On August 7, 2022, the U.S. Senate approved by 51-50 vote the Inflation Reduction Act (IRA) of 2022 (H.R. 5376), a bill to finance climate and energy provisions and an extension of the enhanced Affordable Care Act (ACA) subsidies totaling $369 billion in additional spending. The bill has moved quickly since it was announced on July 27 that Senator Joe Manchin has reached an agreement with Senate Majority Leader Chuck Schumer on the key provisions of the bill.
The two most significant revenue-raising provisions of those discussions remained in the version approved:
- A 15% book-income alternative minimum tax on corporations with financial accounting profits over $1 billion. The $1 billion threshold is based on a three-year modified average, and is inclusive of the taxpayer’s-controlled group, which will potentially include the taxpayer’s foreign related parties.
- An $80 billion increase in IRS tax enforcement funding
Two additional revenue-raising provisions were also added:
- A 1% excise tax on publicly traded US corporations for the value of stock that is repurchased by the corporation. This provision replaced the earlier version’s modification of the carried interest rules, which were dropped in order to secure the support of Senator Kyrsten Sinema.
- A two-year extension of the excess business loss rules under Section 461(l). This provision was added to make up for changes to the alternative minimum tax calculations.
The House will return from its recess on August 12 to consider the bill. It is expected that the House will approve the bill without change so that it may be signed into law by the President before the end of August.
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