Key Tax Provisions in the Inflation Reduction Act
President Joe Biden recently signed the Inflation Reduction Act (the act) — an ambitious new bill which will spend approximately $375 billion over the next decade to fight climate change as well as slash health care costs.
A trimmed down rendition of the original $1.75 trillion Build Back Better Act, this legislation introduces significant new tax provisions to help raise revenue and reduce the federal deficit.
Originally, the bill was not expected to pass, but in a surprise deal Senate Majority Leader Chuck Schumer and Senator Joe Manchin agreed on a revised package. Senator Kyrsten Sinema, the last Democratic holdout on the bill, later negotiated dropping the Carried Interest measure — which would have narrowed a loophole that minimizes taxes on profits paid to hedge fund managers and other investors — once positioned as a major revenue raiser. Although Democrats were forced to drop this tax measure to pass the act, the revised bill still contains a number of other important changes to the tax code, including new taxes on large corporations and increased IRS enforcement of wealthy individuals and companies.
Phil Jelsma, partner and chair of the tax practice team at CGS3, provides a convenient breakdown of the most important tax provisions in the new legislation and the potential consequences for taxpayers.