All Things Newz
Law \ Legal

Public Finance Impact Of The Inflation Reduction Act’s New Corporate Alternative Minimum Tax – Financial Services



To print this article, all you need is to be registered or login on Mondaq.com.

President Joe Biden signed into law the Inflation Reduction Act
(the IRA) on Aug. 16, 2022. The IRA (H.R. 5376, 117th Congress)
includes a variety of legislation concerning energy, climate
change, federal income tax, healthcare and deficit reduction
matters. Notably for those in the public finance sector, the IRA
includes a new limited corporate alternative minimum tax that is
effective for tax years ending after Dec. 31, 2022, which could
impact the demand for tax-exempt municipal bonds. The corporate
alternative minimum tax had previously been repealed in 2017 as
part of the Tax Cuts and Jobs Act.

The IRA creates a new revenue-generating 15 percent corporate
alternative minimum tax (the Corporate AMT) (also known as the book
minimum tax), which, when effective, applies to an “applicable
corporation,” namely, a domestic corporation with average
“adjusted financial statement income” (AFSI) in excess of
$1 billion over a three-taxable-year period or a foreign-parented
corporation with a three-taxable-year average annual AFSI of $100
million or more if they are part of a foreign-parented
multinational group with an average AFSI exceeding $1 billion. An
applicable corporation does not include an S Corporation, a real
estate investment trust or a regulated investment company. A
corporation that is determined not to be an “applicable
corporation” will remain exempt from the corporate alternative
minimum tax consistent with its repeal in 2017 as part of the Tax
Cuts and Jobs Act.

While the Corporate AMT is projected to generate $220 billion of
tax revenue over 10 years, it is expected that the Corporate AMT,
the applicability of which could be expanded in the future, will
have very limited immediate impact in terms of the number of
corporate taxpayers affected. The U.S. Congress Joint Committee on
Taxation has estimated that 150 companies (most of which are in the
manufacturing sector) will be affected by the new Corporate AMT.
With regard to the public finance sector, the affected taxpayers
are banks, insurance companies, and property and casualty insurers,
which are often purchasers of tax-exempt municipal bonds. It is
also expected that tax disclosure language in offering statements
and tax opinion language will have to be revised in order to
account for the enactment of the Corporate AMT. Further, bond
purchase agreements should be reviewed to determine whether this
change will affect any of the so-called “outs” under such
agreements.

Holland & Knight attorneys are working with borrowers,
issuers, underwriters and lenders to address the impact of the
Corporate AMT.

For an in-depth summary of the full IRA legislation, see Holland
& Knight’s previous alert, “The Inflation Reduction
Act: Summary of the Budget Reconciliation Act
,” Aug. 8,
2022.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

POPULAR ARTICLES ON: Finance and Banking from United States



Source link

Related posts

Accounting for Portable Long Service Leave – Employee Rights/ Labour Relations

Surplus Plan Assets Continue To Puzzle IRS And Frustrate Plan Sponsors – Employee Benefits & Compensation

If You Think Child Support Doesn’t Apply To Stepchildren, Think Again – Family Law