President Biden signed into law the reconciliation package titled the Inflation Reduction Act (IRA). The bill is a mix of health, climate, energy, and tax provisions cobbled together. It creates $485 billion in new spending offset by $790 billion in new taxes and savings over the next ten years.
Here is a summary of the key elements of the bill relevant to equipment dealers:
- Corporate Minimum Tax: The bill imposes a 15% corporate minimum tax on large corporations reporting book income in excess of $1 billion over a three-year average. It is projected that only 150-200 companies will be subject to the new tax that is expected to raise $313 billion in the next ten years.
- Stock Buyback Excise Tax: A new 1% tax on corporate stock buyback is expected to raise $78 billion over the ten-year budget window.
- Net Operating Loss Limitation Cap: A late amendment to the bill extends for two years the section 461(l) cap on losses a pass-through business owner is permitted to claim ($250,000 single filers and trusts, $500,000 joint filers). This extension of the current law is expected to raise $52 billion.
- IRS Funding: An additional $80 billion was earmarked for the Internal Revenue Service. The increased funding includes $45.6 billion for enforcement, $25.3 billion for operations support, $4.8 billion for business systems modernization, and $3.2 billion for taxpayer services. The Congressional Budget Office estimates these new expenditures will yield an additional $204 billion in revenue for a net savings of $124 billion.
Ag Sector Provisions
- Ag Conservation: The bill provides nearly $20 billion for agricultural conservation, the second-largest single pot of money in the bill. The increased funding largely bolsters existing farm bill conservation programs by providing financial and technical assistance to landowners who voluntarily implement the practices. The funding targets climate-related goals and prioritizes mitigation activities. Here is a breakdown of the spending:
- $8.45 billion – Environmental Quality Incentives Program
- $4.95 billion – Regional Conservation Partnership Program
- $3.25 billion – Conservation Stewardship Program
- $1.4 billion – Agricultural Conservation Easement Program
- $1 billion – Conservation Technical Assistance
- $300 million – Carbon sequestration quantification program
- Ag Credit: The IRA replaces previous debt relief provisions from the American Rescue Plan Act that were found to be unconstitutional by the courts. The new debt relief program provides $3.1 billion for distressed borrowers of USDA direct or guaranteed farm loans and leaves it to the USDA to establish eligibility criteria. Another $2.2 billion is allocated for USDA farm loan applicants who experienced discrimination from the lending program
- Renewable Energy: $13.3 billion is allocated for farm bill energy title programs. The funding includes loans, grants, tax incentives, and credits for various programs. The major funding includes $9.7 billion for rural cooperative loans to purchase renewable energy, renewable energy systems, and carbon capture and storage systems; $1.7 billion for projects under the Rural Energy for America Program; $1 billion for renewable energy loans under the Rural Electrification Act; $500 million for grants to increase commodity-based fuel infrastructure.
- Colorado River Drought Assistance: Another last-minute amendment from Senator Sinema (D-AZ) allocated $4 billion toward the Colorado River region to conserve water and develop a framework for reimbursing farmers who voluntarily forego water appropriations.
There are additional provisions relating to climate, energy, and healthcare in the 755-page bill. A full detailed summary of the bill can be found here.