By Kenneth H. Bridges, CPA, PFS December 2022
Congress has, in recent years, become increasingly creative in how it names legislation; particularly tax legislation. And so, the tax legislation enacted in August 2022 was named The Inflation Reduction Act of 2022 (IRA), even though it does not appear to be designed to reduce inflation. Here is a high-level summary of what was included in the legislation.
Corporate alternative minimum tax (AMT) – For years beginning after 2022, C-corps with average net income over $1 billion will be subject to a tax equal to the excess of 15% of financial statement net income over AMT foreign tax credit.
Excise tax on repurchase of corporate stock – Repurchases of public-company stock after 2022 will be subject to a 1% tax.
Extension of limitation on excess business losses – TCJA enacted in late 2017 provided a new rule whereby the amount of business loss of an individual (as aggregated from all businesses) which could offset other sources of income was limited to $250,000 for singles and $500,000 for couples. Any amount in excess of this limitation becomes a net operating loss carryforward to the next year. Initially, the rule was to be applicable for years 2018 – 2025, but, as a part of Covid stimulus legislation, the rule was suspended for 2018 – 2020. IRA extends the rule through 2028 (such that the excess business loss limitation applies for losses incurred in 2021 – 2028).
Increase in R&D credit against payroll tax – For tax years beginning after 2022, the amount of research tax credit that a “qualified small business” (generally a business with gross receipts of less than $5,000,000 for the current year and no gross receipts in any year preceding the 5-taxable-year period ending with the current tax year) can claim as an offset against employer FICA is increased from $250,000 to $500,000.
Clean energy credits – The legislation extends, expands or provides for various tax credits associated with clean energy, and, for tax years beginning after 2022, permits the transfer of certain energy-related credits to another taxpayer. With respect to electric vehicles, the legislation extends the credit for purchases by individuals of new electric vehicles (but with income caps on who can qualify), and creates a new credit for purchases of used electric vehicles and purchases of commercial electric vehicles.
IRS funding – The legislation provides the IRS with $80 billion in new funding.
Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP, an Atlanta-based CPA firm.
This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice. The article provides only a very general summary of complex rules. For advice on how these rules may apply to your specific situation, contact a professional tax advisor.