The Inflation Reduction Act includes provisions that extend the expanded Affordable Care Act health plan premium assistance program through 2025, impose an excise tax on stock buybacks, increase funding for IRS tax enforcement, expand energy incentives, and impose a corporate minimum tax.

Specifics pertaining to the Inflation Reduction Act are containing in the following roadmap:

BUSINESS TAX

Corporate Alternative Minimum Tax

Imposes a corporate alternative minimum tax (AMT) equal to the excess of 15% of a corporation’s adjusted financial statement income (AFSI) over its corporate AMT foreign tax credit. Applies to C corporations which, for a three taxable year period, have average annual AFSI greater than $1 billion (and at least $100 million for members of foreign-parented international financial reporting groups).

AFSI is the net income or loss set forth on an applicable financial statement, with certain adjustments. Provides rules for calculating AFSI for certain entities and income (e.g., consolidated groups, foreign-parented groups, effectively connected income). AFSI is reduced by accelerated depreciation deductions.

Applies to taxable years beginning after 2022.

 

Excise Tax on Repurchase of Corporate Stock

Imposes a 1% tax on the fair market value of stock repurchased by a publicly traded U.S. corporation during the taxable year. Reduced for stock issuances during the taxable year.

Applies to IRC §317(b) redemptions and economically similar transactions, as well as stock acquired by a corporation’s specified affiliate from another person. Also applies to certain acquisitions and repurchases of publicly traded foreign corporation stock.

Exceptions for IRC §368 tax-free reorganizations, total repurchased stock of $1 million or less for the taxable year, repurchases treated as dividends, and certain other transactions.

Applies to repurchases of stock after 2022.

 

Extension of Limitation on Excess Business Losses of Noncorporate Taxpayers

Extends limitation on excess business losses of noncorporate taxpayers by two years. Losses disallowed for taxable years beginning in 2021 through 2028.

 

ENERGY

Extension and Modification of the renewable electricity Production Tax Credit (PTC)

Extends the beginning-of-construction deadline for certain renewable electricity production facilities through the end of 2024. Extends to the end of 2024 the election to treat certain facilities that otherwise qualify for the IRC §45 PTC (“qualified investment credit facilities”) as energy property qualified for the IRC §48 ITC instead. Reduces the base amount of the credit. Facilities that pay prevailing wages during construction and for the first decade of operation, and fulfill apprenticeship requirements, can qualify for up to five times the base amount of the credit.

Generally applies to facilities placed in service after 2021. Increased credit amounts for domestic content, energy communities, and hydropower apply to facilities placed in service after 2022. 

 

Extension and Modification of the energy Investment Tax Credit (ITC)

Extends for one year, through the end of 2024, the beginning-of-construction deadline for some types of energy property (for example, qualified fuel cell property) to qualify for the energy credit. Extends the beginning-of-construction deadline for geothermal equipment through the end of 2034. Reduces the base energy credit rate unless wage and apprenticeship requirements are met. Allows the credit for new types of energy property, including energy storage technology, qualified biogas, and microgrid controller property. Quintuples the credit amount in some circumstances, for example, if wage and apprenticeship requirements are met. Adds a 10% bonus credit if a domestic content requirement is met.

The credit for new types of energy property applies to property placed in service after 2022. The extension of the beginning-of-construction deadline applies to property placed in service after 2021.

 

Increase in Energy Credit for Solar and Wind Facilities Placed in Service in Connection with Low-Income Communities

Expands the IRC §48 energy investment tax credit to include certain qualified solar and wind facilities for which the Treasury Department allocates environmental justice solar and wind capacity limitation. To qualify, a facility must have a maximum net output of less than 5 megawatts and must be in a low-income community, or on American Indian land, or part of a low-income residential building project or a low-income economic benefit project.

Effective beginning in 2023.

 

Extension and Modification of Carbon Oxide Sequestration

Extends, with modifications, and enhances the carbon oxide sequestration credit for qualified industrial facilities and direct air capture facilities if construction begins before 2033, subject to conditions. Lowers the minimum carbon capture requirement. Increases credit amount if wage and apprenticeship requirements are met.

Generally applies to facilities or equipment placed in service after 2022. The modified carbon capture requirements apply to facilities or equipment the construction of which begins after the date of enactment. The amendments to the special rules for carbon capture equipment placed in service before February 9, 2018, take effect on the date of enactment.

 

Zero –Emission Nuclear Power Production Credit

Provides a new business credit for electricity produced by the taxpayer at a qualified nuclear power facility that is placed in service before the date of enactment and sold to an unrelated person. The credit amount is quintupled if wage requirements are met.

Applies to electricity produced by a qualified nuclear power facility and sold after 2023, in taxable years beginning after 2023 but before 2033.

 

Extension of Tax Credits for Biodiesel, Renewable Diesel, and Alternative Fuels

Extends the tax credits for biodiesel, renewable diesel, biodiesel mixtures, alternative fuel, and alternative fuel mixtures through 2024.

Applies to fuel sold or used after 2021.

 

Extension of Second Generation Biofuel Credit

Extends the tax credit for second generation biofuel through 2024. Applies to second generation biofuel production after 2021.

 

Sustainable Aviation Fuel Credit

Creates a new business credit for each gallon of sustainable aviation fuel sold or used as part of a qualified fuel mixture. The credit equals the number of gallons of sustainable aviation fuel in the mixture, multiplied by a base amount of $1.25 with increases available for meeting certain greenhouse gas emissions reductions.

Eliminates the tax credit under IRC §40A for sustainable aviation fuel produced from biodiesel.

Included in gross income under IRC §87.

Applies to fuel sold or used in 2023 and 2024

 

Credit for Production of Clean Hydrogen

Creates a new business credit for the production of clean hydrogen during the 10- year period beginning on the date a qualifying facility is originally placed in service. Credit amounts are a percentage, based on emissions rates, of $0.60 (adjusted for inflation). Taxpayers qualify for an increased credit amount if certain wage and apprenticeship requirements are met.

Eliminates the excise tax credit under IRC §6426(d)(2)(D ).

Applies to clean hydrogen produced after 2022.

 

Extension and Modification of Nonbusiness Energy Property Credit

Extends the nonbusiness energy property credit through 2032, changes the credit rate to 30% for both qualified energy efficiency improvements and residential energy property expenditures, replaces the $500 lifetime limit with a $1,200 annual limit, modifies limits for specific types of property, and modifies the standards for qualified energy-efficiency  improvements.

Generally applies to property placed in service after 2022. Extension of credit applies to property placed in service after 2021. Identification number requirement applies to property placed in service after 2024.

 

Extension and Modification of Residential Energy Efficient Property Credit (Residential Clean Energy Credit)

Extends the residential energy-efficient property credit (renamed the “residential clean energy credit”) through 2034. Replaces the credit for biomass fuel property expenditures with a new credit for battery storage technology expenditures.

Generally applies to expenditures made after 2022.

 

Modification of Energy Efficient Commercial Buildings Deduction

Modifies the formula for computing the maximum amount of the energy-efficient commercial buildings deduction, increases the deduction amount if new wage and apprenticeship requirements are met, modifies the energy efficiency  standard, eliminates the partial deduction for property that does not meet the certification standard, and provides an alternative deduction for energy-efficient building retrofit property.

Generally applies to taxable years beginning after 2022. Deduction for energy- efficient retrofit property applies to property placed in service after 2022.

 

Extension, Increase, and Modification of New Energy Efficient Home Credit

Extends through 2032 the new energy-efficient home credit a business credit for contractors who manufacture or construct energy-efficient homes. Increases credit amounts, modifies energy-saving requirements, and provides a larger credit amount for residences that meet wage requirements.

Generally applies to dwelling units acquired from an eligible contractor after 2022. Extension of credit applies to dwelling units acquired after 2021.

 

Modification and Termination of New Qualified Plug-In electric Drive Motor Vehicle Credit (Clean Vehicle Credit)

Increases the dollar limit on the new qualified plug-in electric drive motor vehicles credit (renamed the “clean vehicle credit”) if critical minerals and battery components requirements are met. Adds requirements that would render electric vehicles made with any battery components manufactured by “foreign entities of concern” (e.g., China) ineligible to receive the credit after 2023. Beginning in 2025, prohibits use of any critical mineral in a battery that is extracted or processed by those countries. Adds a requirement that final assembly of the vehicle occur in North America. Eliminates the limit on the number of credit-eligible vehicles, but allows only one credit per vehicle. Imposes a new credit limit based on the taxpayer’s income. Allows a taxpayer to transfer the credit to a registered dealer in exchange for payment from that dealer. Terminates the credit after 2032.

Generally applies to vehicles placed in service after 2022. The final assembly requirement applies to vehicles sold after the date of enactment. The per-vehicle dollar limit applies to vehicles placed in service after the proposed guidance described in IRC §30D(e)(3)(B) is issued. The transfer-of-credit provision applies to vehicles placed in service after 2023. The elimination of the limit on the number of credit-eligible vehicles applies to vehicles sold after 2022.

 

Credit for Previously-Owned Clean Vehicles

Provides a new nonrefundable personal credit for qualifying previously owned clean vehicles to individual purchasers whose modified adjusted gross income does not exceed a specified limit. A taxpayer may elect to transfer the credit to a registered dealer in exchange for payment from that dealer. Credit terminates after 2032.

Generally applies to vehicles acquired after 2022. Transfer-of-credit provision applies to vehicles acquired after 2023.

 

Credit for Qualified Commercial Clean Vehicles

Provides a new business credit for qualified commercial clean vehicles, in an amount equal to the lesser of 15% (or 30% for a vehicle not powered by a gas or diesel internal combustion engine) of basis, or the incremental cost of the vehicle (excess of purchase price of such vehicle over purchase price of a comparable vehicle, up to $7,500 (or $40,000 for a vehicle with a gross vehicle weight rating of at least 14,000 pounds). Credit terminates after 2032.

Applies to vehicles acquired after 2022.

 

Extension and Modification of Alternative Fuel Vehicle Refueling Property Credit

Extends the alternative fuel vehicle refueling property credit through 2032. Lowers the credit rate from 30% to 6% if the refueling property is depreciable. Increases the credit limit to $100,000 per item of depreciable refueling property and $1,000 per item of nondepreciable refueling property. Includes bidirectional charging equipment and electric charging stations as credit-eligible property if requirements are met. Quintuples the credit amount for any depreciable qualified alternative fuel vehicle refueling property that is part of a refueling project that begins within a specified time period and meets wage and apprenticeship requirements. Requires alternative fuel refueling property to be placed in service in a low-income community or in a nonurban area.

Generally applies to property placed in service after 2022. Extension of credit applies to property placed in service after 2021.

 

Extension of the Advanced Energy Project Credit

Extends the advanced energy project credit, a competitively awarded investment tax credit for clean energy and energy efficiency manufacturing projects. Provides for as much as $10 billion of new credit allocations. Reduces the credit rate by 80% if wage and apprenticeship requirements are not met. Modifies the definition of a qualifying advanced energy project.

Effective beginning in 2023

 

Advanced Manufacturing Production Credit

Provides a new production credit for each eligible solar energy component, eligible wind energy component, eligible inverter, qualifying battery component, and applicable critical mineral, that is produced by the taxpayer in the United States, or in a U.S. possession, and sold to an unrelated person.

Applies to components and minerals produced and sold after 2022.

 

Reinstatement of Superfund Hazardous Substance Financing Rate

Beginning in 2023, reinstates the hazardous substance Superfund financing rate on crude oil and imported petroleum products at the rate of 16.4 cents per gallon (adjusted for inflation).

Permits advances to the Hazardous Substance Superfund trust fund through 2032.

 

Clean Electricity Production Credit

Creates a new business credit for the production of clean electricity for facilities placed in service after 2024 where the greenhouse gas emissions rate is not greater than zero. The credit equals the kilowatt hours of electricity produced and sold, multiplied by a base amount of 0.3 cents or 1.5 cents (both adjusted for inflation). Increased credit amounts are available if certain wage and apprenticeship requirements are met.

The credit begins to phase out one year after the later of 2032, or the year when annual greenhouse gas emissions from U.S. electricity production are equal to or less than 25% of the emission rate for 2022.

 

Clean Electricity Investment Credit

Creates a new investment credit for clean electricity property investments in energy storage technology and qualified facilities placed in service after 2024 where the greenhouse gas emissions rate is not greater than zero. The base credit rate is 6% of the qualified investment, with increases available if certain requirements related to construction date, output, and wages, among other factors, are met.

The credit begins to phase out one year after the later of 2032, or the year when annual greenhouse gas emissions from U.S. electricity production are equal to or less than 25% of the emission rate for 2022.

 

Cost Recovery for Qualified Facilities, Qualified Property, and Energy Storage

Provides that qualified facilities for purposes of the new clean electricity production credit and qualified property or energy storage technology for purposes of the clean electricity investment credit are treated as five-year property under the General Depreciation System (GDS).

Applies to facilities and property placed in service after 2024.

 

Clean Fuel Production Credit

 Creates a new business credit for clean fuel the taxpayer produces at a qualifying facility and sells for qualifying purposes. The fuel must meet certain emissions standards. The credit per gallon base amounts are $0.20 (non-aviation fuel) and $0.35 (aviation fuel), with increases available if certain wage and apprenticeship requirements are met. All amounts are adjusted for inflation. Applies to clean fuel produced after 2024 and sold before 2028.

 

Elective Payment of Applicable Credits (“Direct Pay Election”)

 

  • Allows tax-exempt entities, state and local governments and political subdivisions, the Tennessee Valley Authority, tribal governments, Alaska Native Corporations, and cooperatives that furnish electricity to rural areas, to elect to receive a direct payment in lieu of any applicable credit. Applicable credits are:

 

  • the business credit portion of the alternative fuel vehicle refueling property credit;
  • the portion of the renewable electricity production credit attributable to qualified facilities originally placed in service after 2022;
  • he portion of the carbon oxide sequestration credit attributable to carbon capture equipment originally placed in service after 2022;
  • the zero-emission nuclear power production credit;
  • the portion of the clean hydrogen production credit attributable to qualified facilities originally placed in service after 2012;
  • for the U.S., states and political subdivisions, U.S. possessions, tax-exempt organizations other than cooperatives under IRC §521, and tribal governments, the qualified commercial clean vehicle credit determined by reason of new IRC §45W(d)(3) (requirement that a qualified commercial clean vehicle be depreciable property does not apply to any vehicle not subject to a lease that is placed in service by certain tax-exempt entities);
  • the advanced manufacturing production credit;
  • the clean electricity production credit;
  • the clean fuel production credit;
  • the energy investment credit;
  • the qualifying advanced energy project investment credit; and
  • the clean electricity investment credit (if domestic content requirement is met).

Applies to taxable years beginning after 2022.

 

Transfer of Eligible Credit

Permits a taxpayer to elect to transfer all or a portion of an eligible credit to an unrelated eligible taxpayer, but the recipient taxpayer may not transfer any portion of the transferred credit. Eligible credits include:

  • The business credit portion of the alternative fuel vehicle refueling property credit;
  • the renewable electricity production credit;
  • the carbon oxide sequestration credit;
  • the zero-emission nuclear power production credit;
  • the clean hydrogen production credit;
  • the advanced manufacturing production credit;
  • the clean electricity production credit;
  • the clean fuel production credit;
  • the energy investment credit;
  • the qualifying advanced energy project investment credit; and
  • the clean electricity investment credit.

Eligible credits cannot be transferred to a tax-exempt entity, state or local government, political subdivision, the Tennessee Valley Authority, tribal government, Alaska Native Corporation, or cooperative that furnishes electricity to rural areas.

 

HEALTHCARE

 

Premium Tax Credit

Extends through 2025, the reduced percentage of household income that is used to calculate the premium contribution for an individual claiming the premium tax credit.

Also through 2025, allows a taxpayer with household income for the year of 400% or more of the federal poverty line to qualify for the premium tax credit.

Applies to taxable years beginning after 2022.

 

Excise tax on Designated Drugs During Nonenforcement

 Imposes a nondeductible excise tax on the sale by the manufacturer, producer, or importer of certain drugs during a noncompliance period. Applies to drugs that are designated and Medicare high-spend and negotiation eligible. Noncompliance periods include certain periods not covered by pricing agreements between the manufacturer and the Health and Human Services (HHS) Department and periods in which information due to the HHS is overdue.

Provides an exemption for export of the drug or for resale to a second purchaser for export.

 Applies to sales after the date of enactment.

 

Safe Harbor for Absence of deductible for Insulin

Allows continuation of high deductible health plan treatment for qualifying plans with no deductible for selected insulin products.

Applies to plan years beginning after 2022.

 

OTHER

 

IRS Enforcement

Appropriates about $80 billion to the IRS to add auditors, improve customer service, and modernize technology.

Provides $15 million to the IRS with funding for a report to Congress on the potential creation and maintenance of an IRS-run e-file system.

 

Extension of Increased Rate of Coal Tax to Fund Black Lung Disability Trust Fund

Permanently extends the temporarily increased rate of the coal production excise tax that finances the black lung disability trust fund.

Effective for calendar quarters beginning after the date of enactment.

 

 

Increase in Research Credit Against Payroll Tax for Small Businesses

Increases from $250,000 to $500,000 the limit on the amount of research credit that qualified small businesses may elect to treat as a credit against their payroll tax liability. Applies to taxable years beginning after 2022.

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