President Joe Biden, who took office on 20 January 2021, has proposed significant changes to United States (US) tax law as part of his budget submission to the US Congress. President Biden has proposed to increase corporate and individual tax rates that were put into effect by the 2017 tax reform act (Public Law [P.L.] No. 115-97). In August 2022, Congress passed and the President signed into law the Inflation Reduction Act (IRA) of 2022 (Public Law No. 117-169), which includes a 15% book minimum tax on corporations with financial accounting profits over $1 billion, and a 1% excise tax on certain stock buybacks. The IRA also contains numerous clean energy tax incentives related to electricity production, carbon sequestration, alternative vehicles and fuels, and residential and commercial energy efficiency. The IRA does not contain certain other tax proposals, such as international tax provisions intended to address US implementation of the OECD agreement on a Pillar Two per-country global minimum tax.
The US Congress in 2021 enacted an Infrastructure Investment and Jobs Act (P.L. 117-58. While not primarily a tax bill, P.L. 117-58 renewed existing federal fuel excise taxes and featured some new tax provisions, including new tax information reporting requirements related to digital assets and a reinstatement, with modifications, of “Superfund” excise taxes on certain chemicals to finance US environmental cleanup programs.
The 2017 tax reform legislation lowered business and individual tax rates, modernised US international tax rules, and provided the most significant overhaul of the US tax code in more than 30 years. P.L. 115-97 lowered permanently the US federal corporate income tax (CIT) rate from 35% to 21%. The new CIT rate is effective for tax years beginning after 31 December 2017. P.L. 115-97 also repealed the corporate alternative minimum tax (AMT).
P.L. 115-97 provided the most significant overhaul of US international tax rules in more than 50 years by moving the United States from a ‘worldwide’ system to a 100% dividend exemption ‘territorial’ system. As part of this change, P.L. 115-97 included two minimum taxes aimed at safeguarding the US tax base from erosion, along with other international tax provisions. P.L. 115-97 also included a broad range of tax reform proposals affecting businesses, including a new 20% deduction for certain pass-through business income. In addition, P.L. 115-97 repealed or modified many prior-law tax provisions to offset part of the cost of the tax reforms.
The Treasury Department and Internal Revenue Service (IRS) have issued extensive regulations under several key provisions of P.L. 115-97.
Various COVID pandemic relief measures were enacted in 2020 and 2021. Tax relief measures for businesses that were enacted as part of P.L. 116-136 include a five-year net operating loss (NOL) carryback (including a related technical correction to the 2017 tax reform act), a change in the Section 163(j) interest deduction limitations, accelerated AMT refunds, payroll tax relief, a temporary suspension of certain aviation excise taxes, a tax credit for employers who retain employees, and a ‘qualified improvement property’ technical correction to the 2017 tax reform act.