August 15, 2022Share:
The House of Representatives passed the Inflation Reduction Act of 2022 on Friday evening, and President Biden is expected to sign it into law this week. See below for some of the main pieces of the legislation.
• Allocation of $80 billion to the IRS to add auditors, improve customer service, and modernize technology. There is hope this will bring lower wait times and faster resolutions with IRS issues. President Biden and Treasury Secretary Yellen have pledged that the increased enforcement will not affect Americans making less than $400,000 per year.
• Beginning in 2023, the $7,500 Electric Vehicle Tax Credit is expanded to include more vehicles. Used vehicle purchases will also be eligible for a $4,000 credit.
• Beginning in 2023, the Nonbusiness Energy Property Credit transforms into a $1,200 annual credit for certain energy-efficient home installations.
• Implementation of a 15% corporate minimum tax rate for companies with greater than $1 billion of annual financial statement income and a 1% excise tax on stock buybacks.
• Prescription drug price reform including provisions to cap drug costs for Medicare recipients, enhance Affordable Care Act premium assistance, and other provisions to reduce drug costs.
• Several other business tax credits to bring clean energy manufacturing into the United States.
In addition, the President signed the Creating Helpful Incentives to Produce Semiconductors for America Fund Act (CHIPS) into law on Tuesday August 2nd. This bill is designed to bolster domestic semiconductor production, lower costs, and prevent disruption in the supply chain. Some ways the CHIPS+ Act plans to accomplish this are by incentivizing investment in semiconductor facilities, research and development, and STEM education and tech hub funding. There is a focus in training the future workforce to be prepared for the facilities created as a result of this Act.
There is a 25% advanced manufacturing investment credit available for building facilities that manufacture semiconductors or semiconductor equipment. This does not include any of the property that is used for administrative purposes or other functions not related to manufacturing. It is suggested to do a cost segregation study to break down how much of your property qualifies for the 25% credit.
The purpose of these bills is to address the inflation and supply chain issues while also promoting a healthier, more sustainable environment. This is a broad overview of some of the high points in these two acts and many of these tax credits include phaseouts based on income level.
If you are interested in whether you or your business could benefit from any of these incentives, please contact us and we would be happy to help.