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Reconciliation bill advances; carried interest changes removed

August 8, 2022 / 3 min read

Democratic senators have concluded their work on the Inflation Reduction Act of 2022, with specific tax changes, which now heads to the House for consideration. Our National Tax Office experts discuss what taxpayers could expect from this reconciliation bill.

Editor's note: The developments discussed in this piece were part of the legislative process leading to enactment of the Inflation Reduction of 2022. Please see our capstone article about that legislation for details about the final changes included in that bill.

The Inflation Reduction Act of 2022 (IRA) has taken a step forward, as the Senate completed its deliberation and passed the bill on August 7. While in the Senate, a few alterations were made to the tax provisions, including the removal of any changes to the taxation of carried interests. The IRA now heads to the House for consideration, with passage likely later this week.

Senate negotiations and final vote

The IRA was previously announced on July 27 as result of negotiations completed by Senators Manchin and Schumer. However, the bill was subsequently modified during further negotiations. Those included discussions with Senator Sinema during the past week and negotiations on the Senate floor prior to the final vote. Here are the key takeaways following a review of the updated bill:

All other tax provisions remain largely unchanged from the version of the IRA released on July 27. This includes the $80 billion increase in IRS funding over the next 10 years, the increase in the payroll tax credit for research and development by $250,000 per year (total of $500,000), and the many energy tax provisions.

What’s next for the Inflation Reduction Act?

The IRA now heads to the House for consideration this week. If any changes are made to the bill, a conference committee would be required to reconcile the differences. However, initial reporting suggests that Democratic leadership in the House intends to move swiftly toward passage of the bill later this week without any further changes.

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