Inflation Reduction Act of 2022
Recently, President Biden signed the Inflation Reduction Act of 2022. With the signing of this law, there are critical tax provisions we must be aware of:
· The act imposes a 15% minimum corporate tax on financial statement income, less foreign tax credits. This applies to corporate taxpayers whose average annual adjusted financial statement income exceeds $1 billion for three years.
· The final bill added a 1% excise tax that replaced a carried interest provision included in a prior version. This places a 1% excise tax on stock redemptions by publicly traded corporations.
The act extends the business loss limitation which was originally enacted as part of the TCJA for two years, through 2028.
· The act gives funds for the IRS to increase taxpayer services, enforcement, operations support, and business system modernization. It also provides the funds to create a task force to design an IRS-run free “direct file” tax return system.
· There are no changes to individual, estate, or gift tax rates/exemptions.
· EV Credit Changes: After August 16th, 2022, the only electric vehicles that qualify for this credit are ones that had their final assembly occur in North America. To identify the location of manufacturing, search the VIN on the VIN Decoder website for the National Highway Traffic Safety Administration. If a taxpayer entered a binding contract to buy an EV before August 16th, they may claim the credit based on the rules before this date. Apart from the final assembly requirement, all other changes to the credit go into effect on January 1, 2023 or later. Such changes include new income limitations, removal of the manufacturer cap and a credit for used vehicles, among others.