Inflation Reduction Act of 2022(H.R. 5376)

President Joe Biden Signed the Inflation Reduction Act of 2022(H.R. 5376) into law on August 16, 2022. The Inflation Reduction Act will achieve hundreds of billions in deficit reduction through revenue raising provisions including a corporate minimum tax, a 1% excise tax on repurchased by corporations, and increased funding for IRS enforcement efforts. 

The Act contains significant tax incentives for individual and small business owners to become more energy efficient by modifying and expanding credits.  The Act also provides investment in clean energy, promotes reductions in carbon emissions, and extends popular affordable Car Act premium reductions. 

Corporate Tax Reform: Alternative Minimum Tax  

The Act imposes a new 15% corporate alternative minimum tax on the adjusted financial statement income of “applicable corporations,” which will apply if the minimum tax exceeds the taxpayer's regular tax. The tax will apply to corporations with average annual adjusted financial statement income in excess of $1 billion for the three prior tax years.  Effective date after Dec. 31, 2022 (Inflation Reduction Act Sec. 10101(f)). 

Stock Repurchases: 1% exercise tax 

The Act imposes 1% of excise tax on the fair market value of any stock repurchased by domestic corporations whose stock trades on an established securities market. The tax applies to repurchases of stock after December 31, 2022. (Inflation Reduction Act Sec. 10201(d))

Funding the IRS and Improving Taxpayer Compliance  

The bill provides additional $80 billion funding for the Internal Revenue Service for taxpayer services and enforcement, including for operations support, business systems modernization, and the development of a free direct e-file tax return system. It also provides additional funding for the Department of the Treasury Inspector General for Tax Administration, the Office of Tax Policy, the Tax Court, and Treasury departmental offices. The government plans to generate an additional $124 billion from IRS tax enforcement.  

Affordable Care Act Premium Tax Credit Extended:

The Act extends the refundable premium tax credit enhancements by American Rescue Plan Act of 2021 for three additional years—for tax years beginning in 2023 through 2025. (Inflation Reduction Act Sec. 12001(c))

New energy credit, modifications, and extensions to some existing credits

Clean Vehicle Credit starting 2023   

•  Up to $7,500 in tax credits for new electric vehicles and $4,000 or 30% of sales price for used electric vehicles 
• Final assembly in US is required. 
• MSRP must not exceed $80,000 (Vans, SUVs and Pick Up trucks) and $55,000 (Sedans and others).
• Income limitations for new vehicles - MFJ $300,000, Single $150,000, HH $225,000
• Written and signing purchase contract in 2022 and place in service or delivered in 2023 will be qualified the EV credit. 

Nonbusiness & Residential Energy Efficient Property Credit 

• Increased 30% tax credit for install solar on their roofs. 
• Energy Efficient Home Improvement credit: Limit $1,200 credit per year, 30% of qualified energy efficiency home improvements installed. 

Energy efficient Commercial Buildings deduction  

• Maximum deduction changed to tie to total annual energy and power costs for the building certified to be reduced by percentage greater than 25%
• Efficiency standard changed from 50% to 25%

Research Credit Increased for Small Business 

Research Credit against payroll tax limitation amount is increased from $250,000 to $500,000 after 2022. 

Excess Business Losses Limitation 

Partnership and S Corporation’s business loss limitation extended to 2028 

The inflation Reduction Act of 2022 is massive, with more than 300 pages of 

tax-related changes.  

If you need additional information, please see following government links: 

 https://www.congress.gov/bill/117th-congress/house-bill/5376