As observed in our recent blog on the Inflation Reduction Act (or IRA), the vote of Senator Kyrsten Sinema (D-Arizona) was critical to the original proposed bill making it through the Senate approval process intact. Well, the bill was passed but not in its original form. It made it through, but it did not make it through intact.
On Sunday, the Senate agreed to a slightly modified version of the IRA in a 50/50 vote that was broken in favor of the passage by Vice President Kamala Harris. In this version of the bill, the carried interest provision desired by most Democrats was eliminated (keeping intact the current law). It was replaced with a provision calling for a 1% excise tax incurred on corporate stock repurchases, with the tax set to go into effect in 2023.
The newly proposed minimum corporate tax of 15% on adjusted financial reporting was also modified, adding a carve-out that further limits the impact of this change. Some early estimates, including from the Joint Committee on Taxation, indicate that about 150 companies might be impacted.
The House is expected to take up voting on the bill this coming Friday. While a coalition of Democratic lawmakers from high-tax states have been adamant that they would not support a budget reconciliation bill that lacked provisions increasing the $10,000 limit on the state and local itemized tax deduction, they now appear to be on board. Some members of the coalition including Representatives Josh Gottheimer (D-N.J.), Tom Suozzi (D-N.Y.), and Mikie Sherrill (D-N.J.) say they will vote in favor of the proposed legislation, even though it doesn’t include SALT cap reforms. With only a small majority in the House, Democrats cannot afford many no votes from their party to pass the IRA bill.
Might that group, or other more progressive members of the Democratic party advocating for a larger economic package, play hardball after seeing the favorable results to Senator Sinema? House Speaker Nancy Pelosi stated Tuesday that she will ask members of the House to pass the bill without any changes to the version passed by the Senate and told NBC’s “Today” show: “Quite a bit of what is in the bill is what we had worked (on) together - the House and Senate - to do.”
We should know come Friday. However, any changes by the House would need the approval of the Senate and could also impact its support in the Senate.
Note that the current bill still excludes various items highlighted in our original column.
If you have questions on the proposed IRA Act, please reach out to your Schneider Downs tax consultant for additional insights.
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