On August 16, 2022, President Joe Biden signed the Inflation Reduction Act (IRA). We have made an overview of some provisions of the new law that may be of interest to our clients. GREEN ENERGY
Residential energy credits
The credit for nonbusiness energy property has been changed and extended until 2032. The credit applies to energy-efficient windows, doors, air conditioning systems and heat pumps. The maximum amount of credit is $1,200 per year.
The Residential Clean Energy Credit applies to installed clean household equipment such as solar, wind, or geothermal. The credit is now 30% and is valid until 2034.
Clean vehicle credits
The credit for the purchase of electric vehicles and plug-in hybrids (PHEV) has been changed and extended until 2032. The law abolishes the current limit on the number of vehicles produced by a particular manufacturer. Now, the credit requires the final assembly of the vehicle in North America, as well as additional requirements for the country of origin of the critical components of the vehicle and the battery system.
The maximum amount of credit remains at $7,500, but includes taxpayer`s income limitation and restrictions on the manufacturer's suggested retail price.
A new credit of up to 4,000 US dollars for the purchase of a used car is also available.
The law also provides a new 30% credit for the commercial electric vehicle purchased between 2023 and 2033.
The Act allocates $79.6 billion to the IRS over the next 10 years. More than half of the money will be allocated to fund IRS’s tax collection activities. Therefore, taxpayers should expect more tax audits in the coming years.
The remainder of the funding is earmarked for operations, taxpayer services, technology, development of a direct free e-file system and more.
RESEARCH CREDIT FOR SMALL BUSINESSES
According to the IRA, after 2022, the amount of the research credit increases from $ 250,000 to $ 500,000. It is also allowed to use this credit against payroll taxes.
NEW PROVISIONS ON CORPORATE TAXATION
Alternative minimum tax
The new corporate AMT accounts for 15% of the revenue shown on the corporate financial statements. The tax will only apply to corporations with average annual income in excess of $1 billion for the three previous tax years.
The Act includes a 1% excise tax on the repurchase of stocks by domestic publicly traded corporations.