The Inflation Reduction Act was signed into law on August 16, 2022. The tax changes in the law are a part of the “deficit reduction” provisions, Washington-speak for “tax increases”.
The most significant tax increases are primarily aimed at the largest corporations.
- The bill will impose a new minimum tax on corporations with an average annual income of over $1 billion.
- 1% excise tax on publicly traded companies on the excess of repurchased corporate stock over any new issues to employees or the public. The tax would not apply if a corporation’s net buyback is less than $1 million. The new excise tax is estimated to raise $74 billion.
One revenue-raising provision, removed in the final negotiations with Arizona Senator Kyrsten Sinema, was a provision to treat gain from “carried interests “as compensation taxable at ordinary income tax rates.
Another major provision aimed at raising revenue which has generated much discussion is the appropriation of additional funds of nearly $80 billion over a 10-year period for the IRS to enhance enforcement activities, operations support, and business system modernization.
More than half of the new funding (roughly $45.6 billion) must be used to determine and collect owed taxes, provide legal support, conduct criminal investigations, and provide digital asset monitoring and other compliance-related activities. Although not explicitly aimed at US taxpayers outside the US, such increased monitoring could likely help the IRS to identify more non-fillers and undisclosed foreign assets.
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