Upcoming business financial and tax disclosures will likely highlight a tension between two competing federal tax provisions: (1) tax deductions for innovation and equipment investment expanded in the 2025 tax bill and (2) the Corporate Alternative Minimum Tax, or CAMT or book tax, adopted in 2022. On one hand, Congress encourages corporations to expand or invest in innovative technologies with full expensing and the tax treatment of research and development (R&D) expenses. However, a company that uses its profits for innovation may end up triggering CAMT and have to pay tax on investments that Congress tried to keep tax-free. Additionally, because CAMT relies on financial statement income rather than taxable income, corporate tax disclosures often obscure the true tax burden facing firms that invest heavily in the economy.
CAMT imposes a tax floor of 15% on corporations’ financial statement income (rather than their taxable income). CAMT serves as a complex parallel system to the tax code through its reliance on this “book income” rather than taxable income. CAMT applies to companies with average annual financial statement income above $1 billion, and the largest and most profitable corporations in the U.S. are often in the technology sector. Tech companies rely heavily on high research expenditures to meet the demands of billions of consumers worldwide.
CAMT therefore undermines legitimate bipartisan corporate tax incentives for economic development, most notably the tax treatment of research and development (R&D) expenses. This is because companies can deduct R&D expenditures for tax purposes in the same year that those expenses are incurred. While this has been longstanding practice since the 1950s, companies were forced to amortize these expenses over a five-year window starting in 2022. Passage of the One Big Beautiful Bill Act (OBBBA) in July 2025 reinstated immediate expensing for R&D and made the change retroactive back to 2022. OBBBA also made permanent full expensing, which allows companies to deduct the full cost of capital expenditures in the year in which the expense is incurred.
These two diametrically opposed policies may result in sharply different impacts for specific companies. Some companies will invest heavily and see lower tax bills while managing to avoid CAMT. Other companies will be hit harder by CAMT and may hold back on investment to minimize this.
For example, Amazon recently gained attention for disclosing a tax bill of $1.2 billion for 2025, down from $9 billion in 2024. Amazon may have reported a lower tax liability than last year, but it also reported an effective tax rate of 19.6% in 2025. Some reports have inferred that its tax rate should be much higher given its profit level, but that is the wrong way to calculate or think about tax liability. Calculating Amazon’s effective tax rate requires understanding that immediate expensing of R&D and capital expenditures mainly represents a timing shift reducing taxes in the short-term—not permanently. Accounting rules recognize this timing shift, bringing Amazon’s effective tax rate to 19.6%, which exceeds the CAMT threshold of 15% and brings its effective tax rate very close to the statutory corporate income tax rate of 21%.
Meta, on the other hand, reported an 87% effective tax rate for the third quarter of 2025 late last year. At first glance, these tax disclosures seem to tell a very different story about corporate tax burdens. Making sense of the contrast requires an understanding of how the new expensing provisions interact with CAMT. Meta is also affected by timing shifts relating to the restoration of immediate expensing for capital expenditures and R&D. Its 87% effective tax rate for the third quarter of 2025 is the result of an elimination of $16 billion in deferred tax assets due to both OBBBA implementation and CAMT. Meta’s tax liability in the short-term is reduced by immediate expensing and it expects future taxes to also be reduced due to expensing as Meta increases investments in R&D for new technologies and capital expenditures for data centers. Meta was therefore forced to recognize that it may never use its deferred tax assets due to CAMT, which requires corporations to pay a minimum tax of 15% regardless of existing tax incentives enshrined in law. Notably, Meta reported an effective tax rate of 30% for 2025.
It is especially important to recognize that OBBBA enacted tax timing shifts that lower the up-front relative cost for investment but do not reduce corporate taxes over the long-term. In contrast, CAMT represents a tax increase based on financial statement income outside of the regular tax code. CAMT has the effect of diminishing the incentive to invest in our economy today to reap the benefits of future growth by increasing relative investment costs.
Meta’s reduction in deferred tax assets also shows that CAMT may be ineffective at collecting more federal corporate tax revenue. Studies show that tax payments from CAMT have been a fraction of the roughly $35 billion in tax revenue that the provision was estimated to generate, at just over $500 million. CAMT may have eliminated future tax benefits that Meta was relying on, but did not result in a large check being sent to the IRS. Similarly, Amazon’s relatively high effective tax rate means it will not pay additional taxes due to CAMT. Even without additional tax revenue from CAMT, corporate tax receipts are currently at record highs.
As more companies report their financial and tax statements, observers would be wise to look beyond the headline figures when discussing effective corporate tax rates. A company paying lower tax than before because it is heavily investing in equipment and innovation is exactly what Congress intended to happen, but so is a company paying CAMT despite such activity. The interaction of the tax code with its bipartisan tax incentives and the parallel CAMT system creates inefficiency for companies calculating their tax burden and for the economy as a whole through the potential for reduced investment in the short term.