Part I—Applicable Corporation Determination

An applicable corporation is any corporation that satisfies the AFSI Test for 1 or more tax years prior to the current tax year and ends after December 31, 2021. If the corporation is an FPMG member for any tax year, the FPMG AFSI test applies. See section 59(k) and AFSI Test, earlier.

A corporation may choose to apply a safe harbor method (interim simplified method or simplified method) in lieu of the AFSI Test for purposes of determining whether it is an applicable corporation. See the instructions for Form 1120, Schedule K, question 29c, or the applicable question on the corporation’s return.

If a corporation has been in existence for fewer than 3 tax years of the 3-tax-year period, the AFSI test is applied to that corporation by averaging the tax years of the 3-tax-year period during which that corporation existed. For example, a corporation with a calendar tax year is formed on January 1, 2023. Only the calendar tax years ended December 31, 2023, and December 31, 2024, are included in the AFSI test in determining whether the corporation is an applicable corporation for the tax year ended December 31, 2025.

For a corporation with AFSI for any tax year of less than 12 months included in the 3-tax-year period, the AFSI of that corporation is annualized by multiplying the AFSI for the short period by 12 and dividing the result by the number of months in the short period. For example, a corporation with a calendar tax year is formed on July 1, 2022. The AFSI for the tax year ended December 31, 2022, is multiplied by 12 and then divided by 6 when computing the 3-year annual average AFSI on the applicable line. The resulting 3-year annual average AFSI with the AFSI for tax years ended December 31, 2023, and December 31, 2024, is used to determine whether the corporation is an applicable corporation for the tax year ended December 31, 2025.

AFSI for the short period to be annualized does not include those items described as extraordinary items in Regulations section 1.6655-2(f)(3)(ii)(A) to the extent that the items are not otherwise disregarded in determining AFSI, either because of an AFSI adjustment or because the items are not included in FSI. However, the items are included in AFSI for the annualized 12-month period after the AFSI for the short period is annualized. See Proposed Regulations section 1.59-2(d)(2)(ii).

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Note: If it has been determined in either the current or prior tax years that the corporation is an applicable corporation, skip Part I and continue to Part II.

Columns a, b, and c. In columns (a), (b), and (c), enter the required information for the 3-tax-year period ending prior to the current tax year. For example, when a corporation with a calendar tax year determines whether it is an applicable corporation for the tax year ending December 31, 2025, the 3-tax-year period includes the tax years ended December 31, 2024, December 31, 2023, and December 31, 2022.

Line 1a. Enter the net income or loss from the corporation’s AFS. If the corporation’s AFS is a consolidated AFS, enter the consolidated net income or loss which includes net income or loss attributable to noncontrolling interests. If the corporation has been in existence for less than 3 tax years of the 3-tax-year period, enter information for the period during which the corporation existed.

Line 1b. Enter the net income or loss of the other entities the AFSI of which is required to be aggregated with the AFSI of the corporation for purposes of determining if the corporation is an applicable corporation but that are not included in the corporation’s AFS. Include net income or loss of members of the controlled group and corporate-owned disregarded entities that were not included in the corporation’s AFS, and if the corporation is an FPMG member, also include the net income or loss of FPMG members that were not included already. If the other entity has been in existence for less than 3 tax years, enter information for the period during which the corporation existed.

Line 1c. Enter net income or loss from entities included in the AFS but that are not in the controlled group, or in the case of an FPMG member, not in the FPMG or controlled group. Add net loss and subtract net income.

Line 1d. Enter any consolidation entry adjustments made attributable to entities the net income of which is included on line 1a (but only to the extent such adjustments were not reflected on line 1c). See Proposed Regulations sections 1.56A-1(c)(2) and (3) and 1.1502-56A(a)(2) and (c) for details.

Line 1e. Reserved for future use.

Lines 2a through 2z. Compute the adjustments for each of the entities in the aggregation group and report the total amount for all entities on the form.

Line 2a. Appropriate adjustments to AFSI are made when the AFS reporting year covers a period other than the corporation’s tax year.

Line 2b. In the case of any corporation which is not included on a consolidated return with the taxpayer corporation, enter the adjustment required by section 56A(c)(2)(C) with respect to each entity in the aggregation group.

Line 2c. Aggregate pro-rata share of adjusted net income or loss of CFCs.

Corporation that is not a member of an FPMG. For a corporation that is not a member of an FPMG, if the corporation is a U.S. shareholder of one or more CFCs,

enter the corporation’s aggregate pro-rata share (determined under rules similar to the rules under section 951(a)(2)) of the adjusted net income or loss of its CFCs for the first, second, and third preceding years from Form 4626, Schedule A, column (i), line 31. See section 56A(c) (3)(A). If the aggregate pro-rata share of the adjusted net income or loss of the corporation’s CFCs is negative, enter zero.

Attach Schedule A (Form 4626), Pro-Rata Share of Adjusted Net Income or Loss of CFCs Described in Section 56A(c)(3). Attach a separate Schedule A for each of column (a), (b), and (c).

Corporation that is a member of an FPMG. If the corporation is a member of an FPMG, enter zero.

Line 2e. Certain taxes. Enter an adjustment to AFSI to disregard the amount of federal income taxes, and income, war profits, and excess profits taxes (within the meaning of section 901), with respect to any foreign country or U.S. territory which are taken into account on the corporation’s AFS.

Line 2f. For section 1381 cooperatives, enter an adjustment to reduce AFSI by the amounts referred to in section 1382(b) relating to patronage dividends and per-unit retain allocations to the extent such amounts were not otherwise taken into account in determining AFSI.

Line 2g. Alaska native corporations. Enter an adjustment to allow cost recovery and depletion attributable to property with a basis determined by the Alaska Native Claims Settlement Act (the Act) and deductions for amounts payable under section 7(i) or 7(j) of the Act which are allowed for federal income tax purposes.

Line 2h. Certain credits. Enter an adjustment to disregard any amounts treated as federal income tax credits under section 48D(d) or section 6417 or certain amounts received from the transfer of an eligible credit, as defined in section 6418(f)(1)(A), to the extent that these amounts were not otherwise taken into account on line 2e.

Line 2i. Mortgage servicing income. Enter any adjustments to defer items of income in connection with mortgage servicing contracts so that they are not included in AFSI prior to being included in income for federal income tax purposes.

Line 2j. Tax-exempt entities. Enter adjustments to AFSI so that only items from the corporation’s unrelated trade or business activities (as defined in section 513), subject to the modifications to unrelated business taxable income described in section 512(b), are included in AFSI. The adjustments to AFSI include any unrelated debt-financed income determined under section 514.

Line 2d. Income or loss that is not effectively connected to a U.S. trade or business.

Corporation that is not a member of an FPMG. Enter the AFSI income or loss from all foreign corporations that are in the controlled group where such AFSI income or loss is not effectively connected with the conduct of a U.S. trade or business. Enter AFSI income as a positive number and AFSI losses as a negative number.

Corporation that is a member of an FPMG. If the corporation is a member of an FPMG, enter zero.

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Line 2k. Depreciation. Enter an adjustment which is the difference between the section 167 depreciation deductions on section 168 property allowed in calculating taxable income for the tax year and the book expense, depreciation expense, or other cost recovery expense included in the CAMT entity’s AFS for such property. The adjustment is negative if the section 167 depreciation deductions on section 168 property exceed the book expense, depreciation expense, or other cost recovery expense included in the CAMT entity’s AFS for such property. The adjustment is positive if the book expense, depreciation expense, or other cost recovery expense included in the CAMT entity’s AFS for section 168 property exceeds the section 167 depreciation deductions on such property. Also, enter any additional adjustments, including those to account for the disposition of property. See Interim Guidance, earlier.

Line 2l. Qualified wireless spectrum. Enter an adjustment which is the difference between the qualified wireless spectrum section 197 amortization allowed in calculating taxable income for the tax year and the book expense, amortization expense, or other cost recovery expense included in the CAMT entity’s AFS for such property. The adjustment is negative if the section 197 amortization deductions on qualified wireless spectrum exceed the related book expense, amortization expense, or other cost recovery expense included in the CAMT entity’s AFS for such property. The adjustment is positive if the book expense, amortization expense, or other cost recovery expense included in the CAMT entity’s AFS for qualified wireless spectrum property exceeds the section 197 amortization deductions on such property. Also, enter any additional adjustments, including those to account for the disposition of property. See Interim Guidance, earlier.

Line 2m. Covered transactions. If the corporation is relying on interim guidance regarding covered transactions, enter any AFSI adjustments that result from the application of such guidance.

Line 2n. Adjustments related to bankruptcy and in- solvency. If the corporation is relying on interim guidance regarding bankrupt or insolvent corporations, enter any AFSI adjustments that result from the application of such guidance.

Line 2o. Certain insurance company adjustments. If the corporation is relying on interim guidance regarding certain insurance company adjustments and other industry-specific adjustments, enter any AFSI adjustments that result from the application of such guidance.

Lines 2p through 2s. Reserved for future use.

Line 2z. Other. Enter any other AFSI adjustments, including adjustments to prevent omissions or duplications of any items, as permitted by interim guidance. Use line 2z to enter adjustments related to income of foreign governments. Attach a statement describing the adjustment and amount. If the corporation is relying on interim guidance regarding certain hedging transactions or items measured at fair value, enter any AFSI adjustments that result from the application of such guidance.

Line 3. Reserved for future use.

Line 7. 3-year average annual AFSI. Calculate the 3-year average annual AFSI by dividing the amount on line 6 by the number of tax years included on line 6. The average is calculated using the period during which the corporation existed. However, if the amount on line 6 includes AFSI for any tax year of less than 12 months, annualize the amount for each short period by multiplying the short-period AFSI shown on line 5 by 12 and dividing the result by the number of months in the short period. Then add the other amounts on line 5 to the annualized amount and divide that total by the number of tax years of the 3-tax-year period during which the corporation existed.

Line 8. If line 7 exceeds $1 billion, check the “Yes” box on line 8, and continue to line 9. If line 7 is $1 billion or less, check “No.” Stop here. Attach the completed Form 4626 to the corporation’s income tax return for the current tax year.

Line 9. If the corporation is a member of an FPMG, check “Yes,” and continue to line 10. If the corporation is not an FPMG member, check “No,” and continue to Part II.

Line 10a. Enter the amount of AFSI from line 5.

Line 10b. Enter the AFSI amount of FPMG members that are not members of the corporation’s controlled group.

Line 10c. Subtract line 10b from line 10a. Enter that amount on line 10c.

Line 11a. Enter the AFSI income or loss of members of the controlled group that is not effectively connected with the conduct of a U.S. trade or business. Enter AFSI income as a negative number and AFSI losses as a positive number.

Line 11b. If the corporation is a U.S. shareholder of one or more CFCs, enter the U.S. shareholder corporation’s pro-rata share (determined under rules similar to the rules under section 951(a)(2)) of the adjusted net income or loss of its CFCs for the first, second, and third preceding years from Form 4626, Schedule A, column (i), line 31. If the pro-rata share of adjusted net income or loss of the CFCs is negative, enter zero. See Schedule A.

Attach Schedule A (Form 4626), Pro-Rata Share of Adjusted Net Income or Loss of CFCs Described in Section 56A(c)(3). Attach a separate Schedule A for each of column (a), (b), and (c).

Lines 11c and 11d. Reserved for future use.

Line 13. Combine lines 10c and 12. Enter the total on line 13.

Line 15. 3-year average annual AFSI for purposes of the $100 million test. Calculate the 3-year average annual AFSI by dividing the amount on line 14 by the number of tax years of the 3-tax-year period during which the corporation existed. However, if the amount on line 14 includes AFSI for any tax year of less than 12 months, annualize the amount for each short period by multiplying the short-period AFSI shown on line 13 by 12 and dividing the result by the number of months in the short period. Then add the other amounts on line 13 to the annualized amount and divide that total by the number of tax years of the 3-tax-year period during which the corporation existed.

Line 16. If Part I, line 15 is $100 million or more, check “Yes,” and continue to Part II. If line 15 is less than $100

10 Instructions for Form 4626 (2025)

million, check “No.” Attach the completed Form 4626 to the corporation’s income tax return for the current tax year.

Note: If the corporation does not meet the definition of applicable corporation in Part I or has not been classified as an applicable corporation in a prior year, do not complete Part II of Form 4626.