Stoel Rives, Legal Update: Tax Changes in Inflation Reduction Act

Tax Changes in Inflation Reduction Act
Authors: Christopher Heuer, Kevin Pearson, Melissa Roberts, Michael Such, Auburn Wise
August 19, 2022

President Biden earlier this week signed the Inflation Reduction Act of 2022 (Act), which contains a number of tax and spending provisions impacting a broad range of businesses and individuals. These changes include a 15% corporate minimum tax, a 1% tax on certain corporate stock repurchases, an extension of the excess business loss limitation, and expansion of renewable energy and energy efficiency incentives. Following is a summary of some of the key tax provisions of the Act. While the Act contains significant incentives for certain investments in clean energy infrastructure, it defers many of the eligibility specifics and implementation details to federal agencies, leaving significant questions for businesses seeking to understand the short and medium term impacts. We will continue to provide updates as these details are clarified.

New Corporate Alternative Minimum Tax

The Act establishes a 15% corporate alternative minimum tax (CAMT) on certain domestic corporations that report average adjusted financial statement income in excess of $1 billion for any consecutive three-tax-year period. The tax is imposed based on an applicable corporation’s adjusted financial statement income (AFSI). An applicable corporation’s AFSI generally is the corporation’s net income or loss reported on the corporation’s financial statements, with certain adjustments specified in the Act, and may include income of related corporations and partnerships. Special rules apply for purposes of determining whether a domestic corporation is subject to the CAMT and for calculating AFSI if the corporation has a foreign parent or foreign activities, including a reduction of applicable CAMT to the extent any tax is imposed under the base erosion and anti-abuse tax (BEAT). The CAMT is effective for taxable years beginning after December 31, 2022. A number of aspects of the CAMT are subject to guidance to be provided by the Secretary of the Treasury.

Click below to continue reading this alert including details on the following:
• New Excise Tax on Certain Corporate Stock Repurchases
• New and Existing Renewable Energy Incentives
• Extension of Limitation on Excess Business Losses
• Electric Vehicle Tax Credits
• Individual Energy Incentives
• Additional IRS Funding

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