Tax Implications of the Inflation Reduction Act: Corporate AMT, Stock Repurchase Excise Tax, Impact on M&A Transactions

On Aug. 16, 2022, the Act was signed into law. The Act provides significant tax provisions impacting small businesses and corporations across various industries, as well as incentivizing the expansion and financing of various green technology industry projects in the United States. Attorneys and tax professionals must recognize the impact of new tax provisions under the Act, how they are applied to taxpayers, and their effects on certain M&A transactions and tax planning.

The Act includes a variety of tax rules. The two primary tax provisions impacting M&A transactions, deal structures, and tax planning are (1) the new corporate alternative minimum tax imposed on certain corporations meeting a test based on their average annual adjusted financial statement income and (2) an excise tax imposed upon stock repurchases by publicly traded corporations. The Act also expands lucrative tax credits that have the potential to be a game changer for the growth of green technology industries in the United states, both in terms of deployment and equipment manufacture.

The Corporate AMT is a tax of 15 percent on "adjusted financial statement income" rather than "adjusted taxable income" and becomes effective after Dec. 31, 2022. In addition, the Act will impose a one percent excise tax on specific repurchases of a corporation's stock during the taxable year. The stock repurchase excise tax is charged on the fair market value of the repurchased stock, reduced by the fair market value of such corporation's stock issued in the same taxable year. The new tax rules bring about various considerations, such as entities subject to the corporate AMT and excise tax, how they are calculated, available exceptions, and other crucial concerns.

The Act separately enacts and expands tax credits for the renewable energy, energy storage, nuclear energy, clean fuel production (including for hydrogen), carbon capture and sequestration, and green technology manufacturing industries. The Act also provides novel manners for monetizing these tax credits, including through the sale of tax credits. These changes to the tax law have the potential to significantly expand the investor base for green energy infrastructure and technology projects, and thereby accelerate a transition to a green powered economy.

Listen as our panel discusses the new corporate AMT, the excise tax on stock repurchases, commercial enterprise tax benefits for the green technology industry, and other critical matters impacting M&A transactions and other tax rules and challenges under the Inflation Reduction Act.

1. Overview of the impact of the Inflation Reduction Act on M&A transactions
2. New corporate AMT
   1. Which companies are subject to the corp AMT?
   2. How do you calculate corporate AMT?
   3. Exceptions
3. New excise tax for stock repurchases
   1. Key provisions under the Act
   2. Companies subject to the excise tax
   3. Application to specific transactions?
   4. Exceptions
4. Other key tax provisions under the Act
5. Tips and techniques for tax counsel in light of the Act
6. The Act’s alteration of existing green technology tax credits for commercial enterprises
7. The Act’s new green technology tax credits for commercial enterprises
8. New tax credit “adders” and haircut
9. Monetization of tax credits under the Act
10. Takeaways for green technology industry and investors

The panel will discuss these and other key issues:

• Key tax provisions of the Act
• Challenges for structuring M&A transactions in light of the Act
• Impact of new stock repurchase excise tax
• Impact of the new corporate AMT
• Issues for foreign-owned U.S. corporations
• Best practices for tax and M&A counsel in light of the Act
• Overview of and observations regarding expanded green technology tax benefits for commercial enterprises under the Act

Learning Objectives

After completing this course, you will be able to:

• Identify the tax laws impacting M&A transactions under the Inflation Reduction Act
• Understand the impact of the new stock repurchase excise tax
• Recognize methods to avoid tax pitfalls in M&A transactions in light of the Act
• Discern the application of the new corporate AMT

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Working knowledge of partnership/corporate structure, debt financing, merger, and liquidation.

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IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).