The Inflation Reduction Act’s Tax Provisions

The Inflation Reduction Act of 2022, Pub. L. No. 117-169, 136 Stat. 1818 (2022) (IRA), signed into law on August 16, 2022, primarily funds energy security and climate change activities. Because the IRA states that it generates more revenue than it spends, the IRA increases revenue by fixing some well-publicized inequities both within and outside the federal tax system. The most significant fixes are a new corporate alternative minimum tax, the reform of Medicare drug purchases, and funding enhanced enforcement by the Internal Revenue Service (IRS). The IRA includes almost $80 billion in new funding for the IRS, of which almost $46 billion is allocated to enforcement.

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Related Content 

• Energy Tax Credits and Incentives
  Learn more about the IRA's main purpose of funding energy security and climate change investments. The Clean Vehicle Credit is one of the more visible attempts at achieving this goal. The total Clean Vehicle Credit of $7,500 consists of two parts: $3,750 for any vehicle meeting the "critical minerals" requirements and another $3,750 for any vehicle meeting the "battery components" requirements. I.R.C. § 30D(b); Pub. L. No. 117-169, Sec. 13401(a).

• Inflation Reduction Act’s Impact on Group Health Plans
  See what the IRA has done in the employee benefits sphere, affecting Affordable Care Act subsidies, allowing high deductible health plans (which use health savings accounts) to cover insulin without being subject to a deductible, and more.

Legal Developments

• Multinationals Face Most of Inflation Act’s Biz Taxes, Prof. Says
  Multinational corporations would bear most of a 15% minimum tax and a 1% tax on net share repurchases under the IRA.

• Tax Home and the Rise of Telecommuters
  When an employee is commuting versus when an employee is taking a business trip seems like a fairly straightforward concept—unfortunately, it is not simple and can involve a complicated analysis that yields few clear answers. 

• Post-Dobbs, May Abortions Be Reimbursed on a Tax-Free Basis from a Health FSA, an HRA, or an HSA?
  Read this article on using health savings plan funds for abortion services or medication.

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• Tax Key Legal Developments Tracker (Federal)
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  • Business Entities. IRS and Treasury issue final regulations relating to the requirements for making a valid election to adjust the basis of partnership property in the case of a distribution of property by the partnership or a transfer of an interest in the partnership. The regulations affect partnerships and their partners by removing a regulatory burden in making an election to adjust the basis of partnership property. See Streamlining the Section 754 Election Statement, 87 Fed. Reg. 47931 (Aug. 5, 2022); D. 9963, RIN 1545-BN94.
  • Individual Income Tax. IRS modifies and supersedes Rev. Proc. 2006-36 to update the procedures for other government agencies or members of the public to ask IRS to create special statistical studies and compilations involving return information pursuant to I.R.C. § 6108(b), and to set forth criteria for determining reasonable fees for costs associated with creation of special statistical studies and compilations. Proc. 2022-29.
  • Exempt Organizations. IRS announces that the Department of the Treasury and the IRS intend to amend the regulations under R.C. Sec. 987to defer the applicability date of the 2016 final regulations and the related 2019 final regulations (as defined below) by one additional year. Notice 2022-34.
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