The bill encompasses a wide range of budget and pending provisions and has been the focus of protracted negotiations. The Congressional Budget Office (CBO) estimates the bill will cost almost $1.7 trillion and add $367 billion to the federal deficit over 10 years. Adding in $207 billion of nonscored revenue that is estimated to result from increased tax enforcement in the bill, the net total increase to the deficit would be $160 billion.
The bill contains a wide variety of tax provisions, designed to provide incentives to taxpayers and to raise revenue to pay for the spending in the bill. One nontax provision in the bill is the provision for four weeks of paid leave benefits for caregiving leave. These paid benefits would not be considered gross income to the recipient for tax purposes. Among the many tax provisions in the bill are the following:
One-year extension of expanded child tax credit; permanent extension of refundability – This would require that the IRS make advance payments of the credit. Taxpayers whose adjusted gross income (AGI) exceeds $150,000 for joint filers, $112,500 for heads of household, or $75,000 for other taxpayers, would not be eligible for advance payments.
SALT deduction cap – The bill would increase the limitation on the deduction for state and local income taxes from $10,000 to $80,000 ($40,000 for married taxpayers filing separately and for trusts and estates).
15% minimum tax on profits of large corporations – The bill would impose a 15% minimum tax on the profits of corporations that report over $1 billion in profits to shareholders.
Electric vehicle tax credits – The bill provides a refundable income tax credit of up to $8,500 for new qualified plug-in electric drive motor vehicles.
Extending expanded earned income tax credit – The bill would extend the changes to the earned income tax credit that were enacted by ARPA through 2022.
Expanded premium tax credit – The bill would increase the amounts for premium assistance through 2025.
1% surcharge on corporate stock buybacks – The bill would impose a tax equal to 1% of the fair value of any stock of a corporation that the corporation repurchases during the year, effective for repurchase of stock after December 31, 2021.
Limitation on interest expense deduction – The bill would limit the amount of net interest expense for certain domestic corporations that are members in an international financial reporting group. The provision limits the interest expense deduction to an allowable percentage of 110% of the domestic corporation’s net interest expense.
Foreign tax credit limitation – The bill would apply the foreign tax credit limitation on a country-by-country basis, by taxable unit.
Country-by-country minimum tax on foreign profits of US corporations – The bill would modified the base-erosion and anti-abuse tax to gradually increase the applicable percentage from 10% to 12.5% in 2023, 15% in 2024, and 18% after 2024.
Small business stock and high-income taxpayers – The bill would disallow the 75% and 100% exclusion of gain from the sale of stock if the taxpayer’s AGI is over $400,000 or if the taxpayer is a trust or estate.
Wash-sale rules – The bill would make commodities, foreign currencies, and crypto assets subject to the wash-sale rules.
Net investment income tax – The bill would apply the tax to net investment income derived in the ordinary course of a trade or business for taxpayers with taxable income over $400,000 (single filers), $500,000 (married taxpayers filing jointly or surviving spouses) or $250,000 (married taxpayers filing separately).
Excess business losses – The bill would make permanent the limitation on excess losses of noncorporate taxpayers.
High-income surcharge – The bill would impose a surcharge (in addition to any other income tax imposed) on high-income individuals, estates, and trusts. The surcharge tax would equal the sum of 5% of the amount of the taxpayer’s AGI that exceeds $10 million ($5 million for married taxpayers filing separately; $200,000 for an estate or trust), plus 3% of the amount of the taxpayer’s AGI that exceeds $25 million ($12.5 million for married taxpayers filing separately; $500,000 for an estate or trust).
Green energy incentives – The bill covers a wide variety or new and existing green energy incentives, which it generally arranges as two-tiered incentives, providing either a base rate or a bonus rate. The bonus rate is five times the base rate, and it would apply to projects that meet certain prevailing wage and apprenticeship requirements.