The Inflation Reduction Act recently passed the Senate in a slim 51-50 margin followed by House approval. The bill, a re-work from the original Build Back Better Act, was just signed by President Joe Biden.
Key tax provisions are noted below and pertinent to advisors strategically planning with their clients.
- A corporate minimum tax of 15% will be imposed — This minimum tax sets a new precedent as it will apply to “book” net income of corporations. In spite of significant pushback on the challenges this particular legislation will create, this revenue raiser has stayed put. The current provision is expected to only apply to corporations with revenue in excess of $1 billion but that threshold will be lower for certain foreign corporations.
- Non-deductible stock buyback tax — This bill includes a provision for a 1% excise tax on stock repurchases for corporations.
- The bill extends energy efficient credits — Both non-business residential energy improvement credits would be extended as well as other commercial credits available. The extended credits apply mostly to clean electricity and fuels.
- The bill also extends the expanded healthcare premium tax credits through 2025 — The expanded credits allowed for households with income in excess of 400% of the poverty line to still be eligible for some portion of healthcare premium tax credits which will now remain in effect for several more years.
Corporate taxes have most certainly been the topic of conversation with this administration, with the current President supporting an overall increase in the corporate tax rate. It is doubtful that these provisions are the last we will see when it comes to proposed corporate tax law changes.
Advisors who consult on future planning for their clients should still be cautious with long-term strategies and consider presenting your clients with multiple scenarios to make the most informed decision possible.