Notice 2025-28: IRS Simplifies CAMT for Partnership Investments

The IRS issued Notice 2025-28, an interim package that pares back last year’s bottom-up partnership computations and gives corporate partners pragmatic choices. This notice is critical in addressing some of the more complex reporting issues for partnerships applying the corporate alternative minimum tax (CAMT) proposed rules. The Treasury also signaled that it will partially withdraw portions of the 2024 proposed regulations and repropose rules consistent with this notice. Taxpayers may rely on Sections 3–7 of the notice until revised proposed regulations are issued.

Quick Refresher on CAMT

CAMT imposes a 15% minimum tax on adjusted financial statement income (AFSI) for “applicable corporations,” generally those meeting the Inflation Reduction Act’s average AFSI threshold. The 2024 proposed regulations adopted a “bottom-up” approach for partnerships, requiring partnership-level modified FSI, distributive-share percentages, and separately stated CAMT adjustments to be determined by a partnership and reported to its CAMT-entity partners — a widely criticized approach as too complex for tiered structures.

The New Elective Paths for Corporate Partners

Top-Down Election

Electing corporate partners may determine their partnership AFSI by reference to their own AFS, generally including 80% of a “top-down amount,” plus specific sale-of-interest and limited foreign stock adjustments. Partnerships are not required to compute or report modified FSI to electing partners, although they must do so if requested by other non-electing CAMT entity partners. A corporate partner making a top-down election should stop requesting modified FSI information from the partnership. If a partnership computes or reports modified FSI for a CAMT entity partner when the CAMT entity partner has a top-down election in effect for the partnership investment, the CAMT entity partner must continue to apply the top-down election with respect to such partnership investment. A partnership may have both electing and non-electing partners.  

Taxable Income Election (Limited)

Certain corporate partners may instead use their regular tax distributive share — a taxable income amount — with defined add-backs and adjustments (including specified foreign stock items) to compute AFSI. Eligibility for this election is limited based on profit and loss ownership and basis. A corporate partner making the taxable income election should stop requesting modified FSI information from the partnership.  

Why this matters: Both elections dramatically reduce dependence on partnership-level CAMT calculations and data, a frequent pain point in multi-tier structures. However, partnerships may have a mix of corporate partners that make an election and those that do not, and therefore, the partnership would still be receiving requests for modified FSI information.

Partnership-Level Relief and Reporting

Reasonable Method to Allocate Modified FSI

A partnership may use any reasonable method, which is applied consistently to all CAMT-entity partners, to determine each partner’s distributive share of modified FSI, e.g., allocations keyed to a partner’s relative share of net §704(b) income or loss. Partnerships should coordinate with all CAMT partners before selecting a reasonable allocation method to ensure consistency. Because of the new election options described above, corporate partners that make a top-down or taxable-income election are not bound by the partnership’s reasonable method allocation of modified FSI. Partnerships should disclose the use of a reasonable method by attaching a short statement to their Federal income tax returns for the taxable year. The partnership must apply the method consistently for all subsequent tax years until revised regulations are issued.

Streamlined Information Flow

The notice relaxes timing and estimation rules for partnerships that haven’t furnished CAMT data, allowing corporate partners, in certain cases, to base their estimates on their own books and records.

Contributions and Distributions: Two Clearer Choices

For contributions and distributions, Notice 2025-28 offers two ways to align CAMT with Subchapter K. A partnership should choose the approach that best fits the capital and allocation mechanics and apply it consistently until revised regulations are issued.

Modified -20 Method.

A streamlined approach that coordinates contribution and distribution items with CAMT mechanics by applying Prop. Reg. §1.56A-20 with certain modifications. Once chosen, this election applies consistently in subsequent years until revised regulations are issued. A statement attached to its federal income tax return for the taxable year is required.

Full Subchapter K Method.

With the written consent of all CAMT entity partners that don’t have a top-down or taxable-income election, the partnership may follow Subchapter K principles (including remedial allocations and special-basis adjustments for CAMT). The partnership must attach a statement to its federal income tax return for the taxable year with supporting computations.

When Can You Rely on This Guidance?

Taxpayers may rely on Sections 3–7 of Notice 2025-28 now (including for amended returns/AARs), until the Treasury publishes revised proposed regulations. The notice also modifies reliance rules in the 2024 proposals.

Practical Takeaways

Here’s what the notice means in day-to-day terms. The key things to keep in mind are:

• Evaluate Elections. Determine which corporate partners have requested modified FSI information and which have made either a top-down or taxable-income election (have ceased to request data).
• Coordinate Reporting. Update reporting packs and instructions for funds and portfolio companies (which ones get modified FSI and which ones do not, and when).
• Choose a partnership method. For funds and portfolio entities, settle on a reasonable method (or consider Full Subchapter K) and document the choice with the required statement to be attached to the return.
• Watch the policy signal. The simplified, elective posture suggests final rules are likely to retain a less burdensome framework.

Ready to Act?

Need help turning Notice 2025-28 into a workable plan for your partnerships? Connect with a CBIZ professional to compare elections, align reporting, and move forward with confidence.