Update: President Joe Biden signed the legislation into law on August 16, 2022.
Legislation that will increase the amount of taxes paid by some taxpayers will soon become law.
The House of Representatives on August 12th passed the "Inflation Reduction Act of 2022" (formerly known as Build Back Better). The Senate approved the same bill on August 7th.
President Joe Biden is expected to sign the measure into law. The White House has yet to announce a date for when the signing ceremony will occur.
The tax increases are projected to fall on large corporations and taxpayers earning at least $200,000 a year, according to the Joint Committee on Taxation, which determines the revenue impact of tax legislation for Capitol Hill.
What’s in the Bill:
The following provisions are in the legislation (not inclusive):
- Corporate Minimum Tax: Corporations with a three-year average adjusted financial statement income in excess of $1 billion would be subject to a 15% minimum tax, effective for taxable years beginning after 2022. 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.
- Increased IRS Funding: The agency will receive $80 billion over the next ten years. Of that amount $45.6 billion will go to tax enforcement. Administration officials have said that the extra funding is not supposed to increase audit rates on taxpayers and small businesses earning less than $400,000 a year.
- Black Lung fund: Permanent extension of tax rate to fund Black Lung Disability Trust Fund.
- Superfund: Reinstate the Superfund tax for oil and petroleum products (16.4-cents-per-barrel).
- Rx: Allow Medicare to Negotiate the Price of Prescription Drugs
Cost Coverage:
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 currently scheduled to expire at the end of this year), and reduce the federal government’s deficit.
A summary of the energy-related provisions in the bill is here.
The legislative text of the bill is here.
Legislation’s history:
It took Congress roughly a year-and-a-half to pass this bill.
What began as the $4 trillion combined American Jobs Plan and American Families Plan in the spring of 2021 later morphed into the $2 trillion Build Back Better Act. The House passed it in November. Then Sen. Joe Manchin(D-W.Va.) killed it off just in time for Christmas. It was revived this spring and early summer Build Back Manchin (yeah, we won’t use that again), only to be rejected again by Manchin. But Schumer and the West Virginia Democrat brought it back once more as the Inflation Reduction Act in mid-July, totaling about $750 billion. That’s the legislation the House is voting on today.