Inflation Reduction Act is signed into Law
By: Jeremiah (Jerry) Murphy
The Inflation Reduction Act of 2022 officially became law August 16, 2022 when the President signed the bill (H.R. 5376). This act contains significant tax savings including, but not limited to:
Providing significant incentives for individuals and businesses to become more energy efficient by extending, increasing, and expanding credits generally applicable for post-2022 purchases for:
Purchasing clean fuel vehicles (both new and used);
Making their homes more energy efficient (rebates are also available for qualified expenses incurred by qualified individuals and entities);
Making commercial buildings and residences more energy efficient;
Building/manufacturing more energy efficient homes; and
Producing clean energy and fuels;
Doubling the amount of the Research Credit that can be applied against payroll taxes for qualified small businesses for post-2022 tax years;
Extending the current Premium Tax Credit amounts available to taxpayers who purchase health insurance on state health care exchanges for an additional three years; and
Limiting and capping various costs Medicare recipients will have to pay for prescription drugs and certain premiums and co-pays, as well as providing free vaccines.
These expanded programs would be paid for by:
Increasing IRS funding for audits and compliance initiatives;
Extending the excess business loss limitation for noncorporate taxpayers for an additional two years through the 2028 taxable year;
Imposing a 1% excise tax on certain stock repurchases, applicable to post-2022 stock repurchases; and
Imposing a new 15% corporate minimum tax on corporations with average financial statement income over $1 billion per year, beginning with the 2023 tax year.
The text of the bill is here: www.congress.gov/bill/117th-congress/house-bill/5376/text
What does the new legislation mean for you?
Don't buy a new or used solar-powered vehicle until 2023! The new tax credits are not available until 2023, so hold off for a few months. Gives you some time to do more research into the subject.
The new IRS funding will likely mean they will be able to hire more auditors, which means your chance of being audited is higher going forward. If you have a business (corporation, partnership or LLC) it is important for you to recognize that keeping records is more important than ever. That means your annual stockholder/partner/member meeting should be documented; the annual meeting of the board/managing members or partners should also be documented.
Any loans to or from owners of the business must have documentation and the loans should include normal terms, such as an interest rate and a pay-off schedule.
Major decisions should be documented. Major decisions can include annual salary for owner/employees, fringe benefit programs, purchase of fixed assets, and more.
We will be studying this new legislation and have a client letter for you soon. Contact us if you would like to discuss this issue before the letter is out.
Jeremiah (Jerry) Murphy