Inflation Reduction Act of 2022
August 17, 2022
On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022. The bill contains a range of provisions relating to tax, health care and clean energy. The key revenue makers expected to fund new health care and clean energy provisions are listed below.
Re-establishing a new 15% Corporate Alternative Minimum Tax
The bill resurrects the corporate alternative minimum tax, which was previously eliminated by the Tax Cuts and Jobs Act, but with various modifications. The new tax would only apply to large corporations not including S-Corporations, with average annual adjusted financial statement income in excess of $1 billion for the three prior year tax period.
Introducing a new 1% Excise Tax on Corporate Stock Repurchases
A 1% excise tax is introduced on stock repurchases by a domestic corporation. A repurchase includes a redemption or any transaction that would be determined to be economically similar to a redemption and would also apply to the purchase of stock of a specified affiliate corporation.
Extending the excess business loss limitations for noncorporate taxpayers (individuals)
This bill was previously extended by the American Rescue Plan Act of 2021, and gets extended again, meaning noncorporate taxpayers (individuals) continue not to be able to deduct excess business losses through 2028. Instead they must treat any excess business loss as a net operating loss (NOL) carryover to the following tax year.
Additional funding for the IRS
The aim is to add enforcements to IRS personnel to help close the ‘tax gap’ which is the difference between the amount of tax that should be collected by the IRS and what is actually collected. Taxpayers can expect to see an increase in audit levels with the IRS likely to target high net worth individuals.
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Gatto, Pope & Walwick, LLP
Certified Public Accountants