The U.S. House of Representatives and the U.S. Senate each have passed the Inflation Reduction Act, a $430 billion package that includes several changes to tax laws. President Biden signed the bill into law on August 16.
One of the key parts of the Act is increased enforcement funding for the IRS. Under the legislation, there will be an extra $80 billion for the agency, which is meant to enhance its overall capabilities. The Congressional Budget Office estimates this funding will add an additional $124 billion in total revenue.
The Act also includes a 1 percent excise tax levied on corporations that purchase their own stock from shareholders. This is in lieu of a tax levied on shareholders if the corporation paid a cash dividend or if a shareholder were to sell stock on the open market.
The 1 percent excise tax does not apply if, among other things, 1. Repurchases of stock are under $1 million. 2. The repurchases of the stock were contributed to certain plans, such as an employee pension and 3. The repurchases were made by real estate investment trusts.
Under the Act, there are other changes to tax laws with a widespread impact. There is an extension of the limit on deductions made for business losses for an additional two years through 2028, as well as a Global Minimum Tax of 15% on certain corporations with significant global profits that pay relatively little or no US federal corporate income tax.
Ultimately, the Inflation Reduction Act is projected to raise a total of $737 billion over the next decade, and the primary spending is aimed at infrastructure and personnel.
With additional funding, taxpayers can expect to see increased IRS audit activity. The increased funding is also intended to provide the IRS with resources necessary to respond to taxpayers in a timely manner as well.
As things continue to evolve, your professionals at HORNE will be monitoring the situation, so please feel free to contact us if you have any questions.
