This week started off with the news that on 7 August, the United States (US) Senate approved the Inflation Reduction Act (IRA) of 2022 (H.R. 5376), voting 51-50 along party lines, with Vice President Kamala Harris breaking the tie. The bill includes climate and energy provisions and an extension of enhanced Affordable Care Act (ACA) subsidies paid for by a 15% corporate alternative minimum tax (CAMT) on adjusted financial statement income for corporations with profits over US$1 billion, a stock buyback tax, increased Internal Revenue Service enforcement funding, and prescription drug provisions, including permitting Medicare to negotiate certain prescription drug prices. Today, 12 August, the House reconvened to consider the Senate bill (at the time of publication, the House is still in debate but the bill is expected to be passed).
The bill, which stalled late last year when negotiations broke down between the White House and Senator Joe Manchin, gained traction again this July in a much smaller form with a deal backed by Senate Majority Leader Chuck Schumer and Senator Manchin. The deal, announced on 27 July, was joined by Senator Kyrsten Sinema, with changes, on 4 August.
The revised text of the measure, released on 6 August, modified the 27 July compromise reached between Senator Joe Manchin and Senate Majority Leader Chuck Schumer including by: (1) dropping the carried interest holding period provision; (2) adding a 1% stock buyback tax; and (3) making certain changes to CAMT language with respect to depreciation for tangible assets and amortization deductions for qualified wireless spectrum.
In other legislative news, on 9 August, President Joe Biden signed the CHIPS and Science Act (H.R. 4346), a US$280 billion package that provides incentives for companies to produce semiconductor chips domestically and authorizes future appropriations for research.
President Biden has said, "As Americans are worried about the state of the economy and the cost of living, the CHIPS bill is one answer: It will accelerate the manufacturing of semiconductors in America, lowering prices on everything from cars to dishwashers. It also will create jobs — good-paying jobs right here in the United States."
The CHIPS and Science Act, where CHIPS stands for Creating Helpful Incentives to Produce Semiconductors, includes US$52.7 billion in funding for semiconductor manufacturing subsidies, grants and loans. US$24 billion is marked to be spent in fiscal 2022.
For additional information with respect to this Alert, please contact the following:
Ernst & Young LLP (United States), International Tax and Transaction Services, Washington, DC
- Arlene Fitzpatrick
- Joshua Ruland
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
