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Corporate Tax Revenue Raisers In The Inflation Reduction Act



Corporate Revenue Raisers In The Inflation Reduction Act

In case you did not read the previous post from Annette Nellen, we want to point out the Corporate Revenue Raisers in the Inflation Reduction Act.
TaxConnections Editor

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On August 16 President Biden signed the Inflation Reduction Act of 2022 (P.L. 117-169; H.R. 5376). This was enacted via the budget reconciliation process so only 51 votes were needed to pass this in the Senate. And there are various restrictions on what can go in the bill and it can’t lose revenue in the 11th year out and beyond. So the numerous energy credits added or expanded in this law generally end expire 12/31/32. And this law’s official name is “an act to provide for reconciliation pursuant to title II of S. Con. Res. 14” due to the required process (has to have the word reconciliation in it). The unofficial name that you’ll hear is Inflation Reduction Act of 2022 or IRA (which might be confusing).

Single-spaced, this act is 273 pages with 128 pages – or 47% related to tax law changes (these are in Title I of the Act but a lot of these pages are in Subtitle B on prescription drug pricing reform (which tax-wise only includes a minor change to IRC §223 on health savings accounts and a new drug excise tax at §5000D).

The Corporate Revenue Raisers

Revenue raisers:
  • 15% alternative minimum tax for corporations with average annual adjusted financial statement income in any 3-year prior period greater than $1 billion. The Joint Committee on Taxation estimates this could affect about 150 corporations. A similar version was in the House-passed Build Back Better Act (11/19/21) but that also include various international tax changes not in the IRA. This is the largest revenue raiser at $222 billion over 10 years (per JCT). Like the old corporate AMT, this AMT creates a minimum tax credit (IRC §53 modified) so is really a prepayment of future regular income tax. But some of these corporations may be owing this AMT for many years before using an MTC.
  • 1% excise tax on corporate stock buybacks if over $1 million (and a few other exceptions). This is estimated to raise $74 billion over 10 years.
  • IRS enforcement with $80 billion additional funds over 10 yearsCBO estimates this will generate $124 billion over 10 years.  I’ll have more on this later.
  • Extend the §461(l) loss limitation added by the TCJA through 2028. The BBB passed in the House last November would have made this permanent and restricted use of the unusable annual loss. The CARES Act in March 2020 postponed the effective date by three years. The American Rescue Plan Act (ARPA) in March 2021 added one more year to its life so with the IRA, this returns to a n 8-year rule (2021 through 2028) provision as intended by the TCJA. JCT estimates it will raise $53 billion over 10 years.
  • Reinstatement of Superfund taxes – estimated to generate $12 billion over 10 years.

What do you think? Annette Nellen

Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.

Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.

Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.

Prior to joining SJSU, Annette was with Ernst & Young and the IRS.

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