The Senate has passed the “Inflation Reduction Act” (IRA), which is essentially a slimmed-down version of the “Build Back Better Act” that was proposed in December 2021.
Just as important as the income tax changes contained in IRA is what was left unchanged:
- Individual and corporate income tax rates
- Capital gains tax rates
- Section 199-A “flow-through deduction” of 20% of S-Corp/LLC income
- Estate tax exemption limits
The income tax provisions currently contained in IRA are relatively limited in scope:
- An excise tax of 1% on stock buybacks by public companies.
- Corporate Alternative Minimum Tax (AMT) of 15% based on “book” income. The AMT will only apply to companies with financial statement income exceeding $1 billion per year.
- Excess business loss disallowance extended from 2026 to 2028. This rule limits the deduction of losses from flow-through entities to $250,000 ($500,000 for married filing joint).
This legislation now heads to the House of Representatives for consideration. Approval is expected this week.
Please contact your advisor at MST if you would like a more detailed discussion of these matters.