Inflation Reduction Act of 2022 – Summary Guide

Reading Time: 2 minutes, 10 seconds

On August 16, President Biden signed the Inflation Reduction Act (IRA) into law. The enormous bill—clocking in at 725 pages—contains a wide range of provisions and comes with a nearly $750 billion price tag. “The bill is fighting inflation and has a whole lot of collateral benefits as well,” said former Treasury Secretary Larry Summers, who reportedly helped craft the legislation.

We have compiled this broad summary of the entire IRA. Over the next several weeks and months we will also be issuing more in depth summaries of specific areas of the IRA, particularly those concerning income tax changes. Please stay tuned and reach out to us with any particular questions or areas which we can assist you.

Provisions for Funding the IRA

In order to cover the $750 billion price tag of the IRA, authors of the legislation included a variety of savings- and revenue-related provisions. Here is a breakdown of how the IRA will be funded (please note that the numbers are estimates from the Joint Committee on Taxation and the Congressional Budget Office):

  1. Savings in the Healthcare Arena ($288 billion)
    1. Repeal of a Trump-era drug rebate rule
    2. An inflation cap on drug prices
    3. An allowance for Medicare to negotiate certain drug prices
  2. New Revenue
    1. A new 15% corporate minimum tax for corporations with financial statement (“book”) income exceeding $1 billion ($313 billion)
    2. Increased revenue as a result of IRS tax enforcement funding ($124 billion)
    3. A 1% excise tax on corporate stock buybacks
    4. Methane and Superfund fees

How IRA Funds Will be Spent

So how will the $750 billion raised via savings and new revenue be spent? Here is a brief overview of initiatives included in the IRA (please note that the numbers are estimates from the Joint Committee on Taxation and the Congressional Budget Office):

  1. Climate & Energy Spending ($369 billion)
    1. Creation of new clean manufacturing tax credits
    2. Establishment of additional clean electricity grants and loans
    3. Creation of a new “Clean Energy Technology Accelerator”
    4. Incentivization of clean agriculture
    5. Incentivization of clean electronic vehicle manufacturing
    6. Additional energy and climate provisions
  2. Healthcare Spending ($64 Billion)
    1. A three-year extension of Obamacare subsidies for health care insurance costs
    2. A redesign of Medicare Part D and additional health care provisions
  3. IRS Funding
    1. Funding for increased IRS enforcement (namely, to enhance IT systems and compensate specialized employees—for more details, read IRS Commissioner Charles Rettig’s letter on the intended use of funding and plans for enforcement)
  4. Other Spending
    1. Reducing the Federal deficit ($300+ billion)

What are the specific Tax Provisions that the IRA introduced or changed?

Contact your trusted Hancock Askew advisor to assist with guidance on the Inflation Reduction Act.

Contact Us

Stay up-to-date

Remain informed and connected. Follow us and join our mailing list.