The Inflation Reduction Act has been making a significant impact on American households, according to data released by the IRS and a report by the Treasury Department. But the Treasury Department suggests that the program could go a lot further with increased funding.
IRS data indicates more than 3.4 million families have already claimed over $8 billion in tax credits for things such as solar and energy efficient appliance purchases—both of which were expanded and extended under the tax-and-climate law. The number of families receiving these expanded tax credits increased by nearly one-third from 2021, the year prior to the law’s enactment.
Taxpayers in all 50 states, Washington, D.C., and Puerto Rico have helped the program become widespread. Almost half of the families receiving credits had incomes below $100,000, indicating the financial benefits of the tax credit program are likely substantial for many households.
But with more funding, for example, a program providing heat pumps for every household is estimated to be worth between $84 billion and $150 billion per year. This program could help reduce carbon dioxide by 330 million to 590 million tons per year, or 5% to 9% of total emissions.
The benefits of these kinds of programs aren’t mere speculation, either. In Europe, partial heat pump grants have boosted installations in both France and Germany, with nearly a million deployments between those two countries in 2022 alone.
The tax credit program is saving American families money and playing a crucial role in combating climate change. But more can—and should—be done to expand adoption of clean energy and energy-efficient technologies.
—Andrew Leahey
Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed tax covenants in stock deals, the foreign withholding tax, and more.
The Exchange—It’s where great ideas on tax and accounting intersect.
—Curated by Melanie Cohen
Insights
PIIE’s Gary Clyde Hufbauer questions an EU proposal for a central multinational asset registry, saying it would create privacy issues and have little effect on tax enforcement.
Withers’ Michelle Graham says proposed IRS regulations for foreign trusts need more guidance, in part because determining whether a trust passes a certain test still requires a facts-and-circumstance analysis.
Greenberg Glusker’s Zachary Nolan and Daniel Cousineau offer tips for stock purchase agreement negotiations, saying that understanding tax covenants and tax definitions protects both sides of the transaction.
Indiana University’s Vivian Fang says changes to the IRS’s updated crypto tax form simplify reporting but still don’t define digital asset brokers.
Dentons’ John Harrington calls for lowering the high rate of US withholding taxes on payments to nonresidents, saying that inertia has led non-US investors toward tax avoidance measures.
Forvis Mazars’ Lola Lu, Brendan Williamson, and Gokce Gucuyener analyze ways taxpayers can prepare for the OECD Pillar One’s potential impact on transfer pricing.
Columnist Corner
Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax
The IRS could improve federal excise tax collection and remittance on sporting equipment by applying a model used for state sales taxes and developing a centralized tax calculator, Andrew Leahey writes in his latest Technically Speaking column.
This would provide more consistent funding for conservation projects and wildlife restoration, Andrew argues, adding that tax calculation advancements “could also be shared with state governments in the future, offering them a robust system to streamline their own tax collection processes.” Read More
News Roundup
IRS Reopens Covid-Era Credit Voluntary Disclosure Program
Businesses and tax-exempt organizations are getting more time to return to the IRS the pandemic-era tax credit they wrongly claimed at a smaller discount. Read More
Harris Economic Proposals Envision Tax Cuts and Subsidies
Vice President Kamala Harris will propose sweeping new federal subsidies for parents, homebuyers, and Americans with low-incomes alongside new programs to curb increases in rent and grocery prices. Read More
California Gets First Suit Over Law Undoing Microsoft Tax Refund
The National Taxpayers Union is asking a California trial court to block a new state law overturning a win for Microsoft Corp. on tax treatment of dividends that multinational companies receive from foreign affiliates. Read More
Big Four Firms Hold Audit Quality Steady as Second Tier Lags
Top US accounting firms largely held steady on their regulatory compliance rates in 2023, snapping a two-year trend of rising audit rule violations, their latest inspection results show. Read More
Tax Management International Journal
Anshu Khanna of Nangia Andersen discusses India’s Union Budget 2024 proposal that would reform direct and indirect taxation in India as part of the government’s goal to attract investors to India.
Baker McKenzie’s John Barlow, Ethan Kroll, and Samuel Pollack say the proposed DCL and DPL regulations have drawn the ire of many taxpayers and are bad tax policy.
Tax Management Memorandum
Wagner Law Group’s Izzy Goldowitz discusses how the Supreme Court’s June 28 Loper Bright decision may affect administration of federal agencies’ employee benefits regulations.
Career Moves
Renesha Fountain joined Nelson Mullins as tax partner in Houston.
Anastasios Kastrinakis and Jennifer Migliori were appointed co-vice chairs of Duane Morris’s tax division within the firm’s corporate practice group.
If you’re changing jobs or being promoted, email your submission to TaxMoves@bloombergindustry.com for consideration.
