Senate Approves Inflation Tax and Spending Bill - Next Stop, House of Representatives

August 10, 2022 | Alert

By Mel Schwarz, J.D., CPA and Jay Heflin

On August 7, 2022, the Senate approved the Inflation Reduction Act of 2022. The vote was 51-50. All 50 Senate Democrats and Vice President Kamala Harris supported the measure while all 50 Senate Republicans opposed.

Next Steps

The House of Representatives is expected to vote on and approve the legislation later this week. Upon passage from the House, President Joe Biden has indicated he will sign the legislation into law.

Provisions of the Bill

Below is a quick overview of the some of the provisions included in the bill. A more detailed explanation of these provisions will be released as more information becomes available.

Corporate Minimum Tax

Corporations with an average annual adjusted financial statement income in excess of $1 billion would be subject to a minimum tax equal to 15% of their adjusted financial statement income over their AMT foreign tax credit, effective for taxable years beginning after 2022.

Adjusted financial statement income would include dividends received from non-consolidated domestic corporations, the distributive share of financial statement income from partnerships and a pro rata share of financial statement income from controlled foreign corporations.

All entities treated as a single employer for credit purposes under section 52(a) would be aggregated to the determined adjusted financial statement income. The bill replaces depreciation that is normally claimed on the financial statement with the year’s tax depreciation. Broad discretion would be given to Treasury in implementing the corporate minimum tax.

Excise Tax on Stock Buybacks

One percent excise tax on corporate stock buybacks. The levy applies to net buybacks; therefore, it only applies if there is an excess of redemptions over new issues for the year.

Limitation on the Excess Business Losses of Noncorporate Taxpayers

Extended for two years to apply to tax years ending before January 1, 2029.

Allow Medicare to Negotiate the Price of Prescription Drugs

Increased IRS Funding

The amount of revenue raised or saved by these provisions is projected to cover the cost of enacting several energy-related provisions, extend to 2025 the Affordable Care Act’s enhanced premium tax credit (which is currently scheduled to expire at the end of 2022), and reduce the federal government’s deficit.

Curious about the energy-related provisions of the bill?

This article is provided for general informational purposes only. It is not legal, accounting or other professional advice, as it does not address any individual facts, circumstances or concerns. Before making personal or business related decisions, please consult with appropriate legal, accounting or other qualified professionals.

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