15% Corporate Tax Rate: Corporations with $1 billion or more in income will have a new minimum tax rate of 15%. This provision also eliminates an avenue through which corporations were able to report negative income to the government, even amid strong profits. Dozens of large companies paid zero dollars in federal income taxes in 2020 and 2021, avoiding the 21% corporate minimum tax rate. The end result of this piece of the bill? Large corporations like Amazon and Tesla will now be required to pay federal income taxes.
Corporate Stock Buybacks: Such buybacks, which have grown in popularity in recent years, will now be taxed at 1%. The impact of this measure on shareholders is up for debate, with some speculating companies will be less likely to repurchase stock from surplus cash in their coffers.
IRS Funding: The bill injects $80 billion into the Internal Revenue Service (IRS) over the next ten years, expected to collect at least $400 billion in tax revenues over that time. It’s still unclear exactly how the funds will be used, but lawmakers estimate that $45 billion of the funding will fund tax enforcement measures. Budget allocations could include staffing, technology upgrades, and operations.
Tax Break Limits: The bill also extends pass-through-entity tax break limits for two more years through the end of 2028. Real estate businesses and business owners that use pass-through entity losses (S-Corps, some LLCs, sole proprietorships, and partnerships) to offset other non-business income should be happy to hear it.
Prescription Drug Costs: Medicare will now be able to negotiate drug prices with big pharmaceutical companies, a move that will save the federal government an estimated $288 billion over the ten-year fiscal window. Other prescription drug highlights for Medicare beneficiaries include free vaccinations and insulin prices capped at $35 per dose. Americans using private insurance will not see these benefits.
Affordable Care Act (ACA) Subsidy: The bill extends health insurance premium subsidization for individuals and households purchasing via the ACA Marketplace through 2025. This subsidy had previously been set to expire this year.
Climate Change Investments: The bill allocates $369 billion for electric vehicles and clean energy tax breaks. In addition, tax incentives will exist for energy-efficient upgrades like solar panels, electric vehicles, home efficiency projects, appliances, and more. The funding could create opportunities for some investors in green energy, electric vehicles, and more.
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