Highlights of The Inflation Reduction Act of 2022

President Biden signed this bill into law on August 16.  Here are some of the more interesting provisions.  For more information about any of these items, please contact us.

• Revenue Provisions
  • Corporate Alternative Minimum tax of 15% which applies only to large (financial statement income of over $1 billion) corporations
  • 1% excise tax on stock repurchases by public companies
  • Extension of excess business loss limitations to 2028
• IRS Funding to improve Enforcement. Treasury Secretary Janet Yellin issued a directive that this should not increase the examinations of taxpayers making less than $400,000.
• Extension of the Affordable Care Act provisions from the American Rescue Plan through 2025. This will keep the enhanced affordability percentages in place.
• Research Credit for Small Businesses-Beginning with the 2023 tax year, this increases from a maximum of $250,000 to $500,000.
• Green Energy-some good news and some bad news
  • The credit for electricity produced from certain renewable resources was extended, and in some cases, increased, through 2024.
  • The Energy Investment Credit was also extended through 2024, also with some enhancements available based on circumstances.
  • Residential energy incentives were extended and increased through 2034. This applies to energy efficient windows, doors, heat pumps, etc.  The lifetime credit is replaced by an annual credit limited to $1,200.
  • The clean vehicle credit was extended to 2032 BUT modified. It applies to plug-in electric vehicles and fuel cell vehicles.
    • There’s no limit on the credit based on the number of vehicles sold by a manufacturer.
    • The Act requires the final assembly of the vehicle to be in North America.
    • The Act phases in sourcing requirements for critical components of the vehicle and battery system.
    • As of August 16, 2022 the $7,500 credit is limited by the manufacturer’s suggested retail price and the income of the purchaser.
    • A new credit of $4,000 is available for the purchase of a used vehicle, also subject to income limitations, through 2032.
    • There is a new credit for qualified commercial clean vehicles of up to 30% of basis.
  • The Tax Credit for Energy Efficient New Homes is modified as of January 1, 2023 and extended through 2032.

There are more esoteric provisions in the bill, but this summary gives you some idea of the thrust of the bill as it affects many of our clients.

Article Submitted by Lois S. Fried, CPA, CFE, CVA, ABV