A quiet structural fix

For decades, a recurring American scandal was the gap between corporate book income (what companies report to shareholders) and corporate taxable income (what they report to the IRS). Headlines about Fortune 500 firms paying zero in federal taxes despite billions in book profits were a regular feature of US fiscal politics. The 2017 Tax Cuts and Jobs Act actually widened that gap by expanding accelerated depreciation, expensing, and the 199A pass-through deduction.

The 2022 Inflation Reduction Act introduced a structural fix that has been sitting in policy proposals for over a decade: a 15% minimum tax on book income for the largest US corporations (those with average book income above $1 billion over a three-year period). The mechanism is straightforward — if a covered company’s regular tax liability falls below 15% of adjusted financial-statement income, it owes the difference.

What it has actually done

Treasury estimates and early implementation data through 2025 suggest the corporate alternative minimum tax (CAMT) is working roughly as intended. Revenue is modestly below initial Joint Committee on Taxation projections — partly because many large firms restructured to minimize exposure — but it is meaningful, and it is collected from a small number of very large firms whose regular-tax liability had been historically low.

The companies most affected are those that had the largest book-tax gaps under prior law: certain technology companies, pharmaceutical manufacturers with heavy R&D-credit usage, and capital-intensive sectors with significant accelerated depreciation. The CAMT does not eliminate those incentives — it just creates a floor below which they cannot reduce a firm’s effective rate.

What’s been challenged

The CAMT has faced multiple lines of legal and administrative challenge:

1. Definitional disputes. What counts as “adjusted financial-statement income” turns out to be more contested than the statute’s plain text suggests. Treasury has issued multiple sets of guidance; affected industries have lobbied for carve-outs. Most of these disputes are technical, but the cumulative effect on revenue is real.

2. Constitutional challenges. Several pieces of litigation have raised challenges based on the Sixteenth Amendment and the apportionment clause — most prominently, the same line of argument that the Supreme Court left undecided in Moore v. United States (2024). The CAMT survived the relevant arguments in Moore by happy textual accident, but the underlying legal questions remain active.

3. Compliance costs. Affected companies have argued — credibly, in some cases — that the compliance costs are disproportionate. Reform proposals to simplify the CAMT’s definition of book income are technical but worth tracking.

The expansion question

Several proposals would expand the CAMT in different directions:

• Lower the threshold. Currently $1 billion in average book income. Some proposals would lower it to $500 million, capturing a meaningfully larger universe of firms.
• Raise the rate. Some proposals would raise the minimum rate to 18% or 21% — particularly for firms with the largest book-tax gaps.
• Tighten definitions. Tighten the definition of book income to capture deferred-tax-asset and credit gaming.
• Expand to financial-statement income from foreign subsidiaries. Currently the CAMT covers some but not all of a US multinational’s worldwide book income; proposals would extend the coverage.

The pro-growth-manufacturing proposals introduced in the 119th Congress include various combinations of these. The political question is whether the CAMT survives its current scope and whether expansions can attach to a future revenue bill, or whether industry pressure produces a slow erosion through guidance and amendments.

Why this matters beyond the revenue

The CAMT is not, in itself, a transformative reform. The revenue is meaningful but not large compared to total federal tax receipts. What it represents is more important: a structural floor on corporate tax avoidance that does not depend on the legislative branch’s willingness to police every loophole as it appears.

The traditional tax-policy approach to corporate avoidance has been Whac-A-Mole: identify a specific loophole, draft language to close it, watch industry-funded amendments water it down, observe new structures emerge. The CAMT operates differently. It accepts that corporate tax planning will continue and creates a floor below which the planning cannot reduce effective rates.

This is the same logic, in a different domain, as the OECD’s Pillar Two global minimum tax — a 15% effective minimum on multinational corporate income, which most major economies (excluding, so far, the United States at the federal level) have adopted. The CAMT positioned the US partway into that global framework. Whether the next administration completes the integration or pulls the US out of it is one of the most consequential corporate-tax questions of this decade.

What to watch

• JCT and Treasury revenue updates. Each successive update gives a clearer picture of how much the CAMT is actually collecting and from whom.
• Treasury guidance. Each round of guidance shifts the boundary of book-income definition. Industry pressure on this is constant.
• Pillar Two integration. Whether the US eventually integrates the CAMT with the OECD global minimum tax framework will determine whether US firms face simple or compound minimum-tax obligations.
• Repeal pressure. Any legislative vehicle that includes corporate-tax provisions is a potential target for CAMT weakening or repeal. Watch tax-extender packages and end-of-year omnibus bills.

Bottom line

The corporate minimum tax is one of the most structurally significant tax-code changes in a generation. It is not a substitute for higher statutory corporate rates or for tax-base-broadening reforms. But it is the closest the US has come, since the 1980s, to a systemic fix for the corporate-tax-avoidance gap. The political and legal fights to defend and expand it will be among the most important tax-policy fights of the next several years.