Legal Alert: Back from the dead – Corporate minimum tax resurfaces at eleventh hour in Inflation Reduction Act of 2022

On July 27, 2022, the Senate announced agreement on a reconciliation package entitled the Inflation Reduction Act of 2022 (the IRA), the artist formerly known as the Build Back Better Act (the BBBA). Although months ago the $2 trillion BBBA was declared dead, Senators Joe Manchin and Chuck Schumer introduced the skinnied-down $739 billion proposal Wednesday, with its submission to the Senate Parliamentarian Wednesday evening and floor debate hopeful for next week. Among many revenue raisers, the IRA includes the 15% corporate minimum tax, prescription drug pricing reform, increased IRS tax enforcement and changes to the treatment of carried interest income. The initial proposal outlays a significant amount of such revenue to energy provisions to address the climate crisis as well as extending a number of Affordable Care Act health premium subsidies.

This legal alert provides a high-level overview of the corporate minimum tax as presented in this first cut of the IRA with preliminary observations and potential implications. However, details regarding operation of the corporate minimum tax are being discussed. For example, there is consideration of specific income that will be included in the financial statement income test and items for which credits will be allowed that would reduce such income. Moreover, questions are being addressed regarding the application of the corporate minimum tax to certain structures taking into account foreign entities as well as consolidated entities. Resolution of these issues will impact ultimate application of the corporate minimum tax.