Initial Company Responses to the Enactment of the Corporate Alternative Minimum Tax

Congress enacted a corporate alternative minimum tax that imposes a 15 percent minimum tax based on financial statement income. Companies responded by increasing coordination and communication between their tax departments and accounting departments as well as incurring additional compliance costs. Some companies delayed merger and acquisition activity as they modeled the consequences of becoming subject to the tax. To avoid liability, some companies changed the timing of distributions due to uncertainty surrounding the treatment of dividends for purposes of the tax or reconsidered certain accounting practices. Others just paid the tax. Pillar Two poses additional coordination considerations for companies going forward.