By John Kinsella
One of President Biden’s objectives has been to significantly expand a variety of climate and social welfare programs, funded by significant increases in individual and business taxes. These proposals were outlined in his campaign platform and more recently, in the House-passed Build Back Better legislation in late 2021, and in proposals outlined in the administration’s “Green Book” budget proposals announced earlier this year.
Earlier this summer, it appeared that the proposals were likely not going to be enacted due to lack of agreement of certain provisions by moderate Democrat Senators Joe Manchin and Kyrsten Sinema.
In surprising developments after significant negotiations with the administration, however, Sens. Schumer (D-N.Y.), Manchin and Sinema, an agreement was reached and legislation was introduced in the Senate for enactment of a “scaled down” version of the Build Back Better plan.
Following passage by the Senate, the House on August 12 passed the Inflation Reduction Act, a bill to address selected portions of the Biden Administration’s agenda for climate change, healthcare and tax policy. The House adopted the same legislation that passed the Senate. President Biden signed the bill into law on August 16.
The legislation includes a book minimum tax (affecting corporations with income over $1 billion), including favorable adjustments for depreciation, selected amortization and controlled groups that were made as the bill moved through the Senate. In addition, a 1% stock buyback excise tax on public companies and an extension of the excess business loss limitations were included. Generally, the tax revenue provisions are effective for 2023 forward.
The bill also includes rules related to prescription drugs, large expenditures on green energy and adds $80 billion over 10 years to the IRS budget to improve tax compliance, operations and enforcement. Importantly, a controversial reporting provision—that would have required banks to report information on gross inflows and outflows on customer accounts above a certain de minimis level—was omitted from the reconciliation package. ABA, together with other financial trade groups and bank customers, had vigorously opposed the proposal last year.
The association continues to evaluate the bill’s provisions to determine its full implications for banks.
John Kinsella was VP for tax policy at ABA until his retirement in late August 2022.