The Inflation Reduction Act of 2022 was officially passed on August 16, 2022 with the aim of curbing inflation by lowering drug costs, promoting green energy, promoting domestic production and reducing the nation’s current deficit. With many new changes to the tax code, naturally certain groups tend to benefit more than others. Here is a summary of some of the winners and losers of the bill.

Winners:

The IRS: The IRS has been the topic of conversation with an influx of $80 billion being allocated to the IRS over the next 10 years. The main goal has been to increase audit capabilities as well as a much-needed upgrade to their technology systems. The IRS has been severely underfunded which has led to a major backlog of various tax matters and has made basic support from both taxpayers and professionals impossible at times.

High Income Tax-Bracket Earners: Prior to the official passing of the Inflation Reduction Act (“IRA”), many of the previous drafts contained different proposals of potentially billions of dollars in tax increases on high earners. The main proposals being raising the capital gains rates, increasing taxes on inheritances and a surcharge on high income earners. None of which were included in the final bill.

Private Equity: Carried interest provisions were eliminated from the final bill with a carveout for private equity-owned companies with a 15% minimum corporate tax.

Renewable Energy: Tax credit expansion in the renewable energy space was a huge win for solar companies, energy storage, and software providers as well as hydrogen and fuel cell companies. Additionally, a $30 billion production tax credit is a major score for nuclear power providers.

Electric Carmakers: Tax incentives over the past few years has always been an additional selling point for electric vehicle retailers. The $7,500 electric vehicle tax credit has become very popular and was extended with the Act. However, additional compliance on new batteries and minerals sourcing requirements for manufacturers will undoubtedly eat into the new incentives for manufacturers. It’s also worth noting that new cost limitations will render most vehicles over $55,000 ($80,000 for SUVS/Pickups) ineligible for the tax credit.

Losers:

SALT CAP: Many taxpayers adversely impacted by the SALT deductions were hoping legislation would update the current $10,000 cap on state and local tax deductions. Unfortunately, the SALT cap deductions went unchanged.

Tech Companies: Tech companies were hit two-fold by the new bill. A 1% excise tax on stock buybacks as well as potentially a 15% minimum tax on book income on certain large C-Corporations.