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August 7, 2022

Revised text of Inflation Reduction Act makes tax, health changes

Senate Democrats on August 6 released revised text of the Inflation Reduction Act of 2022 that drops the carried interest holding period provision and a provision in the prescription drug pricing package; adds a stock buyback excise tax; and changes the corporate alternative minimum tax (CAMT) proposal to preserve depreciation benefits and for other purposes. The Senate voted 51-50 on the motion to proceed to the bill this evening, with VP Harris breaking the tie. Debate has begun and will be followed by a "vote-a-rama" tonight and potentially overnight and into the morning, likely culminating in a vote on final passage.

Tax - Relating to the new 15% minimum tax on book income, the revised bill would:

  • Allow MACRS depreciation as well as amortization deductions allowed with regard to qualified wireless spectrum to reduce adjusted financial statement income for purposes of computing the new book minimum tax.
  • Make several other conforming amendments, including ensuring that elections in the energy tax credit section of the bill to allow for direct payments of credits can be disregarded for purposes computing adjusted financial statement income, and replacing the references to IRC Section 163(n) in prior versions with new language defining a foreign parented multinational group, since the new bill does not contain the interest limitations previously proposed in IRC Section 163(n).

The effective date of the new minimum tax remains for tax years after December 31, 2022.

Senate Majority Leader Chuck Schumer (D-NY) said August 5 the CAMT provision was trimmed to $258 billion from $313 billion previously.

The stock buyback excise tax, which Senator Schumer said would raise $74 billion, or about $50 billion less than the House proposal, doesn't include significant substantive changes compared to the House-passed Build Back Better Act. However, the effective date has been changed to apply to repurchases of stock after December 31, 2022. The provision imposes a 1% excise tax on publicly traded US corporations for the value of any of its stock that is repurchased by the corporation during the tax year.

The energy tax incentive portion of the bill emerged from the "Byrd Bath" parliamentary review without requiring any changes, the Finance Committee announced early August 6.

Health - The Senate Parliamentarian allowed Democrats to move forward with most of their plan to reduce the cost of prescription drugs, however struck a key provision that would have penalized drugmakers for increasing prices more than inflation in the commercial market — and not just in Medicare. The exclusion of the commercial market could take an estimated $40 billion out of the $280 billion in savings from the bill's drug pricing provisions.

The latest version of the bill also adds in new insulin-specific provisions, including those aimed at limiting out-of-pocket costs for both Medicare and commercial market beneficiaries. This includes allowing for insulin to be provided below the deductible and setting co-payment caps at no more than $35 a month starting in 2023 for Medicare and 2024 for the commercial market. In 2026 and beyond, the co-payment would be set at the lesser of $35 a month or 25% of the price established through the new Medicare price negotiation program, if applicable, for Medicare beneficiaries. Starting in 2024, the co-payment would be set at the lesser of $35 a month or 25% percent of the negotiated price net all price concessions received by or on behalf of the plan or coverage.

A redline version of the substitute amendment is attached below.

The substitute amendment text is available here.

A CBO letter regarding the substitute amendment is available here.


Contact Information
For additional information concerning this Alert, please contact:
Washington Council Ernst & Young
   •  Any member of the group at (202) 293-7474.


Redline of substitute amendment