We wanted to share the latest update regarding the (IRA). On August 7, the Senate voted 51-50 to pass the IRA, a sweeping policy package focused on tax reform, climate change, and healthcare. In order to obtain the support of Senator Kyrsten Sinema, the Act no longer includes the previously proposed changes to the taxation of carried interest. House Speaker Nancy Pelosi is now expected to convene the House of Representatives on Friday, August 12, to vote on the bill.
- Elimination of any change to carried interest: The latest bill implements a one percent excise tax on stock buybacks, included to recoup the federal revenue lost, after Senator Sinema removed a provision in the bill to close the carried interest loophole. The excise tax would be levied on publicly traded US corporations, including any subsidiary that has 50 percent or more of its stock owned by a corporation. The IPA confirmed that the tax includes an exception for regulated investment companies and real estate investment trusts.
- 15 percent minimum tax on corporations: This minimum tax would apply to corporations with more than $1 billion in average annual income over a three-year period. Businesses owned by private equity firms, however, would be exempt. American firms that belong to a foreign-owned multinational group would need to have earned at least $100 million in such income in order to be subject to the tax. Corporations would ultimately pay the larger of the minimum tax or the statutory corporate tax. Under the minimum tax, as much as 80 percent of losses could be carried over to offset financial income in future years. Firms could also claim certain tax credits to offset the minimum tax.
What’s next? The House of Representatives is expected to pass the IRA on Friday, August 12, after which it will be sent to the White House. President Biden released a statement after the Senate passed the IRA on August 7 declaring his intention to sign the bill into law.
As always, we will share additional updates on the IRA as they advance. To read more about further proposed changes related to climate change and healthcare, please read the from our partners at GrayRobinson.
SVP, Government Affairs and General Counsel
Institute for Portfolio Alternatives