Washington – Today, the U.S. Treasury Department released initial guidance on two key tax provisions of the Inflation Reduction Act, the Corporate Alternative Minimum Tax and the excise tax on stock buybacks.
Corporate Alternative Minimum Tax: The Inflation Reduction Act created a 15% alternative minimum tax on large companies earning an average of more than $1 billion annually beginning in 2023. The initial high-level guidance issued by Treasury today clarifies which companies the tax applies to and how the alternative minimum tax is calculated. It also provides taxpayers with answers to basic questions about how certain transactions may be treated and certain adjustments that may be taken into account for purposes of the alternative minimum tax. Critically, it also gives smaller corporations an easy method for demonstrating that the new alternative minimum tax does not apply to them.
Stock Buybacks Tax: The Inflation Reduction Act also created a new annual excise tax that applies to repurchases of a publicly traded corporation’s stock that take place after December 31, 2022. The initial guidance issued by Treasury today addresses the types of transactions subject to the tax, how the tax is calculated, and basic rules to prevent the avoidance of the tax.
Background on Treasury’s work to implement the Inflation Reduction Act:
Since the Inflation Reduction act was signed into law in August, Treasury has worked expeditiously to write the rules that will make real the promise of this legislation. Within days of the law’s enactment, Treasury issued guidance on the electric vehicle tax credit and worked closely with DOT and DOE so consumers could easily find a list of eligible vehicles online.
Last month, Treasury published initial guidance on the prevailing wage and apprenticeship standards. Earlier this month, Treasury and the IRS set out key procedures for manufacturers and sellers of clean vehicles that are required in order for vehicles to be eligible for tax incentives. And last week, Treasury and the IRS issued guidance on the new Sustainable Aviation Fuel (SAF) credit and FAQs on energy efficient home improvement projects and residential clean energy property credits.
For more information on Treasury’s implementation work around the Inflation Reduction Act, see below.
Photo courtesy of U.S. Treasury Department.