From the IFRS Institute – March 2, 2023
In August 2022, President Biden signed into law the Inflation Reduction Act of 2022 (‘IRA’) and the CHIPS and Science Act of 2022 (‘CHIPS’), introducing a corporate Alternative Minimum Tax (AMT), an excise tax on stock repurchases and new options for monetizing certain tax credits. This article summarizes the key accounting considerations under IFRS Accounting Standards and US GAAP based on our current understanding of IRA and CHIPS. For details, read KPMG publication, US tax legislation: IRA and CHIPS - US GAAP and IFRS Accounting Standards.
IRA introduces a new AMT of 15%, effective for tax years beginning after December 31, 2022, which is levied on certain large corporations – generally, those with three-year adjusted financial statement income of $1 billion or more. The income tax liability for each year is the greater of regular taxes payable and corporate AMT. Companies may claim a credit against regular tax in future years for corporate AMT previously paid, under certain conditions.
Under both IFRS Accounting Standards and US GAAP, we believe any incremental tax payable under the corporate AMT regime should be accounted for in the period it is incurred. Deferred taxes should be measured at the regular statutory tax rate (and not the AMT rate). A company should consider its future expected AMT status when assessing whether corporate AMT credit carryforwards will be realized and whether a related deferred tax asset should be recognized (IFRS Accounting Standards) or subject to a valuation allowance (US GAAP)1.
Further, for deferred tax assets other than AMT credit carryforwards, a company should also consider its future expected AMT status when assessing the realizability of tax benefits from deductible temporary differences and carryforwards under IFRS Accounting Standards. Under US GAAP, however, we believe a company may elect to either consider or disregard its corporate AMT status. The accounting policy choice should be consistently applied and appropriately disclosed.