But will it do what its name states?
President Joe Biden signed the Inflation Reduction Act into law on Aug. 16, 2022. The act was the result of months of negotiations and was approved by the Senate on Aug. 7 and by the House on Aug. 12.
The Act is a modified version of the Build Back Better bill that floated around Congress for much of the year. The $773 billion dollar act makes investments in combating climate change, lowers the cost of prescription drugs, and raises taxes on corporations, among other tax reform measures.
Here are key provisions of the act:
Grants tax rebates and credits for households to lower energy costs, and tax credits, loans, and grants to increase the domestic production of wind turbines, solar panels, batteries, and other energy production and storage.
Supports the creation of clean energy jobs and workforce development in disadvantaged communities.
Establishes tax credits to lower and middle-income families to encourage the sale of new and used electric vehicles.
- A credit of up to $7,500 for new “clean vehicles” with final assembly in the United States. (Battery inputs may not be sourced from China, Iran, North Korea, or Russia.) The credit is phased for single tax-payers with a modified adjusted gross income of $150,000 or less and $300,000 or less for joint returns.
- A credit of 30% of the sales price of a previously owned clean vehicle. The credit is phased out for single and joint filers with incomes of $75,000 and $150,000 or more, respectively.
Authorizes Medicare to negotiate the prices of prescription drugs.
Extends the Temporary Premium Tax Credits of the Affordable Care Act through 2025. This is a refundable credit used to help-low income individuals and families cover premiums for their health insurance purchased through the marketplace.
Increases access to vaccines.
Creates a 15% minimum tax on corporations with at least $1 billion in income. The threshold is reduced to $100,000 for certain subsidiaries owned by foreign corporate parents.
Invests $80 billion over 10 years to improve Internal Revenue Service enforcement.
According to the Penn Wharton Budget Model and the Congressional Budget Office, the act will have little to no effect on inflation, despite its name. However, it should decrease the deficit by more than $100 billion over the next decade.
If the legislation may affect your business and you need assistance maneuvering through its parameters, Wright Connatser can help.