Described by the President as “historic,” the act is the largest investment plan ever put in place by the US to fight climate change.
To break down the huge inequalities in access to health care in the United States, the IRA also provides for price limits on certain drugs and increased access to prescription drugs. In this sense, the public health insurance system, Medicare, will now be able to negotiate the price of certain drugs.
New from 2023: Alternative Minimum Tax
To finance these investments, the law closes corporate tax loopholes and foresees taxing companies worth more than one billion dollars in profits per year at an alternative minimum tax rate (AMT) of 15%.
The AMT, or book tax, is calculated on a company’s financial statements (its books), rather than the income calculation usually used for tax purposes. Effective for taxable years beginning after 31 December 2022, the AMT obliges companies to pay taxes they had previously avoided. The Act also includes a 1% excise tax on corporate stock buybacks.
The US corporate tax rate of 21% will remain unchanged.
The effect on global mobility
By omitting the provision that modifies carried interest rules, the new law could impact the cost of global mobility assignments, particularly the assignment costs of partners in the financial services sector who are tax equalised, in other words they pay the same amount of tax as they would have paid had they stayed in their home country.
Moreover, by budgeting an additional $45.6 billion for tax enforcement, the Act sends a clear message to global mobility teams on the importance of tax compliance to avoid penalties.
Contact us for help understanding the impact of the Inflation Reduction Act on your organisation in terms of payroll and tax residence.