Biden Signs Inflation Reduction Act Into Law

On August 16^th, President Biden signed the Inflation Reduction Act into law.  The bill, moved by Congress as a budget reconciliation package, passed on party line votes in the House and Senate.  Below is a summary of the topline budget estimates as well as a description of selected provisions that may be of interest or impact to cold chain companies:

TOTAL REVENUE RAISED                              $737 billion

15% Corporate Minimum Tax                      $222 billion

Prescription Drug Pricing Reform               $265 billion

IRS Tax Enforcement                                       $124 billion

1% Stock Buybacks Fee                                  $74 billion

Loss Limitation extension                            $52 billion

 

TOTAL INVESTMENTS                                    $437 billion

Energy Security and Climate Change        $369 billion

Affordable Care Act Extension                    $64 billion

Western Drought Resiliency                        $4 billion

Corporate Minimum Tax: The bill imposes a 15% minimum tax in tax years after 2022 on the income corporations report on their financial statements, or “book income,” with some adjustments. The minimum tax would apply to corporations with more than $1 billion in average annual income over a three-year period.  US corporations that are members of a foreign-parented multinational group for any taxable year would need to have earned at least $100 million in such income. Foreign corporations that are engaged in a trade or business with the US would be treated as a separate domestic corporation that is owned by a foreign corporation.  Corporations would pay the larger of the minimum tax or the statutory corporate tax — which is currently 21%.

Stock Repurchases: The bill imposes a 1% excise tax of the fair market value of any stock repurchase in a tax year by a publicly traded US corporation, including any subsidiary that has 50% or more of its stock owned by a corporation. Firms purchase their own shares as an alternative way to distribute income to shareholders, with a lower tax rate compared to divided distributions. The tax would also apply to stock repurchases of certain foreign corporations by subsidiaries and covered surrogate foreign corporations.

Excess Business Loss: The bill also extends for two years the limitation on excess business losses of noncorporate taxpayers, including pass-through businesses. Under current law, such taxpayers can’t deduct losses for tax years through 2026.

Green Energy: The bill generally structures various green energy tax credits as tiered incentives, providing either a “base rate” or a “bonus rate” of five times the base amount for projects that meet certain prevailing wage and apprenticeship requirements. An additional increased credit amount could be claimed in certain cases if projects comply with domestic content requirements, such as ensuring that any steel, iron, or manufactured product is produced in the US.

Building Codes: The bill provides $330 million for fiscal 2022 for grants to help states adopt residential and commercial building energy codes that meet or exceed the 2021 International Energy Conservation Code, the ASHRAE Standard 90.1-2019, or some combination of those codes. Funds could also be used to implement building codes achieving equal or greater energy savings. It would provide a further $670 million for states and local governments to adopt building codes to meet or exceed the zero-energy provisions in the 2021 IECC and to implement a plan to achieve compliance with newly adopted building energy codes.

Manufacturing: The bill provides $5.8 billion for fiscal 2022 for DOE to provide financial assistance for domestic, nonfederal, nonpower industrial or manufacturing facilities engaged in energy intensive industrial processes to purchase, install, retrofit or upgrade advanced industrial technology to reach net-zero GHG emissions.

Ports: The bill provides $2.25 billion for fiscal 2022 for grants and rebates for port authorities, air pollution control agencies, private entities, and governments with jurisdiction over ports to install zero-emission port equipment or technology. Awards could also be used to develop climate action plans to reduce GHGs and other air pollutants.  An additional $750 million would be provided for ports in areas that don’t meet national ambient air quality standards.