There has been a lot of tax-talk in the news lately with the passage of the Inflation Reduction Act (IRA), which President Biden signed into law on August 16th. The IRA includes new taxes, extension of old rules, and green energy credits, which we summarized below. While the IRA certainly has stolen the spotlight recently, we also want to remind you of some COVID-relief programs that are still available.
Tax Provisions in the Inflation Reduction Act
- Corporate Alternative Minimum Tax: The IRA imposes a minimum tax of 15% of financial statement income (also known as book income, as opposed to tax income) on U.S. C corporations that have more than $1 billion in annual earnings over the previous three years.
- Excise Tax on Corporate Buybacks: Publicly traded corporations that buy back stock will be subject to a non-deductible 1% excise tax.
- Excess Business Losses: Non-corporate taxpayers are subject to excess business loss limitations, and the IRA extended the limitation by two more years.
- Green Tax Credits: There are several new, extended, and increased tax credits in the bill to incentivize the use of renewable energy. These include credits for private companies and public utilities to produce renewable energy or manufacture parts used in renewable projects, such as wind turbines and solar panels. The bill also revamps the renamed “clean vehicle credit” with price and income limitations and includes tax breaks for home energy efficiency improvements.
- IRS Funding: The IRA provides about $80 billion over 10 years to fund the IRS and improve its “tax enforcement activities” and technology. Many of you have experienced the shortcomings of the IRS lately: phone calls that no one answers, misleading notices that are automatically generated, and tax returns that have yet to be processed. Unfortunately for us, only 4% of this funding will go towards improving taxpayer services. As a contrast, 60% of the funding will go towards enforcement.
COVID-Relief Measures Still on the Table
- Employee Retention Credit: If you had a decline in business in 2020 or 2021 or were subject to government orders that restricted your ability to do business, you can still apply for the employee retention credit. You may qualify for a credit of up to $26,000 per employee.
- PPP Loan Forgiveness: If you received a PPP loan and haven’t applied for forgiveness, time is running out. You don’t want to lose out on this tremendous opportunity to have your loan forgiven. We are happy to assist you in completing the application.
- Texas Travel Industry Recovery Program: The State of Texas has established a $180 million program which provides grants for Texas businesses who were negatively impacted by COVID-19. It provides one-time reimbursement grants of up to $20,000 for the recovery of Texas businesses in the tourism, travel, and hospitality industries. Grants may be spent on payroll and benefits, COVID-19 mitigation and prevention measures, rent, and utilities.
The IRA is a sweeping piece of legislation with numerous tax implications. While we work through the new changes, we also want to remind you of old programs that can provide businesses with much-needed assistance. As always, ATKG is here to help you. Feel free to call your ATKG team if you have questions about the IRA or any of these COVID-relief programs.