President Biden Signs Tax and Climate Bill into Law

President Biden Signs Tax and Climate Bill into Law

On Tuesday afternoon, President Biden signed the Inflation Reduction Act of 2022 (I.R.A.) into law. After clearing the Senate Aug. 7 on a 51 to 50 vote, the I.R.A. quickly advanced to the House floor and passed Aug. 12 on a 220 to 207 vote.

Key business tax provisions of the I.R.A. include a new 15% corporate alternative minimum tax for corporations with at least $1 billion in average adjusted financial statement income, a stock buyback excise tax applicable to repurchases made by publicly traded corporations and a 2-year extension of the cap on deductions for excess business losses. Despite pressure from certain Democratic lawmakers, the I.R.A. does not modify the $10,000 cap on itemized deductions for state and local tax, which currently remains through 2025. The I.R.A. also does not alter any provisions applicable to the tax treatment of carried interests in partnerships, or any provisions pertaining to expanded child tax credit benefits.

Many signature features of the I.R.A. respond to existential climate concerns through the enactment or enhancements of new tax credits for individuals and businesses alike. These and other prominent features of the I.R.A. include:

  • An extension and enhancement of the individual credit for residential energy efficiency improvements
  • An extension and enhancement of the individual credit for residential clean energy property
  • An enhancement of the business deduction provision under Section 179D for energy efficient commercial buildings
  • An enhancement of the individual credit for qualifying plug-in electric vehicles, including a new credit for previously owned vehicles
  • A new business credit for qualified commercial clean vehicles
  • An extension and enhancement of the credit for qualified alternative fuel vehicle refueling property
  • An increase in research credits against payroll taxes for small businesses
  • A three-year extension of enhanced premium tax credit benefits for certain individuals who purchase health insurance under the Affordable Care Act

The I.R.A. also makes significant prescription drug pricing reform by allowing Medicare to negotiate certain drug prices and imposing a new excise tax on businesses that fail to enter into drug pricing agreements. Negotiation rights for certain high-priced drugs will begin in 2026.

Additionally, the I.R.A. allocates $80 billion toward Internal Revenue Service (IRS) improvements, with over half slotted for increased enforcement. The question of whether the IRS would subject individuals and businesses making under $400,000 per year to increased scrutiny was the subject of debate on the House floor Friday, although the Secretary of Treasury Janet L. Yellen stated that those under the $400,000 per year threshold “will not see an increase in the chances that they are audited.” The IRS budget boost doesn’t make for immediate effects, though, as putting new enforcement measures in place will take time. Nonetheless, taxpayers must always take defensible tax positions in their tax filings.

All told, the I.R.A. presently is estimated to raise $737 billion in government revenues (including $124 billion in “non-scoreable” revenues associated with increased IRS tax collections), while allocating $437 billion in spending toward climate-related provisions and Affordable Care Act insurance benefits. This $300 billion revenue excess will be applied to reduce the national deficit.

Most of the new provisions will be effective for taxable years beginning after Dec. 31, 2022. As with any kind of major legislation, thoughtful consideration that relates the new provisions to your ongoing or anticipated activities will help to avoid surprises and take advantage of new opportunities. For more information on the I.R.A. and how it relates to you or your business, please contact us.


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President Biden Signs Tax and Climate Bill into Lawhttps://www.cbiz.com/Portals/0/Images/Hero-PresidentBiden.jpg?ver=U0ObHNSBOlty_lP3bhk1RQ%3d%3dhttps://www.cbiz.com/Portals/0/Images/Thumbnail-PresidentBiden.jpg?ver=rgbWe4cTw1-meYXywWLkbw%3d%3dOn Tuesday afternoon, President Biden signed the Inflation Reduction Act of 2022 (I.R.A.) into law. After clearing the Senate Aug. 7 on a 51 to 50 vote, the I.R.A. quickly advanced to the House floor and passed Aug. 12 on a 220 to 207 vote.2022-08-16T17:00:00-05:00

On Tuesday afternoon, President Biden signed the Inflation Reduction Act of 2022 (I.R.A.) into law. After clearing the Senate Aug. 7 on a 51 to 50 vote, the I.R.A. quickly advanced to the House floor and passed Aug. 12 on a 220 to 207 vote.

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