On Sunday, July 31, 2022 Senator Joe Manchin of West Virgina did a “full Ginsburg” that is he appeared on the five major Sunday morning talk shows on the same day, including ABC’s This Week, Fox News Sunday, CBS’s Face the Nation, NBC’s Meet the Press, and CNN’s State of the Union. The reason for this round robin of talk shows is the recently passed bill in the Senate.
Whether the new bill, called the “Inflation Reduction Act of 2022”, becomes law remains uncertain and is subject to several votes, 1) including a vote in the Senate (where the support of the 50 Democratic senators is believed but not confirmed), 2) analysis by the Senate Parliamentarian to ensure the bill passes the rules for reconciliation (allowing for passage via a simple majority), and 3) a vote by the House. Barring changes to the bill as currently presented, or even an outright defeat of the bill, here is what we know.
The Inflation Reduction Act is a significantly scaled back version of the proposed “Build Back Better Act” defeated in 2021. Many of the tax proposals in the Build Back Better Act didn’t make it into the new bill, but a few did. The proposals with the most significance are:
- A 15% minimum tax rate on the adjusted financial statement income of corporations with average annual adjusted financial statement income of $1,000,000,000.
- Making a five year the holding period for Carried Interest to be taxed as long-term gains, rather than ordinary income.
- A $3.1 billion to increase IRS taxpayer services, $45.7 billion for IRS enforcement, $25 billion for IRS operations support and $4.7 billion for IRS technology upgrades.
The bill also includes climate change programs in the form of various tax credits. The bill is 725 pages long and still being analyzed (and again the current form is not yet law and changes may be coming), but such credits would include:
- Increase the $500 lifetime tax credit limit for qualifying energy-efficient improvements to a $1,200 annual tax credit.
- Removal of the manufacturing limit on qualifying electric vehicles, (currently impacting General Motors)
Lexus, and Toyota electric vehicles) for the credit under current law.
- Limits on claims of the electric vehicle credit to Adjusted Gross Income (AGI) limits of $300,000 for married, $225,000 for head of household and $150,000 for single filers.
- An Electric vehicle credit for used electric vehicles of 30% or $4,000, whichever is lower, with AGI limits of $150,000 for married, $112,500 for head of household and $75,000 for single filers.
- Increase of $250,000 for the R&D Credit that can be applied to payroll taxes for qualified small businesses.
- Extensions of the nonbusiness energy property credit (solar credits) for ten years at a credit rate of 30%.
These changes, effective for tax year starting January 1, 2023, are still very tentative and we will need to see what, if anything, Republicans and those Democrats who, like Manchin, torpedoed the Build Back Better bill last year. Stay tuned and we will keep you posted.
Credit: www.forbes.com /