The Inflation Reduction Act Signed into Law: How It Affects Taxes for Businesses

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On Tuesday, August 16, 2022, the President signed the Inflation Reduction Act into law. The $750 billion statute contains health care, tax, and climate initiatives changes. Here is a breakdown of the tax changes for businesses in the newly signed law.

New Taxes for Businesses

15% Minimum Tax for Large Corporations

The new legislation requires a 15% minimum tax on adjusted financial statement income for large companies. “Large” is defined as a corporation with a three-year average annual income of over $1 billion.

1% Tax on Stock Buybacks

The new legislation requires a 1% excise tax on stock buybacks for covered corporations. A covered corporation is any domestic corporation the stock of which is traded on an established securities market. The excise tax applies to stock repurchases after December 31, 2022, even if the repurchase was approved or authorized before this date. 

Tax Updates for Businesses

Extension of Excess Business Loss Limitations

The new legislation extends the limitation on excess business losses on noncorporate taxpayers for two more years, extending it through 2028 instead of 2026.

Expanded Research & Development Credits for Small Businesses

The new legislation would permit qualified small businesses’ additional research and development credit of up to $250,000 toward Medicare payroll tax. This expansion applies to tax years beginning after December 31, 2022.

Other Credits

The new legislation modifies, extends, and creates a variety of credits related to energy efficiency, clean electricity, fuel, and commercial vehicles.

Questions?

Have questions about how this new law could affect your business’s tax planning? Contact Us to meet with one of our business tax planning experts.