Senate Passes Inflation Reduction Act of 2022

By Christopher Migliaccio, JD, Christopher Johnson, JD, LLM, CPA, MBA and Alan S. Kufeld, CPA

The Senate passed the Inflation Reduction Act of 2022 (the Act) over the weekend. Our summary of the prior draft bill is here. The version passed by the Senate is similar to the prior draft version, although with key changes on the tax side:

  • Carried Interest Provisions Eliminated: The provision changing the holding period to achieve long-term capital gain treatment on carried interest was removed.

  • Excise Tax on Stock Buybacks: A 1% excise tax on stock buybacks by public companies, included in earlier versions of Build Back Better, was added to the final version of the Act.

  • Excess Business Losses: Extends the disallowance of excess business losses (originally due to expire after 2026) through 2028. This provision disallows a deduction for the amount of business losses in excess of $250,000 ($500,000 for joint filers) attributable to a trade or business in which the taxpayer actively participates.

  • Corporate Alternative Minimum Tax (AMT): The Act still includes a 15% alternative minimum tax on corporations based on book income, but the new version adds an adjustment to book income for depreciation, preserving the benefits under the Tax Code of accelerated depreciation. The AMT is only expected to apply to about 150 companies, as it is applicable for companies with average financial statement income of over $1 billion (over a three-year period).

Next Steps

The bill still needs to be passed by the House of Representatives and signed by the President (although President Biden has already indicated his support). That process is expected to be completed this week.

Contact Us

The tax specialists at PKF O’Connor Davies are continuously monitoring tax developments from the federal and state governments. Contact your client relationship manager or:

Christopher Migliaccio, JD
Principal | 646.699.2890

Christopher Johnson, JD, LLM, CPA, MBA
Partner | 646.449.6305

Alan S. Kufeld, CPA
Partner | 646.449.6319