SECTION 9. AFSI ADJUSTMENT

FOR ELIGIBLE GOODWILL AMORTIZATION

.01 Purpose . In response to comments received on the CAMT Proposed Regulations, the Treasury Department and the IRS anticipate that the forthcoming proposed regulations will include proposed regulations under § 56A(c)(15) and (e) consistent with the guidance provided in this section 9 to allow a CAMT entity to adjust AFSI for eligible goodwill that is amortizable under § 197 and acquired in a transaction that was announced to the public on or before October 28, 2021 (the date the House of Representatives Committee on Rules released the first version of the legislative text of H.R. 5376 that contained the CAMT), or if such transaction was not announced to the public, closed and completed on or before October 28, 2021. In addition, the Treasury Department and the IRS anticipate that the forthcoming proposed regulations will propose modifications to proposed § 1.59-2 to provide that, for purposes of applying the average annual AFSI test in § 59(k)(1)(B) or proposed § 1.59-2(c), AFSI is determined without regard to the AFSI adjustments provided in sections 9.04 and 9.05 of this notice. .02 Definitions . For purposes of this section 9:

(1) Covered book goodwill amorti- zation expense . The term covered book goodwill amortization expense means any of the following items that are taken into account in FSI with respect to eligible goodwill- (a) Amortization expense; (b) Other recovery of AFS basis (including from an impairment loss) that occurs prior to the taxable year in which the disposition of the eligible goodwill occurs for regular tax purposes; or

(c) Impairment loss reversal. (2) Covered book goodwill expense . The term covered book goodwill expense means an amount (if any), other than covered book goodwill amortization expense, that‑‑

(a) Reduces FSI; and (b) Is reflected in the basis for depreciation, as defined in §§ 1.167(g)-1 and 1.197-2(f)(1)(ii) (determined without regard to any basis adjustments described

in § 1016(a)(2) and (3)), of eligible goodwill for regular tax purposes.

(3) Deductible goodwill tax amorti- zation . The term deductible goodwill tax amortization means eligible goodwill tax amortization, as defined in section 9.02(5) of this notice, that is allowed as a deduction in computing taxable income.

(4) Eligible goodwill . The term eligible goodwill means goodwill that meets the requirements of section 9.03 of this notice.

(5) Eligible goodwill tax amortization . The term eligible goodwill tax amorti- zation means amortization deductions allowed under § 197 with respect to eligible goodwill.

.03 Eligible goodwill . (1) In general . For purposes of section 9 of this notice, eligible goodwill is goodwill that is- (a) An amortizable section 197 intangible under § 197(c)(1) and (d)(1)(A); and

(b) Acquired in a transaction that was either (i) announced to the public on or before October 28, 2021, or (ii) if such transaction was not announced to the public, closed and completed on or before October 28, 2021.

(2) Eligible goodwill that is not depre- ciable under § 197 for regular tax pur- poses . Eligible goodwill does not include goodwill that is not subject to amortization under § 197 for regular tax purposes.

.04 AFSI adjustment for eligible good- will .

(1) In general . The AFSI of a CAMT entity for a taxable year may be adjusted as follows- (a) Reduced by deductible goodwill tax amortization with respect to eligible goodwill, but only to the extent of the amount allowed as a deduction in computing taxable income for the taxable year; and

(b) Adjusted to disregard covered book goodwill amortization expense and covered book goodwill expense, and amounts described in section 9.05(6) of this notice with respect to eligible goodwill, including eligible goodwill placed in service for regular tax purposes in a taxable year subsequent to the taxable year the eligible goodwill is treated as placed in service for AFS purposes

(2) Eligible goodwill held by a part- nership . If eligible goodwill is held by a partnership, rules similar to proposed § 1.56A-16(d)(2) apply. However, if

the CAMT entity otherwise applies any proposed modifications to the proposed CAMT regulations in Notice 2025-28, the CAMT entity must apply any applicable modifications in determining the effect of the partnership’s eligible goodwill on AFSI for the taxable year.

(3) Consistency requirement . If a CAMT entity chooses to make the adjustment to AFSI provided in this section 9.04 for a taxable year and has eligible goodwill attributable to more than one transaction described in section 9.03(1) (b) of this notice as of the beginning of such taxable year, the CAMT entity must make the AFSI adjustment provided in this section 9.04 with respect to all such eligible goodwill. In addition, once a CAMT entity chooses to make the AFSI adjustment provided in this section 9.04 for a taxable year, such CAMT entity must continue making such adjustment for all subsequent taxable years until all such eligible goodwill is disposed of for regular tax purposes or such time as prescribed by the Treasury Department and IRS in regulations or other guidance.

.05 AFSI adjustment upon disposition of eligible goodwill .

(1) In general . In the case of a CAMT entity that makes the adjustment provided in section 9.04 of this notice to determine AFSI for any taxable year, except as otherwise provided in section 9.05(7) of this notice, if such CAMT entity disposes of eligible goodwill for regular tax purposes, the CAMT entity must adjust AFSI for the taxable year in which the disposition occurs to redetermine any gain or loss taken into account in the CAMT entity’s FSI with respect to the disposition for the taxable year (including a gain or loss of zero) by reference to the CAMT basis (in lieu of the AFS basis) of the eligible goodwill as of the date of the disposition (disposition date), as determined under section 9.05(2) of this notice. To the extent the CAMT basis of the eligible goodwill is negative (for example, because of differences between regular tax basis and AFS basis), this negative amount is required to be recognized as AFSI gain upon disposition of the eligible goodwill.

(2) Adjustments to the AFS basis of eli- gible goodwill . For purposes of applying section 9.05(1) of this notice, the CAMT basis of the eligible goodwill as of the dis

October 27, 2025 642 Bulletin No. 2025–44

position date is the AFS basis of the eligible goodwill as of that date- (a) Decreased by the full amount of eligible goodwill tax amortization with respect to such goodwill as of the disposition date (regardless of whether any amount of eligible goodwill tax amortization was capitalized for regular tax purposes and not yet taken into account as a reduction to AFSI through an adjustment described in section 9.04(1)(a) of this notice as of the disposition date);

(b) Increased by the amount of any covered book goodwill expense with respect to such property;

(c) Increased by the amount of any covered book goodwill amortization expense, if any, that reduced the AFS basis of such property as of the disposition date;

(d) Decreased by any reduction to the CAMT basis of such property under proposed § 1.56A-21, taking into account the proposed modifications to proposed § 1.56A-21 contained in Notice 2025-46 if the CAMT entity otherwise applies such modifications in determining AFSI for the taxable year; and

(e) Increased or decreased, as appropriate, by the amount of any adjustments to AFS basis that are disregarded for AFSI and CAMT basis purposes under the CAMT Proposed Regulations with respect to such goodwill, taking into account any proposed modifications to the CAMT Proposed Regulations contained in Notice 2025-46 if the CAMT entity otherwise applies such modifications in determining AFSI for the taxable year.

(3) Special rules regarding adjustments to the AFS basis of eligible goodwill . For purposes of determining the CAMT basis of the eligible goodwill under section 9.05(2) of this notice, rules similar to proposed § 1.56A-16(e)(2)(ii) apply.

(4) Disposition of eligible goodwill by a partnership . If a partnership disposes of eligible goodwill, rules similar to proposed § 1.56A-16(e)(3) apply. However, if the CAMT entity otherwise applies any proposed modifications to the proposed CAMT regulations in Notice 2025-28, the CAMT entity must apply any applicable modifications in determining the effect of the disposition on AFSI for the taxable year.

(5) Treatment of amounts recognized in FSI upon the disposition of eligible

goodwill . Except as otherwise provided in the CAMT Proposed Regulations (or as otherwise provided in Notice 2025-28 or Notice 2025-46 if the CAMT entity applies a proposed modification to the CAMT Proposed Regulations contained in such notices), if a CAMT entity disposes of eligible goodwill for regular tax purposes and recognizes gain or loss from the disposition in its FSI, the gain or loss (as redetermined under section 9.05(1) of this notice) is recognized for AFSI purposes in the taxable year of disposition, regardless of whether any gain or loss with respect to the disposition is realized, recognized, deferred, or otherwise taken into account for regular tax purposes.

(6) Subsequent AFS dispositions . If eligible goodwill is disposed of for regular tax purposes before it is treated as disposed of for AFS purposes, any AFS basis recovery with respect to such eligible goodwill that is reflected in FSI following the date such eligible goodwill is disposed of for regular tax purposes is disregarded in determining AFSI.

(7) Intercompany transactions . If a member of a tax consolidated group disposes of eligible goodwill for regular tax purposes in an intercompany transaction, rules similar to proposed § 1.56A-16(e) (6) apply, taking into account any applicable proposed modifications to proposed § 1.1502-56A contained in Notice 202546 if the member otherwise applies such modifications in determining AFSI for the taxable year.

.06 Determining applicable corpora- tion status . For purposes of applying the average annual AFSI test in § 59(k)(1)(B) or proposed § 1.59-2(c), AFSI is determined without regard to the AFSI adjustments provided in sections 9.04 and 9.05 of this notice.

.07 Applicability date and reliance . It is anticipated that the forthcoming proposed regulations will provide that rules consistent with the guidance described in section 9 of this notice will apply for taxable years beginning on or after the date of the final regulations addressing the adjustment to AFSI for eligible goodwill are published in the Federal Register . For taxable years beginning before the date such forthcoming proposed regulations are published in the Federal Register, taxpayers may rely on the guidance in this section 9. A CAMT

entity’s reliance on any of the guidance in this section 9 for a taxable year will not cause the CAMT entity to become subject to, or to violate, the proposed reliance rules, including the consistency requirements, provided in section 3.02(1) of this notice for such taxable year.