ 172(a) in computing taxable income for
the taxable year.
(4) Historical tax depreciation. The
term historical tax depreciation means the
amount of deductible tax depreciation and
tax COGS depreciation taken into account
in determining the pre-CAMT NOL for a
pre-CAMT NOL year.
(5) Original depreciation carryforward. The term original depreciation carryforward means the amount determined
in section 7.03(5)(b)(i) of this notice.

Bulletin No. 2025–44

(6) Pre-CAMT NOL. The term preCAMT NOL means an NOL, as determined under § 172(c), arising in a taxable
year ending on or before December 31,
2019.
(7) Pre-CAMT NOL year. The term
pre-CAMT NOL year means, with respect
to any pre-CAMT NOL, the taxable year
in which such pre-CAMT NOL arose.
(8) Remaining depreciation carryforward. The term remaining depreciation
carryforward means the amount determined in section 7.03(5)(b) of this notice.
(9) Section 168 property. The term section 168 property has the same meaning
as provided in proposed § 1.56A-15(b)(6).
(10) Tax COGS depreciation. The
term tax COGS depreciation has the
same meaning as provided in proposed
§ 1.56A-15(b)(7), as determined under
proposed § 1.56A-15(d)(3).
.03 AFSI adjustment for pre-2020
embedded depreciation deductions.
(1) In general. A CAMT entity may
reduce its AFSI for a taxable year by an
amount equal to the portion of an eligible
NOL deduction for such taxable year that
is attributable to historical tax depreciation, as determined under section 7.03(2)
of this notice. This adjustment does not
apply for purposes of computing a CFC’s
adjusted net income or loss.
(2) Determination of the historical
depreciation portion of an eligible NOL
deduction. A CAMT entity may use any
reasonable approach to determine the portion of an eligible NOL deduction that is
attributable to historical tax depreciation
(historical depreciation portion). The
Proportional Approach described in section 7.03(4) and the Lesser-of Approach
described in section 7.03(5) are deemed
to be reasonable approaches. To the
extent a CAMT entity has an eligible
NOL deduction for a taxable year that is
attributable to more than one pre-CAMT
NOL, the CAMT entity may use different
approaches for determining the historical
depreciation portion of the eligible NOL
deduction with respect to each pre-CAMT
NOL.
(3) Reporting and consistency requirements.
(a) Reporting requirement. If a CAMT
entity makes the AFSI adjustment provided in section 7.03(1) of this notice for
a taxable year, it must attach a statement

Bulletin No. 2025–44

to its Federal income tax return for such
taxable year. The statement must be titled
“AFSI adjustment for embedded depreciation deductions” and include the CAMT
entity’s name, address, and taxpayer identification number, and a statement that
the CAMT entity is choosing to make the
AFSI adjustment for pre-2020 embedded
depreciation deductions under section
7.03(1) of Notice 2025-49 for the taxable
year. In addition, for each pre-CAMT NOL
comprising the AFSI adjustment for pre2020 embedded depreciation deductions,
the statement must provide the pre-CAMT
NOL year, the approach used to determine
the historical depreciation portion of an
eligible NOL deduction attributable to
such pre-CAMT NOL, and the amount
of the historical depreciation portion of
the eligible NOL deduction attributable
to such pre-CAMT NOL for the taxable
year. If the CAMT entity chooses to use
an approach for determining the historical depreciation portion other than the
Proportional Approach or the Lesser-of
Approach described in section 7.03(4)
and (5) of this notice, the statement must
include a description of the approach used.
(b) Consistency requirement. Once a
CAMT entity chooses to make the AFSI
adjustment under section 7.03(1) of this
notice for a taxable year with respect to
a pre-CAMT NOL, the CAMT entity
must continue making such AFSI adjustment for each subsequent taxable year
in which the CAMT entity is allowed an
eligible NOL deduction with respect to
that pre-CAMT NOL or until such time
as prescribed by the Treasury Department
and IRS in regulations or other guidance.
Further, for each taxable year in which a
CAMT entity makes the adjustment under
section 7.03(1) of this notice with respect
to a pre-CAMT NOL, the CAMT entity
must use the same approach for determining the historical depreciation portion of
an eligible NOL deduction with respect to
such pre-CAMT NOL.
(4) Proportional Approach. Under
the Proportional Approach, the historical
depreciation portion of an eligible NOL
deduction for a taxable year is calculated
by multiplying the eligible NOL deduction for the taxable year by the applicable
depreciation percentage for the corresponding pre-CAMT NOL. The applicable
depreciation percentage for a correspond-

639

ing pre-CAMT NOL means the fraction:
(i) the numerator of which is the CAMT
entity’s historical tax depreciation for the
pre-CAMT NOL year, and (ii) the denominator of which is the sum of the CAMT
entity’s total cost of goods sold taken into
account in computing gross income for
regular tax purposes for that pre-CAMT
NOL year and the CAMT entity’s total
deductions allowed in computing taxable
income for regular tax purposes for that
pre-CAMT NOL year.
(5) Lesser-of Approach.
(a) In general. Under the Lesser-of
Approach, the historical depreciation portion of an eligible NOL deduction for a
taxable year is the lesser of (i) the amount
of the remaining depreciation carryforward for the corresponding pre-CAMT
NOL as of the beginning of the taxable
year, as determined under section 7.03(5)
(b) of this notice, or (ii) the amount of the
eligible NOL deduction attributable to the
pre-CAMT NOL for such taxable year. If
the amounts in (i) and (ii) are equal, the
historical depreciation portion of an eligible NOL deduction for the taxable year
equals such equal amount.
(b) Determination of remaining depreciation carryforward as of the beginning
of the taxable year.
(i) Step 1. Calculate the amount of the
original depreciation carryforward for the
applicable pre-CAMT NOL as the lesser
of:
(A) the amount of the CAMT entity’s
historical tax depreciation for the preCAMT NOL year; or
(B) the amount of the pre-CAMT NOL
for such pre-CAMT NOL year.
(ii) Step 2. The amount of the remaining depreciation carryforward of the
pre-CAMT NOL as of the beginning of
a taxable year is the amount of the original depreciation carryforward described
in Step 1 minus the cumulative amounts
attributable to such pre-CAMT NOL that
reduced AFSI under section 7.03(1) of this
notice for taxable years preceding the current taxable year. For this purpose, such
cumulative amounts include amounts that
would have reduced AFSI if the CAMT
had been in effect in all taxable years preceding the taxable year and the CAMT
entity chose to make the adjustment under
this section 7.03(1) using the Lesser-of
Approach with respect to the correspond-

October 27, 2025

ing pre-CAMT NOL in all such preceding
taxable years, as applicable.
.04 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 7.03(1) of this
notice.
.05 Examples. The following examples
illustrate the guidance in section 7.03 of
this notice. Unless otherwise specified, X
is an applicable corporation, uses the calendar year for its taxable year and for its
financial accounting period year, and none
of its NOLs may be carried back under
§ 172(b)(1).

(1) Example 1. Proportional Approach.
(a) Facts: Taxable year 2018. For regular tax
purposes, X had a pre-CAMT NOL of $100x for its
taxable year ending December 31, 2018 (2018 preCAMT NOL). For its taxable year ending December 31, 2018, X had $200x of total cost of goods
sold taken into account in computing gross income
and $300x of total deductions allowed in computing taxable income for regular tax purposes. The
amount of tax COGS depreciation and deductible
tax depreciation taken into account in determining
the 2018 pre-CAMT NOL (the historical tax depreciation for the 2018 pre-CAMT NOL) was $50x.
X carried its 2018 pre-CAMT NOL forward under
§ 172(b)(2).
(b) Facts: Taxable year 2024. X’s taxable year
ending December 31, 2024, was the first taxable year
in which X was eligible to claim an NOL deduction
under § 172(a) with respect to the 2018 pre-CAMT
NOL. For its taxable year ending December 31,
2024, X claimed an eligible NOL deduction under
§ 172(a) attributable to the 2018 pre-CAMT NOL
of $30x. As such, X’s unused 2018 pre-CAMT NOL
to carry forward to its taxable year ending December 31, 2025, and subsequent taxable years under
§ 172(b)(2) is $70x.
(c) Facts: Taxable year 2025. During its taxable year ending December 31, 2025, X claims its
remaining 2018 pre-CAMT NOL carryforward as an
eligible NOL deduction under § 172(a) ($70x).
(d) Facts: AFSI adjustment for taxable years
2024 and 2025. For the taxable years ending
December 31, 2024, and December 31, 2025, X
makes the AFSI adjustment provided in section
7.03(1) of this notice with respect to its 2018
pre-CAMT NOL, and X attaches the statement
described in section 7.03(3)(a) of this notice to its
Federal income tax returns for both taxable years.
X chose to use the Proportional Approach to determine its historical depreciation portion of the eligible NOL deductions that are attributable to the
2018 pre-CAMT NOL.
(e) Analysis: Determination of applicable depreciation percentage for 2018 pre-CAMT NOL. Under
section 7.03(4) of this notice, X’s applicable depreciation percentage for the 2018 pre-CAMT NOL is
10%, computed by dividing $50x, X’s historical tax
depreciation for the 2018 pre-CAMT NOL year, by

October 27, 2025

$500x, the sum of X’s total cost of goods sold taken
into account in computing gross income ($200x) and
X’s total deductions allowed in computing taxable
income for regular tax purposes ($300x) for the 2018
pre-CAMT NOL year ($50x / ($200x + $300x) =
10%).
(f) Analysis: AFSI adjustment for taxable year
ending December 31, 2024. Under the Proportional
Approach described in section 7.03(4) of this notice,
the historical depreciation portion of the eligible
NOL deduction for X’s taxable year ending December 31, 2024, is $3x, determined by multiplying the
amount of the eligible NOL deduction for 2024,
$30x, by the applicable depreciation percentage for
the 2018 pre-CAMT NOL, 10%. Accordingly, X
reduces AFSI for its taxable year ending December
31, 2024, under section 7.03(1) of this notice by $3x
($30x x 10%).
(g) Analysis: AFSI adjustment for taxable year
ending December 31, 2025. Since X chose to make
the AFSI adjustment under section 7.03(1) of this
notice with respect to the 2018 pre-CAMT NOL for
the taxable year ending December 31, 2024, X must
continue making the AFSI adjustment for the eligible
NOL deduction attributable to the 2018 pre-CAMT
NOL for its taxable year ending December 31, 2025.
Further, X must continue using the Proportional
Approach for determining the historical depreciation
portion of eligible NOL deductions attributable to
the 2018 pre-CAMT NOL. Thus, for its taxable year
ending December 31, 2025, X’s historical depreciation portion of the eligible NOL deduction attributable to the 2018 pre-CAMT NOL is $7x, calculated
by multiplying the eligible NOL deduction for its
taxable year ending December 31, 2025, $70x, by
the applicable depreciation percentage for the 2018
pre-CAMT NOL, 10%. Accordingly, X reduces
AFSI for its taxable year ending December 31, 2025,
under section 7.03(1) of this notice by $7x ($70x x
10%).
(2) Example 2. Lesser-of Approach.
(a) Facts: Taxable year 2019. For regular tax
purposes, X had a pre-CAMT NOL of $30x (2019
pre-CAMT NOL) and $60x of historical tax depreciation for its taxable year ending December 31, 2019.
X carried its 2019 pre-CAMT NOL forward under
§ 172(b)(2).
(b) Facts: Taxable year 2025. X’s taxable year
ending December 31, 2025, is the first taxable year
in which X is eligible to claim an NOL deduction under § 172(a) with respect to the 2019 preCAMT NOL. X claims an eligible NOL deduction
for its taxable year ending December 31, 2025,
with respect to its 2019 pre-CAMT NOL of $5x.
As of December 31, 2025, X has an unused 2019
pre-CAMT NOL of $25x, which is carried forward
under § 172(b).
(c) Facts: Taxable year 2026. During its taxable year ending December 31, 2026, X claims the
remaining amount of its 2019 pre-CAMT NOL
carryforward as an eligible NOL deduction under
§ 172(a) ($25x).
(d) Facts: AFSI adjustment for taxable years
2025 and 2026. For the taxable years ending
December 31, 2025, and December 31, 2026, X
makes the AFSI adjustment provided in section
7.03(1) of this notice with respect to its 2019
pre-CAMT NOL, and X attaches the statement

640

described in section 7.03(3)(a) of this notice to its
Federal income tax returns for both taxable years.
X chooses to use the Lesser-of Approach to determine its historical depreciation portion of the eligible NOL deductions that are attributable to the
2019 pre-CAMT NOL.
(e) Analysis: Determination of original depreciation carryforward. Under section 7.03(5)(b)(i) of
this notice, X determines the amount of the original
depreciation carryforward for the 2019 pre-CAMT
NOL of $30x, which is the lesser of X’s historical
tax depreciation for the 2019 pre-CAMT NOL year,
$60x, or the amount of the pre-CAMT NOL for the
2019 pre-CAMT NOL year, $30x.
(f) Analysis: Determination of remaining depreciation carryforward as of the beginning of the
taxable year ending December 31, 2025. As of the
beginning of X’s taxable year ending December 31,
2025, the amount of remaining depreciation carryforward of the 2019 pre-CAMT NOL is $30x, computed by subtracting from the amount of the original
depreciation carryforward, $30x, the cumulative
amounts that reduced AFSI under section 7.03(1) of
this notice with respect to the 2019 pre-CAMT NOL
for taxable years preceding 2025, $0x.
(g) Analysis: AFSI adjustment for taxable year
ending December 31, 2025. Under the Lesser-of
Approach described in section 7.03(5) of this notice,
X’s historical depreciation portion of its eligible
NOL deduction attributable to its 2019 pre-CAMT
NOL is $5x, determined as the lesser of the remaining depreciation carryforward attributable to the
2019 pre-CAMT NOL as of the beginning of X’s
taxable year ending December 31, 2025, $30x, or the
amount of the eligible NOL deduction attributable
to the 2019 pre-CAMT NOL, $5x. Accordingly, X
reduces its AFSI under section 7.03(1) of this notice
for its taxable year ending December 31, 2025, by
$5x.
(h) Analysis: AFSI adjustment for taxable year
ending December 31, 2026. Since X chose to make
the AFSI adjustment under section 7.03(1) of this
notice with respect to the 2019 pre-CAMT NOL
for the taxable year ending December 31, 2025,
X must continue making the AFSI adjustment for
the eligible NOL deduction attributable to the 2019
pre-CAMT NOL for its taxable year ending December 31, 2026. Further, X must continue using the
Lesser-of Approach for determining the historical
depreciation portion of eligible NOL deductions
attributable to the 2019 pre-CAMT NOL. Thus, as
of the beginning of X’s taxable year ending December 31, 2026, X’s remaining depreciation carryforward under section 7.03(5) of this notice for the
2019 pre-CAMT NOL is $25x, computed as the
original depreciation carryforward, $30x, minus the
cumulative amounts that reduced AFSI under section 7.03(1) of this notice with respect to the 2019
pre-CAMT NOL for the taxable years preceding
X’s taxable year ending December 31, 2026, $5x.
Under section 7.03(5), X’s historical depreciation
portion of its eligible NOL deduction attributable
to its 2019 pre-CAMT NOL for its taxable year
ending December 31, 2026, is $25x, determined
as the lesser of the remaining depreciation carryforward for the 2019 pre-CAMT NOL as of the
beginning of the taxable year, $25x, or the amount
of the eligible NOL deduction for the taxable year

Bulletin No. 2025–44

ending ­December 31, 2026, attributable to the 2019
pre-CAMT NOL, $25x. Accordingly, X reduces its
AFSI under section 7.03(1) for its taxable year ending December 31, 2026, by $25x.

.06 Applicability date and reliance. It
is anticipated that the forthcoming proposed regulations will provide that rules
consistent with the guidance described
in this section 7 will apply for taxable
years beginning on or after the date the
final regulations addressing the adjustment to AFSI for pre-2020 embedded
depreciation deductions are published in
the Federal Register. For taxable years
beginning before the date such forthcoming proposed regulations are published in the Federal Register, taxpayers
may rely on the guidance in this section
7. A CAMT entity’s reliance on any of
the guidance in this section 7 for a taxable year will not cause the CAMT entity
to become subject to, or to violate, the
proposed reliance rules, including the
consistency requirements, provided in
section 3.02(1) of this notice for such
taxable year.
SECTION 8. AFSI ADJUSTMENTS
FOR NONLIFE INSURANCE
COMPANY NOL CARRYBACKS

.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 8 to allow an eligible CAMT
entity to make certain adjustments to
AFSI for nonlife insurance company
NOL carrybacks. 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 adjustments provided
in this section 8.
.02 Definitions. For purposes of this
section 8:
(1) Eligible CAMT entity. The term eligible CAMT entity means a CAMT entity
that is a nonlife insurance company.
(2) Eligible return. The term eligible
return means either an amended return for

Bulletin No. 2025–44

an NOL carryback year or an application
for tentative carryback adjustment that
includes the carryback of a nonlife insurance company NOL to an NOL carryback
year.
(3) Financial statement net operating
loss (FSNOL). The term financial statement net operating loss has the meaning
provided in proposed § 1.56A-23(b).
(4) Loss year. The term loss year
means the taxable year in which an NOL
arose for regular tax purposes.
(5) NOL carryback year. The term
NOL carryback year means a taxable year
to which a nonlife insurance company
NOL is carried under § 172(b)(1)(C)(i).
(6) Nonlife insurance company. The
term nonlife insurance company means an
insurance company, as defined in § 816(a),
other than a life insurance company.
(7) Nonlife insurance company NOL.
The term nonlife insurance company NOL
means a net operating loss of a nonlife
insurance company subject to § 172(b)(1)
(C) for regular tax purposes.
.03 AFSI adjustments for nonlife insurance companies.
(1) AFSI adjustment for an NOL carryback year. If an eligible CAMT entity
takes an NOL deduction for regular tax
purposes on an eligible return for an NOL
carryback year, the AFSI for such taxable
year is reduced by an amount equal to the
NOL deduction taken for regular tax purposes for such taxable year (NOL carryback amount).
(2) AFSI adjustment for taxable years
succeeding a loss year.
(a) In general. If an eligible CAMT
entity reduces AFSI by an NOL carryback
amount for an NOL carryback year under
section 8.03(1) of this notice, that CAMT
entity has a corresponding increase to
AFSI in one or more later taxable years
under section 8.03(2)(b) of this notice
equal to the absolute value of the reduction to AFSI for the NOL carryback year
under section 8.03(1) of this notice (NOL
inclusion). If a nonlife insurance company
NOL results in an NOL deduction for
more than one NOL carryback year, the
NOL inclusions resulting from those NOL
carryback amounts must be combined and
treated as a single NOL inclusion for purposes of section 8.03(2)(b) of this notice.
(b) Timing and amount of NOL inclusion.

641

(i) In general. The entire amount of
an NOL inclusion is carried to the first
taxable year succeeding the loss year of
the nonlife insurance company NOL, the
carryback of which gave rise to the NOL
inclusion. For such taxable year and any
relevant subsequent taxable year, AFSI is
increased by the lesser of—
(A) The remaining NOL inclusion as of
the beginning of the taxable year; or
(B) The absolute value of any reduction to AFSI taken into account for the
taxable year under § 56A(d) or proposed
§ 1.56A-23(c), reduced (but not below
zero) by the amount of any other increase
to AFSI for an NOL inclusion for the taxable year that is attributable to an earlier
loss year.
(ii) Remaining NOL inclusion. For
purposes of section 8.03(2)(b)(i)(A) of
this notice, the remaining NOL inclusion
means the amount of the NOL inclusion
determined under section 8.03(2)(a) of
this notice, reduced (but not below zero)
by any amount of that NOL inclusion
taken into account as an increase to AFSI
under section 8.03(2)(b)(i) of this notice
in a prior taxable year.
.04 Determining applicable corporation status. For purposes of applying the
average annual AFSI test in § 59(k)(1)(B)
or proposed § 1.59-2(c) for any taxable
year, AFSI is determined without regard
to the AFSI adjustments provided in section 8.03 of this notice.
.05 Applicability date and reliance. It
is anticipated that the forthcoming proposed regulations will provide that rules
consistent with the guidance described
in section 8 of this notice will apply
for taxable years beginning on or after
the date the final regulations addressing AFSI adjustments related to nonlife
insurance company NOL carrybacks
are published in the Federal Register.
For taxable years beginning before the
date those forthcoming regulations are
published in the Federal Register, taxpayers may rely on the guidance in this
section 8. A taxpayer’s reliance on the
guidance in this section 8 for a taxable
year will not cause the corporation to
become subject to, or to violate, the
proposed reliance rules, including the
consistency requirements, provided in
section 3.02(1) of this notice for that
taxable year.

October 27, 2025

SECTION 9. AFSI ADJUSTMENT
FOR ELIGIBLE GOODWILL
AMORTIZATION
.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 9 to allow a CAMT entity to
adjust AFSI for eligible goodwill that is
amortizable under § 197 and acquired in
a transaction that was announced to the
public on or before October 28, 2021 (the
date the House of Representatives Committee on Rules released the first version
of the legislative text of H.R. 5376 that
contained the CAMT), or if such transaction was not announced to the public,
closed and completed on or before October 28, 2021. 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
9.04 and 9.05 of this notice.
.02 Definitions. For purposes of this
section 9:
(1) Covered book goodwill amortization expense. The term covered book
goodwill amortization expense means any
of the following items that are taken into
account in FSI with respect to eligible
goodwill-(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 goodwill
occurs for regular tax purposes; or
(c) Impairment loss reversal.
(2) Covered book goodwill expense.
The term covered book goodwill expense
means an amount (if any), other than covered book goodwill 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

October 27, 2025

in § 1016(a)(2) and (3)), of eligible goodwill for regular tax purposes.
(3) Deductible goodwill tax amortization. The term deductible goodwill tax
amortization means eligible goodwill tax
amortization, as defined in section 9.02(5)
of this notice, that is allowed as a deduction in computing taxable income.
(4) Eligible goodwill. The term eligible
goodwill means goodwill that meets the
requirements of section 9.03 of this notice.
(5) Eligible goodwill tax amortization.
The term eligible goodwill tax amortization means amortization deductions
allowed under § 197 with respect to eligible goodwill.
.03 Eligible goodwill.
(1) In general. For purposes of section
9 of this notice, eligible goodwill is goodwill that is-(a) An amortizable section 197 intangible under § 197(c)(1) and (d)(1)(A); and
(b) Acquired in a transaction that was
either (i) announced to the public on or
before October 28, 2021, or (ii) if such
transaction was not announced to the public, closed and completed on or before
October 28, 2021.
(2) Eligible goodwill that is not depreciable under § 197 for regular tax purposes. Eligible goodwill does not include
goodwill that is not subject to amortization under § 197 for regular tax purposes.
.04 AFSI adjustment for eligible goodwill.
(1) In general. The AFSI of a CAMT
entity for a taxable year may be adjusted
as follows-(a) Reduced by deductible goodwill tax
amortization with respect to eligible goodwill, but only to the extent of the amount
allowed as a deduction in computing taxable income for the taxable year; and
(b) Adjusted to disregard covered book
goodwill amortization expense and covered book goodwill expense, and amounts
described in section 9.05(6) of this notice
with respect to eligible goodwill, including eligible goodwill placed in service
for regular tax purposes in a taxable year
subsequent to the taxable year the eligible
goodwill is treated as placed in service for
AFS purposes
(2) Eligible goodwill held by a partnership. If eligible goodwill is held by
a partnership, rules similar to proposed
§ 1.56A-16(d)(2) apply. However, if

642

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 partnership’s eligible goodwill on
AFSI for the taxable year.
(3) Consistency requirement. If a
CAMT entity chooses to make the adjustment to AFSI provided in this section
9.04 for a taxable year and has eligible
goodwill attributable to more than one
transaction described in section 9.03(1)
(b) of this notice as of the beginning of
such taxable year, the CAMT entity must
make the AFSI adjustment provided in
this section 9.04 with respect to all such
eligible goodwill. In addition, once a
CAMT entity chooses to make the AFSI
adjustment provided in this section 9.04
for a taxable year, such CAMT entity must
continue making such adjustment for all
subsequent taxable years until all such eligible goodwill is disposed of for regular
tax purposes or such time as prescribed by
the Treasury Department and IRS in regulations or other guidance.
.05 AFSI adjustment upon disposition
of eligible goodwill.
(1) In general. In the case of a CAMT
entity that makes the adjustment provided
in section 9.04 of this notice to determine
AFSI for any taxable year, except as otherwise provided in section 9.05(7) of this
notice, if such CAMT entity disposes of
eligible goodwill 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 goodwill as of the date of the disposition (disposition date), as determined under section 9.05(2) of this notice. To the extent
the CAMT basis of the eligible goodwill 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 goodwill.
(2) Adjustments to the AFS basis of eligible goodwill. For purposes of applying
section 9.05(1) of this notice, the CAMT
basis of the eligible goodwill as of the dis-

Bulletin No. 2025–44

position date is the AFS basis of the eligible goodwill as of that date-(a) Decreased by the full amount of
eligible goodwill tax amortization with
respect to such goodwill as of the disposition date (regardless of whether any
amount of eligible goodwill 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 9.04(1)(a) of this
notice as of the disposition date);
(b) Increased by the amount of any
covered book goodwill expense with
respect to such property;
(c) Increased by the amount of any covered book goodwill amortization expense,
if any, that reduced the AFS basis of such
property as of the disposition date;
(d) Decreased by any reduction to the
CAMT basis of such property 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 goodwill, 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) Special rules regarding adjustments
to the AFS basis of eligible goodwill. For
purposes of determining the CAMT basis
of the eligible goodwill under section
9.05(2) of this notice, rules similar to proposed § 1.56A-16(e)(2)(ii) apply.
(4) Disposition of eligible goodwill by
a partnership. If a partnership disposes
of eligible goodwill, rules similar to proposed § 1.56A-16(e)(3) apply. 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

Bulletin No. 2025–44

goodwill. 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 eligible goodwill for regular tax purposes and recognizes gain or loss from the
disposition in its FSI, the gain or loss (as
redetermined under section 9.05(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 eligible goodwill 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
goodwill that is reflected in FSI following
the date such eligible goodwill 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 eligible goodwill for regular tax
purposes in an intercompany transaction,
rules similar to proposed § 1.56A-16(e)
(6) apply, taking into account any applicable proposed modifications to proposed
§ 1.1502-56A contained in Notice 202546 if the member otherwise applies such
modifications in determining AFSI for the
taxable year.
.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 adjustments provided in sections 9.04 and 9.05
of this notice.
.07 Applicability date and reliance. It is
anticipated that the forthcoming proposed
regulations will provide that rules consistent with the guidance described in section
9 of this notice will apply for taxable years
beginning on or after the date of the final
regulations addressing the adjustment to
AFSI for eligible goodwill are published
in the Federal Register. For taxable years
beginning before the date such forthcoming proposed regulations are published in
the Federal Register, taxpayers may rely
on the guidance in this section 9. A CAMT

643

entity’s reliance on any of the guidance in
this section 9 for a taxable year will not
cause the CAMT entity to become subject to, or to violate, the proposed reliance
rules, including the consistency requirements, provided in section 3.02(1) of this
notice for such taxable year.
SECTION 10. AFSI ADJUSTMENTS
FOR ACCOUNTING PRINCIPLE
CHANGES AND RESTATEMENTS OF
A PRIOR YEAR AFS
.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 modifications to proposed § 1.56A-17(c)(2) and (d)
(1) consistent with the guidance provided
in this section 10, which provides a simplified approach to determine the accounting principle change amount and the AFSI
restatement adjustment.
.02 Accounting principle change
amount.
(1) In general. (a) Except as provided in
section 10.02(2) of this notice, if a CAMT
entity implements a change in accounting
principle in its AFS for a taxable year, the
accounting principle change amount is
equal to the amount of the net cumulative
adjustment to the CAMT entity’s beginning retained earnings for the taxable year
that results from the change in accounting
principle, adjusted to-(i) Disregard any portion of the cumulative retained earnings adjustment attributable to taxable years ending on or before
December 31, 2019; and
(ii) Reflect the AFSI adjustments provided in § 56A, the CAMT Proposed Regulations, or other guidance to the extent
the cumulative retained earnings adjustment is attributable to FSI items to which
those AFSI adjustments apply.
(b) Except as provided in section
10.02(2) of this notice, if a CAMT entity
is treated as implementing a change in
accounting principle under proposed
§ 1.56A-17(c)(5) for a taxable year, the
accounting principle change amount
is equal to the difference between the
CAMT entity’s beginning retained earnings reflected in the CAMT entity’s current AFS as of the beginning of the taxable year and the CAMT entity’s ending

October 27, 2025

retained earnings reflected in the CAMT
entity’s former AFS as of the end of the
immediately preceding taxable year
(retained earnings difference), adjusted
to-(i) Disregard any portion of the cumulative retained earnings adjustment attributable to taxable years ending on or before
December 31, 2019; and
(ii) Reflect the AFSI adjustments provided in § 56A, the CAMT Proposed Regulations, or other guidance to the extent
the cumulative retained earnings adjustment is attributable to FSI items to which
those AFSI adjustments apply.
(2) Simplified accounting principle
change amount. A CAMT entity that
implements a change in accounting
principle, or is treated as implementing
a change in accounting principle under
proposed § 1.56A-17(c)(5), for a taxable
year may use the simplified accounting principle change amount described
in this section 10.02(2) in place of the
accounting principle change amount.
The simplified accounting principle
change amount is the accounting principle change amount described in section 10.02(1)(a) or (b) of this notice, as
applicable, determined without regard to
section 10.02(1)(a)(i) or 10.02(1)(b)(i) of
this notice, respectively.
.03 AFSI restatement adjustment.
(1) In general. Except as provided in
section 10.03(2) of this notice, if a CAMT
entity issues a restated AFS and, as a
result, the CAMT entity’s FSI for a taxable year ending after December 31, 2019,
is restated on or after the date the CAMT
entity filed its original Federal income tax
return for such taxable year (restatement
year), the CAMT enti

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A82b62bbf4abd2508. Public record. Not legal advice.