n-25-49.pdf

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing.

This collection currently includes the publisher’s available advance-release directory. Historical bulletin renditions are discovered separately; an advance-release record alone does not certify the collection archive complete.

Part III – Administrative, Procedural, and Miscellaneous

Additional Interim Guidance for the Application of the Corporate Alternative Minimum
Ta x

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 2025-28, 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

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

- 2 -

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), 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

2
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.

- 3 -

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) P
rovisions 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

- 4 -

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) A
djustment 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 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) G
eneral 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 C
AMT Proposed Regulations.

- 5 -

(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 REG-112129-23, 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) P
rovisions 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).
(ii) A
ccounting 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

- 6 -

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

- 7 -

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 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.

- 8 -

(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 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) A
FSI 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

- 9 -

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 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 §§ 1.1502-2, 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) R
eliance 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

- 10 -

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 N
otices 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 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

- 11 -

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. 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 Regulations unless the taxpayer

- 12 -

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

- 13 -

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 commission 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 980-340-25-1 (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

- 14 -

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
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

- 15 -

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 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

- 16 -

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 taxable 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

- 17 -

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.

- 18 -

Commenters requested that AFSI be adjusted for corporations subject to the tonnage
tax regime 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 § 1.56A-23 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,

- 19 -

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 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

- 20 -

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 book-tax 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 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

- 21 -

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
taxable 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

- 22 -

.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 § 1.56A-1) 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 T
axable years beginning before final regulations.
(1) Reliance on CAMT Proposed Regulations.
(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

- 23 -

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 245A(d) as an eligible tax for purposes of proposed § 1.59-4

- 24 -

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) R
eliance 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 2025-27, 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

- 25 -

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 De
finitions. 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

3
https://www.irs.gov/forms-pubs/about-form-4626

- 26 -

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 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

- 27 -

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:
(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

- 28 -

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

- 29 -

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).
(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 C
onsistency 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.

- 30 -

.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.
.08 A
pplicability 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

- 31 -

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 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

- 32 -

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
2025-46 (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 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

- 33 -

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 F
VI 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,

- 34 -

§ 1256, or a similar provision. The determination regarding whether a CAMT entity
recognizes 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) A
pplication 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) T
ransition 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

- 35 -

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 exclusion
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) CF
Cs. 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

- 36 -

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 2025-
49. 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) 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) C
onsistency 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) A
pplication of hedge coordination option.
(a) In general. Except as provided in section 5.04(2)(b) of this notice, a CAMT

- 37 -

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
entity intends to apply the hedge coordination option for that taxable year.
(3) D
uration 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

- 38 -

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 A
djustments for disregarded fair value measurement adjustments. A CAMT
entity that disregards a fair value measurement adjustment under the FVI exclusion

- 39 -

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) A
ppropriate 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) I
nclusion 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

- 40 -

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. 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) E
xample 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) A
nalysis. 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) E
xample 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

- 41 -

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 A
pplicability 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 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

- 42 -

.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 C
oordination 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) G
ross 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) D
eductions, 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 § 1357(c)(1) or 1358(b) for regular tax purposes.
(4) I
nterest expense disallowed under the tonnage tax regime. The AFSI of a

- 43 -

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) I
ncrease 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 A
pplicability 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

- 44 -

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,
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 De
finitions. 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).

- 45 -

(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) H
istorical 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.
(6) Pre-CAMT NOL. The term pre-CAMT 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) R
emaining 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

- 46 -

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) R
eporting 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 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 pre-2020 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

- 47 -

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) P
roportional 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 corresponding 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

- 48 -

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) D
etermination 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 pre-
CAMT 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

- 49 -

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 corresponding 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 E
xamples. 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) E
xample 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 pre-CAMT 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) F
acts: 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)

- 50 -

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) F
acts: 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) A
nalysis: 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 $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) A
nalysis: AFSI adjustment for taxable year ending December 31, 2024.

- 51 -

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) E
xample 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

- 52 -

§ 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 pre-CAMT 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) F
acts: 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) F
acts: 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 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) A
nalysis: 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) A
nalysis: Determination of remaining depreciation carryforward as of the

- 53 -

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) A
nalysis: 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) A
nalysis: 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,

- 54 -

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 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

- 55 -

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 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) F
inancial 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.

- 56 -

(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) A
FSI 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) T
iming and amount of NOL inclusion.
(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—

- 57 -

(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 D
etermining 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 A
pplicability 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

- 58 -

3.02(1) of this notice for that taxable year.
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 De
finitions. 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

- 59 -

(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 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) E
ligible goodwill tax amortization. The term eligible goodwill tax amortization
means amortization deductions allowed under § 197 with respect to eligible goodwill.
.03 E
ligible 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.

- 60 -

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 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) C
onsistency 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

- 61 -

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) A
djustments 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
disposition 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

- 62 -

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

- 63 -

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
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) S
ubsequent 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) I
ntercompany 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 2025-46 if the member
otherwise applies such modifications in determining AFSI for the taxable year.
.06 D
etermining 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

- 64 -

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 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 A
ccounting 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

- 65 -

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 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

- 66 -

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 entity accounts for the restatement by adjusting its AFSI for the taxable year in
which the restated AFS is issued (AFSI restatement adjustment). The AFSI restatement
adjustment equals 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, adjusted to--
(a) Disregard any portion of the retained earnings restatement attributable to
taxable years ending on or before December 31, 2019; and
(b) Reflect the AFSI adjustments provided in § 56A, the CAMT Proposed
Regulations, or other guidance to the extent the AFSI restatement adjustment relates to
one or more FSI items to which AFSI adjustments provided in § 56A, the CAMT
Proposed Regulations, or other guidance apply. For example, to the extent the AFSI
restatement adjustment includes a Federal income tax component, § 56A(c)(5) and
proposed § 1.56A-8 apply to disregard that component.

- 67 -

(2) Simplified AFSI restatement adjustment. A CAMT entity required to make an
AFSI restatement adjustment for a taxable year, pursuant to section 10.03(1) of this
notice, may use the simplified restatement adjustment described in this section 10.03(2)
in place of the AFSI restatement adjustment. The simplified AFSI restatement
adjustment is the AFSI restatement adjustment described in section 10.03(1) of this
notice, determined without regard to section 10.03(1)(a) of this notice.
.04 A
pplicability date and reliance. It is anticipated that the forthcoming proposed
regulations will provide that rules consistent with the guidance described in section 10 of
this notice will apply to changes in accounting principle implemented in, and restated
AFS issued in, taxable years beginning on or after the date the final regulations
addressing AFSI adjustments for accounting principle change amounts and AFSI
restatement adjustments are published in the Federal Register. For changes in
accounting principle implemented in, and restated AFS issued in, 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 10. However,
regardless of when such forthcoming proposed regulations are published in the Federal
Register, a taxpayer may rely on the guidance provided in this section 10, for
accounting principle changes implemented in, and restated AFS issued in, any taxable
year beginning before January 1, 2026. A CAMT entity's reliance on any of the
guidance in this section 10 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 11. REQUEST FOR COMMENTS

- 68 -

.01 Comments regarding guidance provided in section 5 of this notice. The Treasury
Department and the IRS request comments on the interim guidance set forth in section
5 of this notice.
(1) Interim AFSI adjustments for certain fair value items. The Treasury Department
and the IRS continue to study whether the interim guidance described in this section 5
creates unintended results, including mismatches or distortions between AFSI and
regular taxable income, and request comments identifying those unintended results.
Commenters are also encouraged to specify the issues on which additional guidance is
needed for fair value items.
(2) C
oordination with proposed § 1.56A-22. The Treasury Department and the IRS
request comments on how the rules in proposed § 1.56A-22(c) and proposed § 1.56A-
22(d) and the guidance described in section 5.02 through section 5.07 of this notice
should be coordinated.
.02 P
rocedures for Submitting Comments.
(1) Deadline. Written comments should be submitted by [INSERT DATE 60 DAYS
AFTER DATE OF RELEASE]. Consideration will also be given to any written comment
submitted after [INSERT DATE 60 DAYS AFTER DATE OF RELEASE], although such
comments may not be considered in the development of the forthcoming proposed
regulations if such consideration would delay the publication of the forthcoming
proposed regulations.
(2) F
orm and manner. The subject line for the comments should include a
reference to Notice 2025-49. All commenters are strongly encouraged to submit
comments electronically. Comments may be submitted in one of two ways:

- 69 -

(a) electronically via the Federal eRulemaking Portal at
https://www.regulations.gov (type IRS-2025-0202 in the search field on the
https://www.regulations.gov homepage to find this notice and submit comments); or
(b) by mail to: Internal Revenue Service, CC:PA:01:PR (Notice 2025-49), Room
5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C., 20044.
(3) Publication of comments. The Treasury Department and the IRS will publish for
public availability any comment submitted electronically and on paper to the IRS’s public
docket on https://www.regulations.gov.
SECTION 12. PAPERWORK REDUCTION ACT
The Paperwork Reduction Act of 1995 (44 U.S.C. §§ 3501-3520) (PRA) required that
a Federal agency obtain the approval of the Office of Management and Budget (OMB)
before collecting information from the public, whether such collection of information is
mandatory, voluntary, or required to obtain or retain a benefit. An agency may not
conduct or sponsor, and a person is not required to respond to, a collection of
information unless the collection of information displays a valid OMB control number.
The collections of information in this notice are in sections 4.04(3), 5.03(2) and (3),
5.04(2) and (3), and 7.03(3)(a) of this notice.
Section 4.04(3) of this notice requires a CAMT entity to file a statement with its
Federal income tax return if it chooses to use a reasonable method to determine
regulatory asset book inventoriable depreciation under section 4.04(2) of this notice to
make the AFSI adjustment described in section 4 of this notice. The information
requested in section 4.04(3) of this notice is required to obtain the benefit of making the
AFSI adjustment described in section 4 of this notice. This information will be used by

- 70 -

the IRS to confirm compliance with the guidance in section 4 of this notice. The likely
respondents are corporations.
Section 5.03(2) and 5.04(2) of this notice requires a CAMT entity to file a statement
with its Federal income tax return if it chooses to apply the FVI exclusion option or
hedge coordination option. The information requested in section 5.03(2) and 5.04(2) of
this notice is required to obtain the benefit of using the FVI exclusion option or hedge
coordination option. This information will be used by the IRS to confirm compliance with
the FVI exclusion option or hedge coordination option. The likely respondents are
corporations.
Section 5.03(3) and 5.04(3) of this notice requires a CAMT entity to file a statement
with its Federal income tax return if it chooses to no longer apply the FVI exclusion
option or hedge coordination option. The information requested in section 5.03(3) and
5.04(3) of this notice is required to no longer obtain the benefit of using the FVI
exclusion option or hedge coordination option. This information will be used by the IRS
to confirm whether the CAMT entity ceases to apply the FVI exclusion option or hedge
coordination option. The likely respondents are corporations.
Section 7.03(3)(a) of this notice requires a CAMT entity to file a statement with its
Federal income tax return if it chooses to make the AFSI adjustment described in
section 7.03 of this notice. The information requested in section 7.03(3)(a) of this notice
is required to obtain the benefit of making the AFSI adjustment described in section 7.03
of this notice. This information will be used by the IRS to confirm compliance with the
guidance in section 7 of this notice. The likely respondents are corporations.
The reporting requirements in this notice will be included within OMB control number

- 71 -

1545-0123 in accordance with the PRA procedures under 5 CFR § 1320.10. The
recordkeeping requirements are considered general tax records under § 1.6001-1(e).
For PRA purposes, general tax records are already approved by OMB under 1545-0123
for business filers.
Books or records relating to a collection of information must be retained as long as
their contents may become material in the administration of any internal revenue law.
Generally, tax returns and tax return information are confidential, as required by § 6103.
SECTION 13. DRAFTING AND CONTACT INFORMATION
The principal authors of this notice are Samuel Terhaar of the Office of the Associate
Chief Counsel (Income Tax & Accounting); Justin Karlin of the Office of Associate Chief
Counsel (Financial Institutions & Products); and Timothy Blauch of the Associate Chief
Counsel (International). Other personnel from the Treasury Department and the IRS
participated in its development. For further information regarding sections 4, 7, and 9 of
this notice, contact the Office of the Associate Chief Counsel (Income Ta x &
Accounting), Branch 7, at (202) 317-7005 (not a toll-free number). For further
information regarding section 5 of this notice, contact Justin Karlin at (202) 317-6842
(not a toll-free number). For further information regarding section 6 of this notice,
please contact Timothy Blauch at (202) 317-3485 (not a toll-free number). For further
information regarding section 10 of this notice, contact James Yu at (202) 317-4718.
For further information regarding sections 3 and 8 and all other aspects of this notice,
contact Madeline Padner at (202) 317-7006 (not a toll-free number).