As many readers will know, on Aug. 16 Joe Biden signed into law a massive and landmark 735-page statute entitled the Inflation Reduction Act (IRA). The hundreds of billions of dollars of benefits that the IRA will provide to individuals and businesses, summarized below, will be offset by, among other new taxes, a major new 15% federal income tax on hundreds of billion-dollar corporations that currently have massive book earnings but pay little or no federal income taxes, as well as by other new taxes applicable only to rich taxpayers. And under the IRA, the IRS will receive $203.7 billion of new funding to enable it to better audit, among other taxpayers, the tens of thousands of wealthy individuals presently avoiding federal income taxes illegally.
As for IRA benefits:
First, for individuals covered by Medicare, the IRA provides massive savings of pharmaceutical costs that will mainly benefit low- and middle-income people. Although with various effective dates, it does so by phasing in a cap for out-of-pocket pharmaceutical costs, establishing a $35 cap for a month’s supply of insulin, and allowing the federal government to negotiate with pharmaceutical companies the cost of the pharmaceuticals the federal government purchases. It also extends key provisions of the Affordable Care Act.
Second, it provides massive new federal income tax savings to a vast range of companies whose research efforts, products and services help combat global warming.
What will be the principal IRA benefits for New Hampshire business owners? Many socially minded New Hampshire business owners will celebrate the IRA for non-business reasons — namely, for its impacts on health care costs, environmental benefits, and tax fairness.
However, from a purely business viewpoint, many New Hampshire business owners will also celebrate the enactment of the IRA because their companies are engaged in one or more of the vast array of business activities that qualify for IRA federal income tax credits. (Tax credits are not merely deductions from taxable income; they are dollar-for-dollar reductions of income taxes.) New Hampshire companies will benefit from the IRA if, among other things, they directly or indirectly:
Support the production of solar, wind, marine or geothermal energy;
Produce and sell any other form of clean energy, include nuclear energy;
Manufacture, purchase or use carbon capture equipment;
Are engaged in the production hydro technology; or
Support the production of photovoltaic wafers and cells, solar-grade polysilicon, polymeric backsheets, solar modes, wind energy components, or energy-efficient batteries and battery cells and modules.
In addition, special federal income tax benefits are available under the IRA to companies that fight global warming and whose plants or projects are located in low-income communities and brown-field sites.
In summary, any New Hampshire businesses that engage in manufacturing or selling any of the kinds described above, in manufacturing components for these products, in doing research relating to them, or in buying and using these products are likely to qualify for substantial IRA benefits.
However, these businesses should be aware that the federal income tax requirements they must meet in order to obtain IRA tax benefits can be very complex: For example, to qualify for IRA tax credits, they may have to meet highly detailed federal prevailing wage requirements and apprenticeship requirements.
I’m an LLC lawyer, not an expert in advising business owners on how to qualify for IRA tax credits. However, if your company wants to obtain and maximize IRA credits and you haven’t yet located such an expert, let me know. I’ll help you find one.
I can also help you find an expert in maximizing, under the recently enacted CHIPS Act (the Creating Helpful Incentives to Produce Semiconductors for America Fund Act), the massive federal loans and subsidies available to U.S. companies engaged in any way in the semiconductor industry.
These loans and subsidies are providing America with powerful new weapons in our high-tech competition with China.