Coleman Jackson, P.C. | Transcript of Legal Thoughts
Published October 31, 2022
Overview:
Legal Thoughts is an audiocast presentation by Coleman Jackson, P.C., a law firm based in Dallas, Texas serving individuals, businesses, and agencies from around the world in taxation, litigation, and immigration legal matters.
This episode of Legal Thoughts is an audiocast where the Attorney, Coleman Jackson is being interviewed by Alexis Brewer, Tax Legal Assistant of Coleman Jackson, P.C. The topic of discussion is “The 2022 Inflation Reduction Act — Three Federal Tax Implications You Ought to Know About.” You can listen to this podcast by clicking here:
If you enjoy this podcast, make sure to stay tuned for more episodes from the taxation, litigation, and immigration Law Firm of Coleman Jackson, P.C. Be sure to subscribe. Visit the taxation, litigation and immigration law firm of Coleman Jackson, P.C. online at www.cjacksonlaw.com.
TRANSCRIPT:
ATTORNEY: Coleman Jackson
LEGAL THOUGHTS
COLEMAN JACKSON, ATTORNEY & COUNSELOR AT LAW
ATTORNEY: Coleman Jackson
Welcome to Legal Thoughts
My name is Coleman Jackson and I am an attorney at Coleman Jackson, P.C., a taxation, litigation and immigration law firm based in Dallas, Texas.
In addition to myself, we have Alexis Brewer – Tax Legal Assistant, Leiliane Godeiro – Litigation Legal Assistant, and Johanna Powell – Tax Legal Assistant.
On today’s “Legal Thoughts” podcast, our Tax Legal Assistant, Alexis Brewer, will be interviewing me on the important topic of: “The 2022 Inflation Reduction Act — Three Federal Tax Implications You Ought to Know About.”
INTERVIEWER: Alexis Brewer, Tax Legal Assistant
Hi everyone, my name is Alexis Brewer and I am a Tax Legal Assistant at the tax, litigation and immigration law firm of Coleman Jackson, Professional Corporation. Our law firm is located at 6060 North Central Expressway, Suite 620, right here in Dallas, Texas.
Good afternoon, Attorney; thank you for agreeing to sit with me as I interview you with respect to this hot tax topic: “The 2022 Inflation Reduction Act — Three Federal Tax Implications You Ought to Know About.”
Let’s jump right in,
Question 1: What is The Inflation Reduction Act of 2022 and how did it come about?
Attorney Answer – Question 1:
Hello Alexis.
The Inflation Reduction Act of 2022 is a new landmark bill that was passed by Congress & signed into law by President Biden in August 2022.
The Inflation Reduction Act of 2022 (IRA) is the product of many back-and-forth negotiations between the Democrats and Republicans following the failure of President Biden’s Build Back Better bill that was introduced last year.
The law approves more than 700 billion dollars in federal investments aimed at reducing the national deficit, combating climate change, and lowering health care costs, among a number of other stated initiatives.
INTERVIEWER: Alexis Brewer, Tax Legal Assistant
That leads me right into my next question –
Question 2: Why is The Inflation Reduction Act of 2022 such a big deal right now?
Attorney Answer – Question 2:
That’s a great question.
Despite its name, “The Inflation Reduction Act of 2022” addresses more than just the rise in inflation. The Inflation Reduction Act is gaining attention right now because it is a massive bill that addresses many hot button issues.
For example, the Inflation Reduction Act has provisions related to healthcare coverage, capping prescription medication costs, pollution reduction, energy investments, tax code reform and much more.
Today’s podcast will focus on the top three relevant tax provisions predicted to raise revenue under the Inflation Reduction Act.
INTERVIEWER: Alexis Brewer, Tax Legal Assistant
Question 3: Attorney, what is the first major tax change resulting from the passage of the Inflation Reduction Act?
Attorney Answer – Question 3:
The first major tax change under the Inflation Reduction Act is the imposition of a 15% Corporate Alternative Minimum Tax (AMT) on corporations with an annual profit of at least $1 billion.
The Alternative Minimum Tax was originally designed to prevent specific companies from being able to use enough tax breaks to face zero tax liability in a given year while reporting an accounting profit. To combat this problem, Congress decided to calculate the tax using book income rather than taxable income.
This measure is expected to raise over $300 billion in new revenue, providing more than 40% of the bill’s funding.
INTERVIEWER: Alexis Brewer, Tax Legal Assistant
Wow, that’s a huge portion of expected revenue.
Question 4: What kind of companies are subject to this Alternative Minimum Tax and when will it take effect?
Attorney Answer – Question 4:
The 15% Corporate Alternative Minimum Tax only applies to corporations with an average annual adjusted financial statement income of more than $1 billion. Tax experts estimate that around 120-150 corporations will be affected by the Corporate Alternative Minimum Tax annually.
This means the average taxpayer doesn’t need to be concerned. For the majority of American taxpayers, the number one thing you need to know with respect to the 15% Corporate Alternative Minimum Tax is that: IT WILL HAVE NO DIRECT IMPACT ON YOU; although corporations impacted might find ways of passing any increased costs of doing business along to consumers of their products and services.
The Corporate Alternative Minimum Tax will be effective after December 31, 2022.
INTERVIEWER: Alexis Brewer, Tax Legal Assistant
Question no. 5: What is the next major tax provision in The Inflation Reduction Act?
Attorney Answer – Question 5:
In addition to the Corporate Alternative Minimum Tax, the Inflation Reduction Act also imposes a 1% Excise Tax on the fair market value of any stock that is repurchased by the corporation during the tax year.
- The taxable amount is reduced by the fair market value of any stock issued by the repurchasing corporation during the taxable year, including stock issued or provided to employees of the corporation.
There is no minimum threshold, such as gross receipts, market cap, earnings and profits, etc., for the application of the 1% Excise Tax. And the Secretary of the Treasury is authorized to define “repurchase” to include “economically similar” transactions.
This tax will also be effective after December 31, 2022. Again, for the majority of taxpayers, unless they own stock, this Inflation Reduction Act provision will have little to know impact on their lives.
INTERVIEWER: Alexis Brewer, Tax Legal Assistant
Question no. 6: What is the final major tax change under the Inflation Reduction Act?
Attorney Answer – Question 6:
The Inflation Reduction Act provides the IRS an additional $80 billion over the next 10 years.
The majority of these funds, about 60% of the increased IRS funding, is allocated to IRS enforcement activities, such as:
- Determining and collecting unpaid taxes
- Criminal investigations
- Asset monitoring & compliance investigations
The stated purpose of this Inflation Reduction Act provision is to ensure high-income households & corporations pay their fair share of federal taxes. This provision for increased IRS enforcement funding is not supposed to increase taxes on taxpayers with taxable incomes under $400,000.
This is what taxpayers should know: Any additional funding to IRS is going to allow it to more efficiently and effectively collect taxes from whoever owes them regardless whether their taxable income is under $400,000 or over $400,000.
- Word to the wise: timely file your tax returns when they become due and pay your taxes as you go. It’s likely that the IRS will be updating its processing systems, modernizing its monitoring and forms matching processes, hiring more auditors and examiners and knocking on more doors with this increased funding.
Interviewer Wrap-Up
Attorney, thank you for siting with me today to explain the Inflation Reduction Act, specifically the 15% Corporate Alternative Minimum Tax, the 1% Excise Tax and the $80 billion dollars in increased funding allocated to IRS enforcement activities.
Today’s takeaway seems to be that although the Inflation Reduction Act’s 15% Corporate Alternative Minimum Tax and the 1% Excise Tax on stock buy backs might only impact a few taxpayers, it’s very likely that the additional $80 billion allocated to IRS enforcement is very likely to impact lots-and-lots of taxpayers.
To our listeners who want to hear more podcast like this one please subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or where ever you listen to your podcast. Take care, everyone! And come back in about two weeks, for more taxation, litigation and immigration Legal Thoughts from Coleman Jackson, P.C., located right here in Dallas, Texas at 6060 North Central Expressway, Suite 620, Dallas, Texas 75206.
English callers: 214-599-0431 | Spanish callers: 214-599-0432 |Portuguese callers: 214-272-3100
Attorney Closing Remarks
This is the end of today’s Legal Thoughts!
Thank you all for giving us the opportunity to inform you about: “The 2022 Inflation Reduction Act — Three Federal Tax Implications You Out to Know About.”
If you want to see or hear more taxation, litigation and immigration LEGAL THOUGHTS from Coleman Jackson, P.C. Subscribe to our Legal Thoughts Podcast on Apple Podcast, Google Podcast, Spotify or wherever you listen to your podcast.
Stay tuned! We are here in Dallas, Texas and want to inform, educate and encourage our communities on topics dealing with taxation, litigation and immigration. Until next time, take care.
