On Sept. 12, 2014, the Treasury and the IRS released long-awaited proposed regulations covering the corporate alternative minimum tax (CAMT). The 604-page proposed regulations and the accompanying Notice 2024-66 shed light on several important questions, which are outlined below. Q: What is needed to document that a taxpayer has satisfied the Notice 2023-7 simplified method safe harbor and thus is not an applicable corporation required to file Form 4626? A: The regulatory rules below require “books and records sufficient to demonstrate” eligibility for the simplified method and applicable corporation determinations.   Specifically, the rules under treasury regulation section 1.56A-1(g)(1) provide: “(i) Substantiation requirement: A corporation (other than an S corporation, a regulated investment company or a real estate investment trust) must maintain books and records sufficient to demonstrate whether it is an applicable corporation for any taxable year, including the identification of all persons treated as a single employer with such corporation under section 52(a) or (b) and whether the corporation is a member of [a foreign-parented multinational group] under §1.59-3. See §1.6001-1(a).” and “(j) Reporting requirement: A corporation (other than an S corporation, a regulated investment company, or a real estate investment trust) that does not satisfy the simplified method under paragraph (g) of this section must provide information to demonstrate whether it is an applicable corporation, in such form and manner as Form 4626, Alternative Minimum Tax-Corporations (or any successor form), the Federal income tax return required to be filed by such corporation, or their respective instructions prescribe. See §§1.6011-1 and 601.602 of this chapter.” Q: Can a partnership be penalized if it doesn’t respond to a request to provide information required to help determinate a partner’s distributive share for CAMT adjusted financial statement income (AFSI) purposes? A: Yes, a partnership can face penalties under section 6031(b) for failing to help estimate data requested by a partner.    Specifically, the rules under treasury regulation section 1.56A-5(i) provides: “(ii) Required estimate: If a CAMT entity is required to estimate its distributive share amount under paragraph (h)(2)(i) of this section with respect to a partnership investment, it must base its estimate on whatever information it can reasonably obtain, if received before the expiration of the period of limitations under section 6501 of the Code, and it must continue to use its best efforts to obtain the requested information from the partnership. Except as provided in paragraph (h)(2)(iii)(B) of this section, once the CAMT entity receives the information from the partnership, the CAMT entity (if not also an applicable corporation) should report the information to its partners, including any [upper-tier partner] UTP (which would then report the information to its partners), until the information is received by an applicable corporation. A partnership that fails to furnish the required information may be subject to penalties and adjustment in accordance with paragraph (i)(6) of this section” and “(6) Penalties: The information required to be furnished under this paragraph (i) also is required to be furnished under section 6031(b). See also section 6722 of the Code.” Q. Will I have to fill out a complex Form 4626 for my small business next year? A. No, the simplified method now applies for any year. Specifically, the preamble to the proposed regulations provides: “Under section 5.03(1) of Notice 2023-7, the simplified method applies only for the first taxable year beginning after December 31, 2022. Stakeholders recommended that the simplified method be extended to subsequent taxable years. The simplified method should be extended to apply for any taxable year for which applicable corporation status is relevant. See proposed §1.59-2(g)(1).” Q. Can I currently rely on these proposed regulations? A. Generally, in this instance, yes. In general, taxpayers typically can rely on proposed regulations if: (1) there are no applicable final or temporary regulations in force, and (2) there is an express statement in the preamble to the proposed regulations that taxpayers may rely on them currently. The CAMT proposed regulations generally state that taxpayers may rely on many specified regulations for taxable years ending on or before Sept. 13, 2024, if they consistently follow the regulations in their entirety. Of course, not everything in the regulation package falls within this general allowance, and not all reliance is equal, as a proposed regulation is much different than a law. Q. Was there any relief for tax penalties due to the uncertainty stemming from these regulations? A. Yes, Notice 2024-66 provided penalty relief for quarterly estimated tax underpayments due to corporate alternative minimum tax (AMT) liability calculations. Note that Notice 2023-42 relates to relief in the form of a limited waiver of the addition to tax under section 6655 that is attributable to a corporation’s CAMT liability with respect to any taxable year that begins after Dec. 31, 2022 and before Jan. 1, 2024. We continue to analyze this guidance and will issue additional alerts as warranted. Please reach out to your Baker Tilly advisor if you have any questions about how the above impacts your tax situation.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The IRS has issued interim guidance to help corporations determine the applicability of the new corporate alternative minimum tax (CAMT) and how to compute it. It includes rules for calculating financial statement income and AFSI.

Federal Tax

Treasury and IRS release long-anticipated CAMT proposed regulations

In the era of rapidly advancing artificial intelligence (AI), leveraging generative AI safely requires a thoughtful approach that considers not only its capabilities, but also the ethical, privacy and security implications.  Organizations can work to leverage generative AI safely by investing in several key practices. Understanding new technologies Education is foundational for any organization looking to integrate generative AI technologies safely and effectively. Ensuring that your employees, especially decision-makers, understand what generative AI is, its capabilities and its limitations will help in setting realistic expectations and understanding the potential risks of its usage.  Education also extends to generative AI’s strategic implications on your organization as decision-makers need to know how it can impact their business model, customer engagement and competition in the market. Understanding the potential generative AI can have to impact your organization’s core operations enables decision makers to proactively plan for integrating the new technologies by re-imagining traditional processes to capitalize on the efficiency and personalization that AI can provide.  Beyond decision makers, increasing data and AI literacy in employees across your organization is necessary for an effective integration of generative AI into day-to-day business processes. Not only does this promote responsible use of AI, but also increases its likelihood of successful adoption. When employees understand the benefits and potential use cases of generative AI in their daily work, they are more likely to support its adoption.  Leveraging change management practices can help to support the organizational cultural shift that is essential for successful AI implementation. By ensuring employees across various teams have a solid understanding of generative AI, organizations create a foundation for its effective and responsible use. Ultimately, a well-informed workforce not only ensures the successful integration of generative AI, but also fosters a culture of continuous learning and innovation within the organization.  Legal, risk and compliance considerations To leverage generative AI safely, organizations need to prioritize compliance with both regulatory standards and internal guidelines. Staying updated with laws and regulations specific to AI use in your industry and region is crucial. Ensuring compliance with current and incoming laws not only helps to prevent legal repercussions, but also fosters trust among customers.  In addition to regulatory compliance, organizations should have a strong understanding of ethical guidelines and best practices for AI use. Ethical AI usage involves using the technology responsibly to avoid bias, misinformation and other unintended consequences that could put the organization at risk. Establishing and adhering to internal standards for ethical AI usage can help guide decision-makers and ensure that generative AI deployment aligns with the organization’s values. By aligning and educating employees across the organization on compliance and ethical standards, organizations can harness the benefits of generative AI while minimizing risks.  Data governance, privacy, transparency and accountability Effective data governance involves establishing policies and procedures that ensure the responsible collection, storage, management and use of organizational data. A robust data governance framework provides clear guidance on data ownership, access, quality and compliance with legal and regulatory standards. This framework should include regular audits to verify data integrity and security, ensuring that only high-quality, non-sensitive data is used for training generative AI models. By implementing robust data governance frameworks, organizations can manage data responsibly, mitigate risks and ensure their generative AI initiatives are ethically and legally compliant. Robust access control and development practices are also a necessity in leveraging generative AI safely. Implementing strict access controls ensures that only authorized personnel can access sensitive data and generative AI systems, reducing the risk of unauthorized use or data breaches. Development practices focusing on data governance and AI operations should include continuous monitoring of AI systems to track outputs, ensuring they align with current data governance frameworks and operational standards. These practices not only enhance security, but also facilitate compliance with internal policies and regulatory requirements.  Additionally, generative AI models should be trained on data free of personal or sensitive information to comply with data protection laws. Organizations should adopt data handling, storage and privacy protocols that isolate sensitive data to ensure it’s not used for training purposes. By ensuring that data used to train generative AI models is secure and excludes personal identifiers, organizations can mitigate the risks associated with data breaches and misuse. Lastly, transparency and accountability are critical components of safe generative AI deployment. Detailed documentation of the generative AI development process, including records of training datasets, model versions and training parameters supports auditing and accountability by providing a clear trail of the AI’s development and operational history. By having thorough documentation, organizations can maintain control over their AI systems, ensuring they operate ethically and in line with bother internal and external standards.  Secure development practices and continuous monitoring Implementing secure development practices and monitoring systems is crucial to safely leveraging generative AI. Secure coding practices are essential to avoid vulnerabilities and defend against cyber-attacks, such as patching systems to address security threats and complying with best practices to mitigate nefarious use of your AI systems. Continuous monitoring and observability of generative AI systems help identify and prevent misuse. Algorithms should be in place to detect nefarious activities, with feedback loops from monitoring to address security breaches and misuse promptly. By addressing these security concerns proactively, organizations can work to ensure the safe operation of their generative AI systems.  How we can help Leveraging generative AI requires a multifaceted approach to ensure the safety of your AI systems and organization as a whole. Take a proactive approach to safely implementing generative AI with an AI readiness assessment to support a holistic, safe and responsible approach to AI adoption.  Interested in learning more? Contact one of Baker Tilly’s digital consulting professionals today.

Understand how a multifaceted approach to leveraging generative AI can ensure the safety of your AI systems and organization as a whole.

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How to leverage generative AI safely

Within the Inflation Reduction Act (IRA), there are more than 70 available tax credits, many of which are “entitlements,” meaning an organization is entitled to the tax credit if their project meets specific eligibility criteria. Most of these credits are effectively good through 2032 and this “10-year runway” is one of the largest in our nation’s energy policy history. This timeframe provides stakeholders with time to plan, develop and execute projects that could leverage the energy tax credit program as part of the energy transition.  While a large chunk of the 10-year runway remains, there continue to be significant changes in how the legislation is promulgated. Companies need to be aware of the changing tax credit details (including the deadlines). It is imperative that organizations get their wheels in motion now if they hope to benefit from the “new regime” starting in 2025 – and beyond. Understanding the new regime Historically, two categories of income tax credits were available for renewable energy projects (1) investment tax credits (ITC) under section 48 and (2) production tax credits (PTC) under section 45. Both programs were in place prior to the passage of the IRA. Eligibility under the existing credit programs is generally based on technology types, which are listed below.  As of Dec. 31, 2024, the existing credit regime under section 48 and section 45 expires. Projects that begin construction after Dec. 31, 2024, will need to qualify under the new credit regime of section 48E clean energy investment tax credits and section 45Y clean electricity production tax credits. Eligibility under the new credit regime focuses on producing electricity without producing greenhouse gas emissions. The new credit regime is essentially technology neutral and focuses on the output of the process.  The shift from a technology-specific to technology-neutral credit program impacts many of the technologies that have qualified under the old regime. Some will be left out of the new regime.   Further, qualification under the new regime may require complicated lifecycle analysis to establish a greenhouse gas (GHG) emissions rate that is not greater than zero. These studies can be time consuming and subject to changing regulatory requirements each year.  More on ITCs and PTCs Under the current regime, ITC (section 48) and PTC (section 45) qualifying energy property types are listed below. For section 48, the base credits refer to the initial percentage of the investment costs that an eligible property can receive.  *Asterisks denote projects that are at risk of facing increased credit limitations – or potentially being phased out entirely – under the new regime. These are the projects that organizations want to begin construction on now, so that they can qualify for tax credits under the current regime.
Projects that can begin construction (as defined below) prior to year-end, will be eligible to claim credits under the existing section 48 and section 45 credit regime and do not have to qualify under the new technology neutral regime.  How to meet “begun construction” To demonstrate “begun construction,” taxpayers must meet one of the following requirements: Start physical work of a significant nature or Incur at least 5% of the total cost of the facility by the end of 2024  In either case, taxpayers must demonstrate continuous construction efforts – more on that in a bit – and work performed must be completed under a binding, written contract between vendors to prove “begun construction.”
Additional implications related to Dec. 31, 2024 For any project looking to receive direct payment of their IRA credits under section 6417, there are implications to projects beginning construction after Dec. 31, 2024.  Direct payment recipients are required to meet the domestic content requirements for projects or be subject to limitations on the amount credit they will receive as direct payment. The below table indicates the percentage of credit available for projects that do not meet domestic content. For projects beginning construction in 2025, 85% of the credit is available. For projects beginning construction in 2026, no credit is available unless domestic content requirements are met.  Projects producing less than one megawatt are exempt from this limitation. Further, there are certain exceptions to having the below limitations applied that were outlined in IRS Notice 2024-09. These exceptions are nuanced and often difficult to prove. 
Where to go from here?  The new credit regime beginning Jan. 1, 2025, introduces significant changes to energy project tax credits, emphasizing the importance for organizations to commence construction by Dec. 31, 2024, to qualify for existing benefits. Companies looking to complete qualifying projects between now and 2028 may act promptly to secure their projects' eligibility and maximize potential credits before the new eligibility requirements and limitations take effect.  Baker Tilly offers an end-to-end solution to help companies maximize their IRA opportunities. As you strive to secure the maximum eligible credits, we can assist with: Planning now to meet begun construction Determining other IRA bonus credits that may be afforded to your project Development advisory to help manage the project  Maximizing the tax credit earned – pre- and post-construction cost certification  Work-paper file generation to support investment tax credit claim Support management under audit of credit Go there with an IRA specialist. 
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The IRA's new regime changes energy tax credits, both investment tax credits and production tax credits, requiring construction to start by Dec. 31, 2024, for eligibility. Act now to maximize your benefits.

Inflation Reduction Act Tax Credit Solutions

New energy tax credit regime incentivizes projects to begin construction ahead of Dec. 31, 2024, deadline

Organizations of all sizes and in all industries are targets of ransomware attacks — and the number is skyrocketing.  In recent years, ransomware attacks have proved themselves to be malicious well-oiled machines that use ransom as a source of revenue, leaving organizations scrambling to defend their digital assets. Ransomware attacks can not only cause significant direct and indirect costs to the organization, but they also degrade productivity and can cause irreparable reputational damage.   Let’s explore how ransomware has evolved:  The business mindset Ransomware attacks no longer hide in the shadows. They have adopted a business mindset, treating their illicit activities as a revenue stream. Ransomware attackers invest in research, development and customer support, ensuring that they strive for maximum returns. Ransom payments, often demanded in cryptocurrencies, fuel the attackers' operations.  The multiphase approach 
By implementing proactive controls, organizations can minimize the chance of falling victim to a ransomware attack. Our guide explores the following leading cybersecurity practices, with critical steps to take and tips to incorporate into your approach:  Know your environment  Keep your data backups safe  Implement a patch management program  Build a security-aware culture  Assess control and authentication  Monitor, detect and respond  Implement a ransomware recovery strategy  Consider ransomware insurance 

Our ransomware prevention guide explores eight leading cybersecurity practices to minimize an organization’s chance of a ransomware attack. 

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A little more than three years ago, everything changed about the way we live and work.  One day, we were talking face-to-face with our friends and family. The next day, we were six feet apart. Masks quickly became a staple of our everyday lives. And the idea of going to restaurants, schools and stores suddenly became more of a fantasy than a reality.  Additionally, there was a massive shift in the way we work. The COVID-19 pandemic rattled everything we knew about our jobs – not only the location from which most of us worked, but also the way we communicated with coworkers, the use of technology to do our jobs, and many other aspects, including the way we attract, hire and retain employees.  These changes were presented as short-term realities at the time, although we now realize that many of these adjustments are here to stay – or, at the very least, they are going to stick around for longer than we originally expected.  While the idea of working remotely existed prior to the arrival of COVID-19, the pandemic certainly brought the concept front and center for many employers as it emerged as a national issue. It quickly became obvious that the way we work was changing and that companies were going to have to swiftly adapt to keep up. The HR and payroll perspective  One of the most significant shakeups to the way we work has taken place within the human resources and payroll departments of companies, both large and small, throughout the U.S.  In the spring of 2020, organizations had to quickly figure out how to interview applicants without meeting them in person. As a result, HR was screening a pool of applicants from different states, including locations that in many cases had never been on their hiring radar previously.  Of course, multistate employment has always existed – particularly at larger companies with many locations – but starting three years ago, an even larger number of organizations found themselves discussing the possibility and practicality of remote work in other states. Companies began recruiting outside of their immediate geographic regions for positions that could be performed from an alternate location. Existing employees who could or were required to work from home, began setting up their offices and in some cases, changing their addresses. Needless to say, internal changes needed to be made to support this multi-location workforce. The idea that an organization in Florida can simply hire a remote worker from California isn’t so simple. It’s easy to say, “You’ve got the job.” But it’s not so basic, from an HR benefits and payroll perspective, to quickly add an employee from across the country. There is a lengthy list of complications within those key areas, and until recently, there was no centralized resource for finding information about HR and payroll compliance for all 50 states. What HR and payroll professionals need to know At the start of the pandemic, companies were reactive to the challenges that emerged on almost a daily basis. The shift in how we worked arrived seemingly overnight, and HR and payroll leaders had to figure out multistate compliance issues in a hurry. This overnight shift was more than three years ago and organizations must now take proactive steps to ensure they are prepared to hire employees from multiple states. That means HR and payroll professionals need to have easy access to the employment rules and regulations that apply in every state from coast to coast. They need to be prepared for a potential hire in California, Florida, New York and everywhere in between. Of course, that doesn’t mean that organizations should not hire people from other states; rather, they just need to be prepared for the possibility and the potential impact upon their compliance requirements, because if they don’t the cost for noncompliance can be staggering. Key HR multistate compliance considerations include: General employment requirements Benefits Equal employment opportunity HR administration Leave of absence/time off Wage and hour Unemployment compensation Additionally, from a payroll perspective, there is a need to understand state and local regulations concerning: Tax and withholding Registrations Required tax forms Unemployment insurance Workers’ compensation Digging deeper into a couple of specific examples, HR leaders need to understand each state’s specific regulations around leave (parental leave, personal leave, paid family leave, etc.). And they need to know whether pre-employment testing is permissible for new hires in their organizations.   Payroll departments must understand what is required of employers in terms of filings, payments and rules for employees who work out-of-state. Who needs to be reported and who is exempt? When and how do they need to file? What local or other taxes need to be considered in addition to federal and state taxes? There are typically no uniform rules for all 50 states. Regulations can vary significantly, and there is generally no flexibility when payroll rules are violated or misinterpreted.  Introducing Baker Tilly’s Employer State Compliance Roadmap Given the major changes to the way we work, and the hiring landscape in particular, Baker Tilly is proud to introduce our Employer State Compliance Roadmap. The Roadmap provides access to HR and payroll compliance information through an easily accessible and searchable state-by-state database, bringing everything together in one convenient location. Through quarterly updates, organizations will be kept informed of HR and payroll regulatory changes across all 50 states.  We want organizations to feel confident hiring and onboarding qualified candidates in any state – without struggling to understand confusing regulations or worrying about notices, penalties, interest and audits because of inadvertent mistakes. The Roadmap will save you time, energy and money. It will help your organization adapt to the new way of working and be strategic in your decisions on where to recruit and hire new employees. It will keep you compliant and avoid fines and penalties. For more information about the Roadmap, click here. And to discuss how it can change the way you work, contact us. 

Treasury and IRS release long-anticipated CAMT proposed regulations

How to leverage generative AI safely

New energy tax credit regime incentivizes projects to begin construction ahead of Dec. 31, 2024, deadline

Ransomware prevention guide

Managing multistate HR and payroll compliance for today’s remote workforce

Treasury and IRS release long-anticipated CAMT proposed regulations