Congress enacts tax and climate bill

By Paul Bonner

The U.S. House of Representatives on Friday approved the Inflation Reduction Act, H.R. 5376, reflecting the Senate's substitution of the original bill with a package of tax credits encouraging conservation and cleaner sources of energy, increased IRS funding, and a number of tax provisions.

The bill, which in its larger, original version was known as Build Back Better, was signed into law by President Joe Biden on Tuesday.

The Senate approved the amended bill on Aug. 7. Among its tax provisions are a 15% corporate minimum tax, an extension of temporarily expanded eligibility for premium tax credits, and a 1% excise tax on corporations applying to repurchases of their stock. Nontax items include prescription drug pricing reform and other energy-related and transportation measures.

The 220 to 207 vote in the House reflected Democrats' resolve to pass the bill, which was well over a year in the making and whose prospects at more than one point appeared unlikely. Passage came despite fundamental differences among even many Democrats regarding its components.

Both chambers passed the bill under budget reconciliation rules, allowing a simple majority to prevail. In the Senate, its passage was accomplished with a tiebreaking vote by that chamber's president, Vice President Kamala Harris, with no Republican votes. The House vote likewise was strictly along party lines.

The biggest revenue-raising provision in the final version remained the corporate minimum tax, based on financial statement, or "book," income. The tax will apply to only the largest corporations, those with an average of more than $1 billion in book income for three consecutive tax years, for tax years beginning after Dec. 31, 2022.

Also taking effect starting next year is a tax on stock buybacks, which is added to the Internal Revenue Code as new Sec. 4501. That provision was added by the Senate after it removed another measure that would have extended the long-term-capital-gain holding period for "carried interests" — partnership interests held in connection with the performance of services — from three years to five.

The bill also amends Sec. 36B to extend through 2025 the rule expanding eligibility for health care premium tax credits to taxpayers whose household income exceeds 400% of the poverty line and changes to the calculation of the applicable percentage of premium assistance amount, both of which were temporarily provided for tax years 2021 and 2022 under the American Rescue Plan Act, P.L. 117-2.

The bill's provisions related to energy include several new credits for clean energy and fuels and clean vehicles and other transportation. The bill also extends a number of temporary existing credits, such as — one important to many homeowners — the Sec. 25C credit for nonbusiness energy property and the Sec. 25D credit for residential clean energy.

The IRS funding provisions included in the bill would raise an estimated $124 billion in revenue, according to Senate Democrats' summary of the bill's revenue effects. A Congressional Research Service report tallies those provisions as increasing the Service's budget authority through fiscal 2031 by these functions and amounts:

  • Enforcement, by 69% to $111.7 billion;
  • Operations support, by 53% to $72.9 billion;
  • Taxpayer services, by 9% to $36.8 billion; and
  • Business systems modernization, by 153% to $7.8 billion.

The AICPA submitted comments to Congress on several tax provisions in the bill and plans to submit comments to the IRS on implementation guidance from the legislation.

— To comment on this article or to suggest an idea for another article, contact Paul Bonner at

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