Legal Alert: Signed, sealed, delivered – Biden signs Inflation Reduction Act enacting “new” corporate minimum tax

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the IRA) into law. Among the most notable IRA provisions is a 15% corporate alternative minimum tax on corporations with book profits exceeding $1 billion effective for taxable years beginning after December 31, 2022 (the AMT). Originally a provision of the now-defunct Build Back Better Act, the AMT was revived by Senators Chuck Schumer and Joe Manchin earlier this month. The AMT managed to survive the budget reconciliation process, including a “vote-a-rama” in the Senate (i.e., a procedure in which Senators propose an unlimited amount of amendments to budget-related bills). The corporate AMT applies only if the 15% rate applied to a designated corporation’s financial statement income exceeding $1 billion with adjustments is greater than the corporation’s regular US Federal income tax liability plus any base erosion anti-abuse tax (BEAT). According to the Joint Committee on Taxation, approximately 150 of the world’s largest companies may potentially be subject to the AMT. Consequently, there are a range of issues to consider in applying this new tax.

This legal alert provides a high-level overview of the AMT with preliminary observations and potential implications. As practitioners and taxpayers have the opportunity to digest the new statute, it will be interesting to see what major issues arise, where clarification is needed, and what direction is provided by the IRS and Treasury in issuing implementation guidance.