Inflation Reduction Act of 2022 Summary
It looks like the “Build Back Better” plan has been replaced with a much-downsized agenda. Below is a summary of the basic tax legislation.
First, the controversial “millionaire’s tax” is noticeability missing from the new version of the bill This was a major provision of the Build Back Better (BBB) plan. As of today, this millionaire’s tax is no longer in the new bill.
This new legislation is a very scaled-down version of the BBB that President Biden has been trying to get passed for the last 18 months.
The new law incentivizes climate control and domestic manufacturing efforts. Although, there is nothing in the bill to pay for these aspects of the bill.
Alternative Minimum Tax (AMT) is a big issue, but only for large corporations. There will be a minimum tax on corporations that have an “adjusted financial statement” exceeding $1 billion.
Yes, that is a billion. This part of the new bill will not have an effect on all but the biggest corporations that have that average income.
Energy credits. A wide range of energy credits for the BUSINESS Sector have been expanded and/or extended. But the Inflation Reduction Act (IRA) goes on to encourage consumers to buy “green”. So, buyers of new electric vehicles will be eligible for a $7,500 credit for electric vehicles placed in service before 2033. Don’t get too excited. If the manufacturer exceeds certain levels of production, the credit is eliminated after 2022.
There is also up to a $4,000 credit on purchases of previously owned electric vehicles. This part of the plan is not specific how it will be implemented. So, this is a wait and see part of the plan.
The residential energy property credit for homeowners has been extended until it begins to phase out in 2033. Again, it is not clear, at this time, how that will play out.
The IRS appropriates $3.18 billion for the IRS to provide taxpayer and other services. What? We have no idea at this time how that money will be allocated.
The IRS is also appropriating another $45.6 billion for expenses for the IRS to help close the $441 billion tax gap. What this means is that the IRS will have more money for the following:
Determine & collect taxes
Provide legal & litigation support
Conduct criminal investigations
Provide digital assets monitoring & compliance activities
This is not a complete list of how the money will be allocated, but you get the picture.
Finally, the Act supports Presidents Biden’s promise that none of the IRS’s appropriations will result in tax increase to taxpayers with taxable income below $400,000. Be careful with this item because there are tables that show the lowest earners will have an increase in their tax.
We will keep you posted as things develop, and it is fairly fluid at this point in time.