President Biden signed the Inflation Reduction Act into law at a White House ceremony on August 16, finalizing legislation intended to address inflation by paying down the national debt, lower consumer energy costs, provide incentives for the production of clean energy and reduce healthcare costs.
The bill moved through the legislative process in near-record time, having been first introduced by Sens. Chuck Schumer (D-NY) and Joe Manchin (D-WV) on July 27. With the 50-50 Senate, summer recess, and approaching mid-term elections, the path to passage by both houses of Congress was not a certainty.
The act is expected to raise roughly $450 billion through new tax provisions, including a 15% minimum book tax on certain large corporations, a 1% excise tax on corporate stock buybacks, and a two-year extension of section 461(l) loss limitation rules for noncorporate taxpayers, which is now set to expire for tax years beginning after 2028. The act also boosts funding for the IRS, intended to result in increased tax collections over the next 10 years.
The act includes the largest-ever U.S. investment committed to combating climate change, allocating $369 billion to energy security and clean energy programs over the next 10 years, including provisions incentivizing the manufacturing of clean energy equipment and electric vehicles domestically.
Overall, the act modifies many of the current energy-related tax credits and introduces significant new credits and structures intended to facilitate long-term investment in the renewables industry.