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Posted by Bill Smith, Nate Smith, Don Reiser, and Eric Strawder on Mon, Nov 1, 2021 @ 10:00 AM


On Oct. 28, 2021, the White House released its “Build Back Better Framework.” Later that day, the House Ways and Means Committee issued the “TEXT OF H.R. 5376, BUILD BACK BETTER ACT,” which fleshes out the spending and tax proposals summarized in the White House release with meaningful legislative changes. This article analyses the most relevant tax provisions of the Build Back Better Act (BBBA). At the time of publication, the House has yet to set a date for a  vote on the BBBA or its complementary legislation. The $1.9 Trillion bipartisan infrastructure bill passed by the Senate on Aug. 3 by a vote of 69-30.

Without further attribution, much of this article is excerpted directly from the Section-By-Section explanation issued by the House Ways and Means Rules Committee. We have organized our analysis under the following table of contents to assist with your topics of interest.

Table of Contents

  1. Domestic Corporate Tax Reforms
  2. International Corporate Tax Reforms
  3. Tax Increases for High-Income Individuals
  4. Social Safety Net Spending Provisions
  5. Green Energy Credits and Incentives
  6. Funding the Internal Revenue Service and Improving Taxpayer Compliance
  7. What Is Not Included in the BBB Act?

The size and scope of the BBBA rival the 2017 tax law commonly referred to as the Tax Cuts and Jobs Act. We understand that you may have questions about how many of these proposals could impact you or your business. Please contact us to review your questions and observations.


I.A.  Corporate Alternative Minimum Tax. The proposal for alternative minimum tax (AMT) was a lynchpin of President Biden’s campaign proposals. In April, It found its way into the American Jobs Plan and the Treasury Green Book in May, only to disappear in the initial Ways and Means draft in September. It returns in the latest iteration.

The corporate AMT proposal would impose a 15 percent minimum tax on corporations with adjusted financial statement income in excess of $1 billion. It applies to any C corporation (other than a regulated investment company or a REIT) with a three-year average annual adjusted financial statement income (AFSI) in excess of $1 billion. The tax would equal the amount by which the tentative minimum tax exceeds the corporation’s regular tax for the year. The tentative minimum tax is determined by applying a 15 percent tax rate to the corporation’s AFSI for the taxable year (after taking into account the AMT foreign tax credit and the financial statement net operating losses).

For these purposes, AFSI is the net income or loss of the taxpayer stated on the taxpayer’s applicable financial statement with certain modifications. Generally, an applicable financial statement is a corporation’s form 10-K filed with the Securities and Exchange Commission, an audited financial statement, or other similar financial statement. Adjustments generally include (1) aligning the period covered to the taxpayer’s taxable year, (2) disregarding any federal or foreign taxes taken into account, and (3) disregarding certain direct-pay tax credits provided in the Clean Energy for America Act received by the taxpayer. Under regulations, the Secretary shall provide adjustments to: (1) prevent the omission or duplication of any item, (2) appropriately address corporate reorganizations and similar transactions, and (3) address the effect of these provisions on partnerships with income taken into account under the corporate AMT.

Special rules apply in the case of related corporations included on a consolidated financial statement and in the case of taxpayers filing a consolidated return.

The proposal would be effective for taxable years beginning after Dec. 31, 2022.

I.B.  Excise Tax on Repurchase of Corporate Stock. The provision imposes a 1 percent excise tax on publicly traded U.S. corporations for the value of any of its stock that the corporation repurchases during the taxable year. The term “repurchase” means a redemption within the meaning of Section 317(b) concerning the stock of such corporation and any other similar transaction as determined by the Secretary of Treasury.

The amount of repurchases subject to the tax is reduced by the value of any new issuance to the public and stock issued to the corporation's employees.

A subsidiary of a publicly-traded U.S. corporation that performs the buyback for its parent or a U.S. subsidiary of a foreign corporation that buys back its parent’s stock is subject to the excise tax.

The provision excludes certain repurchases from the excise tax to the extent: 1) the repurchase is part of a tax-free reorganization; 2) the repurchased stock or its value is contributed to an employee pension plan, ESOP, or similar plan; 3) the total amount of stock repurchases within the year is less than $1 million; 4) the purchase is by a dealer in securities in the ordinary course of business; 5) the repurchase is treated as a dividend, and 6) the repurchase is by a RIC or REIT.

The proposal would be effective for repurchases of stock after Dec. 31, 2021.

I.C.  Limitation on Deduction of Interest Expense. This provision adds Section 163(n) to limit the interest deduction of certain domestic corporations that are members of an international financial reporting group to an allowable percentage of 110% of the net interest expense. A domestic corporation’s allowable percentage means the ratio of such corporation’s allocable share of the group’s net interest expense over such corporation’s reported net interest expense. A domestic corporation’s allocable share of the group’s net interest expense is the portion of such expense that bears the same ratio to the total group expense as the corporation’s EBITDA bears to the group’s total EBITDA.

This interest limitation applies only to domestic corporations whose average excess interest expense over interest includible over a three-year period exceeds $12,000,000. The limitation does not apply to any small business exempted under section 163(j)(3). Nor does the limitation apply to any S corporation, real estate investment trust, or regulated investment company.

The proposal would be effective for taxable years beginning after Dec. 31, 2022.

I.D.  Modifications to Treatment of Certain Losses. The provision amends Section 165(g) to provide that losses with respect to securities are treated as realized on the day that the event establishing worthlessness occurs. In addition, the provision provides that partnership indebtedness is treated in the same manner as corporate indebtedness under the section. The provision also clarifies that abandoned securities are treated as worthless at the time of abandonment. In addition, the rule amends Section 165 to provide that a loss on a worthless partnership interest is subject to the same rules as a loss in a sale of a partnership interest. This provision is applicable for taxable years beginning after Dec. 31, 2021.

The rule also changes the treatment of taxable liquidations of corporate subsidiaries. Under the provision, a loss in a taxable liquidation (or dissolution of a corporation with worthless stock) is deferred until the property received in the liquidation is sold to a third party. This provision applies to liquidations after the date of enactment.

I.E.  Adjusted Basis Limitation for Divisive Reorganization. This provision amends section 361 to require a corporation that distributes debt securities of a controlled corporation in a divisive reorganization to recognize gain. The provision applies to reorganizations after the date of enactment, subject to a binding contract exception.

I.F.  Modifications to Exemption for Portfolio Interest. This provision modifies the definition of “10-percent shareholder”, whose interest is exempt from portfolio interest. If a corporation issues an obligation, any person who owns 10% or more of the total vote or value of the stock of such corporation is not eligible for the portfolio interest exemption. This amendment applies to obligations issued after the date of enactment.

I.G.  Limitation on Certain Special Rules for Section 1202 Gains. This provision amends Section 1202(a) to provide that the special 75% and 100% exclusion rates for gains realized from certain qualified small business stock will not apply to taxpayers with adjusted gross income equal to or exceeding $400,000. The baseline 50% exclusion in Section 1202(a)(1) remains available for all taxpayers. The amendments made by this section apply to sales and exchanges after Sep. 13, 2021, subject to a binding contract exception.

AMT does not apply to excluded Section 1202 gain only if it qualified for the 100% exclusion (Section 1202(a)(4)(C)). The bill only “switches off” section 1202(a)(3) (75% gain exclusion) and 1202(a)(4) (100% gain exclusion). So if a taxpayer qualifies for 50% gain exclusion (or 75% because AGI is less than $400,000), the excluded gain will be subject to AMT. The AMT preference is 7% of the gain excluded. That means the taxpayer has AMTI of either 53.5% (the unexcluded 50% plus 7% of the excluded 50%) or 30.25% (the unexcluded 25% plus 7% of the excluded 75%).

I.H.  Rules Relating to Common Control. The tax code aggregates certain business entities to apply various limitations (e.g., the gross receipts limitation in the use of the cash method of accounting under section 448(c), the exemption from interest deductibility limitations under Section 163(j)). Section 52(a) addresses corporate entities and section 52(b) provides similar rules for corporate and non-corporate entities. Section 52(b) refers to “trades or business (whether or not incorporated),” and the treatment of certain for-profit activities is unclear.

The provision would provide that a taxpayer engaged in any activity connected with a trade or business or any for-profit activity is subject to the aggregation rules under section 52(b). The provision would be effective for taxable years beginning after Dec. 31, 2021.

I.I.  Modification of Wash Sale Rules. This section includes commodities, currencies, and digital assets in the wash sale rule, an anti-abuse rule previously applicable to stock and other securities. The wash sale rule in section 1091 prevents taxpayers from claiming tax losses while retaining an interest in the loss asset by denying losses if substantially similar security is purchased within 30 days before or after the loss. The amendments made by this section apply to taxable years beginning after Dec. 31, 2021.

I.J.  Research and Experimental Expenditures. This provision delays until taxable years beginning after December 31, 2025, prior to the effective date of section 13206 of the TCJA.  That section required capitalization and amortization of the research and experimental expenditures, starting with taxable years beginning after Dec. 31, 2021.


II.A.  Modifications to Deduction for Foreign-Derived Intangible Income (FDII) and Global Intangible Low-Taxed Income (GILTI). The provision reduces the section 250 deduction with respect to both FDII (to 24.8%) and GILTI (to 28.5%). This yields a 15% GILTI rate and a 15.8% FDII rate. If the section 250 deduction with respect to GILTI or FDII exceeds taxable income, the excess is allowed as a deduction, which will increase the net operating loss for the taxable year. This provision is generally applicable for taxable years beginning after Dec. 31, 2022.  A transition rule is provided for taxable years that include but do not end on Dec. 31, 2022.

II.B.  Repeal of Election for 1-Month Deferral in Determination of Taxable Year of Specified Foreign Corporations. The provision strikes section 898(c)(2), which previously allowed the choice of a taxable year beginning one month earlier than the majority U.S. shareholder year.  This provision is applicable for taxable years of specified foreign corporations beginning after Nov. 30, 2022.

II.C.  Modifications of Foreign Tax Credit Rules Applicable to Certain Taxpayers Receiving Specific Economic Benefits. Under this provision, any amount paid by a dual capacity taxpayer to a foreign country will not be considered a tax to the extent it exceeds the generally applicable income tax of that country. Dual capacity taxpayers are U.S. companies subject to levy in and receive certain benefits from a foreign country or possession of the United States.  This provision applies to taxes paid or accrued after Dec. 31, 2021.

II.D.  Modifications to Foreign Tax Credit Limitations. This provision requires foreign tax credit determinations on a country-by-country basis by assigning each item of income and loss to the taxpayer's taxable unit, which is a tax resident of a country (or, in the case of a branch, has a taxable presence in such country).  It also repeals the foreign branch income basket. It repeals the limitation on foreign tax credit carryforwards for GILTI category income by allowing a carryforward to five succeeding tax years beginning after December 31, 2022, and before January 1, 2031.  With respect to all baskets, the current one-year carryback of foreign tax credits is repealed.

For purposes of the GILTI foreign tax credit limitation, a taxpayer’s foreign source income is determined by allocating only such deductions that are directly allocable to such income (e.g., the section 250 deduction and taxes attributable to that 250 deductions).  All other U.S. group expenses that otherwise would be allocated to GILTI income are allocated to U.S. source income.  In the case of any covered asset disposition (generally a transaction treated as a disposition of corporate stock for foreign law purposes), the principles of Section 338(h)(16) apply in determining the source and character of any item.

The rules related to covered asset dispositions apply to dispositions after the date of enactment.  All other foreign tax credit changes are applicable for taxable years beginning after December 31, 2022.

II.E.  Modifications to Inclusion of Global Intangible Low-Taxed Income (GILTI). This provision requires a country-by-country application of the GILTI regime under which a U.S. shareholder’s GILTI is the sum of the amounts of GILTI determined separately with respect to each country in which any CFC taxable unit of the U.S. shareholder is a tax resident. Other items and amounts, including net CFC tested income, net deemed tangible income return, qualified business asset investment (QBAI), and interest expense also are determined on a country-by-country basis. The net deemed tangible return (other than for CFC taxable units in U.S. territories) is reduced from 10% to 5%.  In addition, country-specific net CFC tested loss can be carried forward to the succeeding taxable year, and tested income will include foreign oil and gas extraction income (FOGEI). This provision is applicable for taxable years of foreign corporations beginning after Dec. 31, 2022, and to taxable years of U.S. shareholders in which or with which such taxable years of foreign corporations end.

II.F.  Modifications to Determination of Deemed Paid Credit for Taxes Properly Attributable to Tested Income. The provision reduces the current 20% haircut on GILTI foreign tax credits by increasing the deemed paid credit for foreign taxes attributable to GILTI from 80% to 95% (and to 100% for taxes paid or accrued to U.S. territories). Special rules apply to foreign-owned United States shareholders. This provision is applicable for taxable years of foreign corporations beginning after Dec. 31, 2022, and to taxable years of U.S. shareholders in which or with which such taxable years of foreign corporations end.

II.G.  Deduction for Foreign Source Portion of Dividends Limited to Controlled Foreign Corporations. The provision amends Section 245A so that the 100% participation exemption provided by that section applies to foreign portions of dividends received only from controlled foreign corporations.  This provision is applicable for distributions made after the enactment.

II.H.  Modifications Related to Determination of Status as a CFC. The provision effectively restores former Section 958(b)(4) by providing that the downward attribution rules in Section 318(a)(3) shall not be applied to consider a U.S. person as owning stock which a non-U.S. person owns. It also adds new Section 951B, which provides that the GILTI and Subpart F regimes generally apply to any “foreign controlled United States shareholder” (i.e., a U.S. person that is considered to own more than 50% of the foreign corporation taking into account downward attribution) of a “foreign controlled foreign corporation” (i.e., a foreign corporation, other than a CFC, that would be treated as a CFC if “foreign controlled United States shareholder” is substituted for “United States shareholder” under the GILTI and Subpart F provisions and downward attribution rules apply). An election is provided for certain foreign corporations with U.S. shareholders to be treated as CFCs. The amendments made by this section apply to taxable years of foreign corporations beginning after the date of enactment and taxable years.

II.I.  Limitation on Foreign Base Company Sales and Services Income. The provision limits Foreign Base Company Sales and Services Income to residents of the U.S. and pass-through entities and branches in the U.S. It also closes loopholes that cause shareholders of a controlled foreign corporation to avoid tax on some income from their controlled foreign corporations. This provision is applicable for taxable years of foreign corporations beginning after Dec. 31, 2021. 

II.J.  Modifications to Base Erosion and Anti-Abuse Tax (BEAT). Under this provision, the BEAT rate is 10% for taxable years beginning after Dec. 31, 2021, and before Jan. 1, 2023; 12.5% in taxable years beginning after Dec. 31, 2022, and before Jan. 1, 2024; 15% in any taxable year beginning after Dec. 31, 2023, and before Jan. 1, 2025; and 18% in any taxable year beginning after Dec. 31, 2024. The base erosion minimum tax amount is determined by taking into account tax credits.

The provision modifies the rules in Section 59A(c) for determining modified taxable income by disregarding base erosion tax benefits and base erosion payments in determining the basis of inventory property; by determining net operating losses without regard to any deduction, which is a base erosion tax benefit; and making adjustments under rules similar to the rules applicable to the alternative minimum tax.

Base erosion payments include amounts paid to a foreign-related party that are required to be capitalized in inventory under Section 263A and amounts paid to a foreign related party for inventory that exceed the costs of the property to the foreign related party. A safe harbor is available to deem base erosion payments attributable to indirect costs of foreign-related parties as 20 percent of the amount paid to the related party.

Base erosion payments would not include payments subject to U.S. tax and payments to foreign parties if the taxpayer establishes that such amount was subject to an effective rate of foreign tax not less than the applicable BEAT rate.  The provision also limits the exception to BEAT for taxpayers with a low base erosion percentage to taxable years beginning before Jan. 1, 2024. Further, it provides that an applicable taxpayer remains an applicable taxpayer for the next ten succeeding calendar years after it is an applicable taxpayer.  The changes to the BEAT apply to taxable years beginning after Dec. 31, 2021.


III.A.  Application of Net Investment Income Tax to Trade or Business Income of Certain High-Income Individuals. This provision amends section 1411 to expand the net investment income tax to cover net investment income derived in the ordinary course of a trade or business for taxpayers with greater than $400,000 in taxable income (single filer) or $500,000 (joint filer), as well as for trusts and estates. The provision clarifies that this tax is not assessed on wages on which FICA is already imposed. The amendments made by this section apply to taxable years beginning after Dec. 31, 2021.

It applies to “specified net income,” which is defined as net investment income determined ‘‘(A) without regard to the phrase ‘other than such income which is derived in the ordinary course of a trade or business not described in paragraph (2)’ in [subsection 1411(c)(1)(A)(i)]” (and similar complementary changes).

III.B.  Limitations on Excess Business Losses of Non-corporate Taxpayers. This provision amends section 461(l) (the “excess business loss limitation”) to permanently disallow business losses (i.e., net business deductions in excess of business income) for non-corporate taxpayers in excess of $250,000 per year for taxpayers other than married individuals, and $500,000 for married filing jointly. The provision allows taxpayers whose losses are disallowed to carry those losses forward to the next succeeding taxable year. The amendments made by this section apply to taxable years beginning after Dec. 31, 2021.

III.C.  Surcharge on High-Income Individuals, Estates, and Trusts. This provision adds Section 1A, which imposes a tax equal to 5% of a taxpayer’s modified adjusted gross income in excess of $10,000,000 (or in excess of $5,000,000 for a married individual filing separately, or $200,000 for an estate or trust), and an additional tax of 3% of a taxpayer’s modified adjusted gross income in excess of $25,000,000 (or in excess of $12,500,000 for a married individual filing separately, or $200,000 for an estate or trust). For this purpose, modified adjusted gross income means adjusted gross income reduced by any deduction allowed for investment interest (as defined in Section 163(d)). The amendments made by this section apply to taxable years beginning after Dec. 31, 2021.


IV.A.  Child Tax Credit. The BBB Act provides a one-year extension of the increased child tax credit and advanced payments. Under American Rescue Plan Act (ARPA), the credit was increased from $2,000 to $3,000 ($3,600 for children under 6) for taxpayers below certain income thresholds ($150,000 MFJ, $112,500 HoH, and $75,000 Single) and was made available on an advanced basis. The legislation modifies this advance provision such that only taxpayers with income below these income thresholds will be eligible for advanced payments. The provision of the ARPA that made the credit fully refundable would be made permanent.

IV.B.  Earned Income Credit. The ARPA provisions expanding eligibility for childless individuals are made permanent. The credit percentage and the phase-out percentage are also increased. This has the effect of increasing the potential maximum amount of the credit as well.

IV.C.  Healthcare Related Tax Credits. The BBB Act generally extends previous provisions expanding the tax credits available to low-income individuals through 2025. This will generally increase the number of individuals eligible for the tax credit as well as increase the credit amount for some individuals. It also provides that lump sum social security benefits and certain dependent income are not included in the income for premium tax credit purposes. The health insurance tax credit would also be made permanent.

IV.D.  Medical Career Training Scholarships. The Act creates a new scholarship program and refundable tax credit to support medical students from rural and underserved communities. The scholarship will include amounts for tuition, fees, textbooks, and equipment, a monthly stipend, and funds for other normal expenses for students enrolled in qualifying medical programs. Students must attend medical school, complete their residency, and practice for at least one year in a medically underserved or rural area. Priority for the scholarship will be given to students from rural and underserved communities. To fund the vouchers, the university where the scholarship recipient attends will receive a refundable tax credit equal to the amount of the voucher. The scholarship program will begin in 2023.

IV.E.  Public University Research Infrastructure Credit. Taxpayers may receive a 40% general business credit for qualified cash contributions made by a taxpayer to a certified educational institution in connection with a qualifying research infrastructure program. Taxpayers may elect to claim this credit with respect to a qualifying cash contribution in lieu of treating such contribution as a charitable deduction. A qualifying institution may designate such contributions as qualified cash contributions only if it is certified as having been allocated a credit amount with respect to a qualifying project. The provision provides $500 million of credits for each of the calendar years 2022 - 2026 to be awarded to eligible educational institutions on a project application basis. The award of these credits would be based on the extent of the expected expansion of a higher education institution’s targeted research within disciplines in science, mathematics, engineering, and technology. An institution’s allocation may not exceed $100 million per calendar year.

IV.F.  Endowment Fund Excise Tax Modified. The BBB Act proves that the excise tax on an endowment fund’s investment income would be proportionately reduced as the amount of its qualified aid exceeds 20 percent of tuition and fees, up to 33 percent of tuition and fees. The tax liability faced by the fund under this proposal would be reduced by 1/13 for each percentage by which grant aid exceeds 20 percent of tuition and fees. The bill also clarifies that the tax would not apply to institutions with fewer than 500 tuition-paying undergraduate students.

IV.G.  Pell Grants and the American Opportunity Credit. Federal Pell Grants would be excluded from gross income and no longer reduce qualified tuition and related expenses for purposes of the American Opportunity Tax Credit, Lifetime Learning Credit, and the exclusion of qualified scholarship from income. Essentially, students could double-dip these expenses by counting them for purposes of their Pell Grant and the applicable credit or exclusion. The American Opportunity Credit provision denying the credit to students convicted of a state or felony drug offense would be repealed as well.


The first section of green energy credits and incentives pertains to businesses.  Those provisions pertaining to individuals begin at Section V.K. 

V.A.  Possessions Economic Activity Credit. A new general business credit would be created for qualified domestic corporations that derive a majority of gross income from sources (or business activity conducted) within American Samoa, Guam, Commonwealth of Northern Marianas, Commonwealth of Puerto Rico, and the U.S. Virgin Islands. A $50,000 maximum per-employee credit would be based on wages and fringe benefits paid or incurred. The credit would apply for taxable years beginning after the date of enactment and prior to Jan. 1, 2032.

V.B.  Extension of Production Tax Credit. The Production Tax Credit, which allows energy producers to claim a credit based on electricity produced from renewable energy resources, would be extended from Dec. 31, 2021 to Dec. 31, 2026, with regard to construction started by the applicable date for renewable power facilities.

V.C.  Extension of Business Energy Credit. The Business Energy Credit (a component of the Investment Tax Credit), which allows a credit based on the cost of renewable energy property placed in service for business use, would be extended from Dec. 31, 2023 to Dec. 31, 2026 with regard to construction started by the applicable date for renewable energy property.

V.D.  Qualifying Electric Transmission Property Credit. A new credit would be added as a component of the investment tax credit, based on the cost of electric transmission lines and related transmission property, including upgrades and replacements to existing lines. The credit would apply to property placed in service after Dec. 31, 2021 and before Jan. 1, 2032.

V.E.  Extension of Carbon Oxide Sequestration Credit. The Carbon Oxide Sequestration Credit, which allows a per-metric ton credit for carbon oxide captured at direct air facilities, would be extended from Dec. 31, 2025 to Dec. 31, 2031 with regard to construction started by the applicable date for such facilities.

V.F.  Zero-Emission Nuclear Power Production Credit. A new credit would be added as a component of the general business credit for producing electricity from a qualified nuclear power facility. The credit would apply to electricity produced and sold after Dec. 31, 2021, in taxable years beginning after such date and before Jan. 1, 2030.

V.G.  Credits for Renewable Fuels. Various general business credits pertaining to the production and sale (or use) of biodiesel, renewable diesel, alternative fuels, and second-generation biofuel would be extended through Dec. 31, 2026. New general business credits would also be added for the production and sale (or use) of sustainable aviation fuel or clean hydrogen, for aviation fuels sold or used after Dec. 31, 2022, and before Jan. 1, 2027, and for hydrogen produced during the 10-year period beginning in 2022.

V.H.  Energy Efficient Commercial Buildings Deduction. The Section 179D deduction would be expanded by increasing the maximum deduction based upon a three-year cap versus a lifetime cap and by increasing the base deduction to a $0.50-$1.00 range per square foot, with a bonus deduction based on a range of $2.50-$5.00 per square foot. The enhanced deductions would apply to taxable years beginning after Dec. 31, 2021, and before Jan. 1, 2032.

V.I.  Superfund Tax. The Hazardous Substance Superfund Financing Rate on crude oil and imported petroleum products would be reinstated at the rate of 16.4 cents/per gallon, indexed for inflation, as well as the tax on taxable chemicals. These new taxes would be applicable after June 30, 2022.

V.J.  Other Business Provisions. Other business provisions include:

  • an extension of the New Energy Efficient Home Credit for homebuilders,
  • nontaxable treatment for subsidies pertaining to water conservation and wastewater management,
  • a new credit for wildfire mitigation expenditures, a new credit for qualified commercial electric vehicles,
  • an extension of the credit for qualified fuel cell motor vehicles,
  • an extension of the credit for the alternative fuel vehicle refueling property credit,
  • reinstatement and expansion of employer-provided fringe benefits for bicycle commuting,
  • a new credit for certain new electric bicycles,
  • reinstatement of the Qualified Advanced Energy Property Credit (a component of the Investment Tax Credit),
  • a new credit for labor costs of installing mechanical insulation property,
  • a new credit for the manufacturing of semiconductors and semiconductor tooling equipment,
  • a new credit for the production and sale of renewable energy components (solar polysilicon, wafers, cells, modules, wind blades, nacelles, towers, and offshore foundations),
  • a new credit for higher education institutions that offer qualified environmental justice programs,
  • new credits for clean electricity production and investment credits based on carbon emissions, and
  • a new credit for the production of clean fuels based on carbon emissions.

V.K.  Extension and Expansion of Nonbusiness Energy Property Credit. The credit for qualified residential energy efficiency improvements (windows, doors, etc.) and residential energy property expenditures (air conditioners, heat pumps, etc.) would be extended from Dec. 31, 2021 to Dec. 31, 2031 with regard to the requisite placed in-service date. The credit would also be expanded to replace a lifetime cap with a $1,200 annual credit limitation, subject to certain exclusions.

V.L.  Extension and Expansion of Residential Energy Efficient Property Credit. The credit for the cost of residential energy efficient property (solar electric, solar water heating, etc.) would be extended at the full 30% rate through Dec. 31, 2031, with phase downs in 2032 and 2033. The credit would also be expanded to include battery storage technology, and the credit would be made refundable starting in 2023.

V.M.  Qualified Plug-in Electric Drive Motor Vehicle Credits. A new refundable credit would be created for new qualified plug-in electric drive vehicles, based on 50% of the vehicle purchase price. The base amount of the credit would be $4,000, with an additional $3,500 available for vehicles placed into service before Jan. 1, 2027. No credit would be allowed for vehicles having a manufacturer’s suggested retail price that exceeds $64,000 (vans), $69,000 (SUVs), $74,000 (pick-up trucks), or $55,000 (any other vehicle). Additionally, a $4,500 increase to the credit would be allowed if the vehicle is assembled in a U.S. facility operating under a union-negotiated collective bargaining agreement. And another $500 increase to the credit would be allowed if the battery cells are manufactured within the U.S. Beginning Jan. 1, 2027, the credit would not be allowed unless the final assembly is within the U.S. Taxpayers with modified adjusted gross income in excess of $800,000 (married filing joint), $600,000 (head of household), or $400,000 (all other filers) would be subject to phase-outs on the credit amount. The new credit would be allowed for vehicles acquired after Dec. 31, 2021, and before Jan. 1, 2032.

A new refundable credit ranging from $2,000 to $4,000 would also be created for previously-owned qualified plug-in electric drive vehicles, based on 50% of the vehicle purchase price. The new credit would be allowed for vehicles acquired after the date of enactment and before Jan. 1, 2032. In addition to other eligibility requirements, the vehicle sales price must not exceed $25,000, and the vehicle must be a model year that is at least two years earlier than the date of sale. Taxpayers would only be eligible for the credit once every three years and must purchase the vehicle from a dealership for personal use. Taxpayers with adjusted gross income in excess of $150,000 (married filing joint), $112,500 (head of household), or $75,000 (all other filers) would be subject to phase-outs on the credit amount.


VI.A. Funding of the Internal Revenue Service. The IRS will receive approximately $79 Billion in new funding through 2031.  No use of the funds is intended to increase taxes on any taxpayer with taxable income below $400,000.

VI.B.  Modification of Procedural Requirements Relating to Assessment of Penalties. This provision repeals a requirement that a supervisor must approve any assessment of penalties of the employee making such determination. This amendment is effective as if included in section 3306 of the Internal Revenue Service Restructuring and Reform Act of 1998, which is notices issued, and penalties assessed, after December 31, 2000.

This provision also requires that each supervisor certify quarterly by letter to the Commissioner of Internal Revenue whether employees have followed the procedural requirements regarding issuing notices of penalty. This amendment applies to notices of penalty issued after the date of the enactment of this Act.

VI.C.  Modifications to Limitation on Deduction of Excessive Employee Remuneration.  Section 162 generally limits the deduction for wages paid by a public company to certain of its highest-paid employees to $1 million per year.  The new provision adds an aggregation rule, so the limitation applies to any two or more persons who are treated as a single employer under section 414 to be treated as a single employer. For purposes of this determination, the brother-sister-controlled group and combined group rules under section 1563(a) are disregarded. The provision also expands the definition of applicable employee remuneration to clarify that such remuneration includes performance-based compensation, commissions, post-termination compensation, and beneficiary payments, whether or not paid directly by the publicly held corporation.

VI.D.  Prohibited Transactions Relating to Holding DISC or FSC in Individual Retirement Account. This provision provides that any IRA holding an interest in a DISC or FSC that receives any commission or other payment from an entity owned by the individual for whose benefit the IRA is established is a prohibited transaction for purposes of section 4975. The provision also applies if the DISC or FSC is held indirectly through one or more corporations. For purposes of determining ownership of the entity that makes the payments, the constructive ownership rules in section 318 apply, substituting 10 percent for 25 percent. The tax imposed by section 4975 applies even if the account ceases to be treated as an IRA. The section applies to stock acquired or held on or after December 31, 2021.

The prior Ways and Means write-up allowed taxpayers with non-compliant IRAs two years to become compliant and extended the statute of limitations for IRS assessments from 3 years to 6 years.


With proposals discussed during President Biden’s campaign, the American Families Plan in April, the Treasury Green Book in May, and the first House Ways and Means draft in September, there have been no shortage of tax proposals discussed, dissected, revised, and rejected. The following list names some of the more important proposals that did not make it into the BBB Act

VII.A.  Business Provisions Not Included

  • Increase in the corporate tax rate (proposed initially at 28%, then pared down to a graduated rate topping out at 26.5%)
  • Changes to the Like Kind Exchange Rules
  • Changes to the Qualified Business Income Exclusion rules
  • Increasing the number of highly paid employees of public corporations’ wage deduction at $1 million from top 3 to top 8 highest-paid employees

VII.B.  Individual Provisions Not Included

  • Increase the top marginal rate to 39.6%
  • Increase the long term capital gains rate (proposed initially to go to 39.6% for taxpayers with income over $1 million, trimmed to 25% effective Sept. 13, 2021)
  • Changes to the $10,000 SALT cap
  • Changes to the carried interest rules
  • Various changes to traditional and Roth IRA rules for large accounts and backdoor IRAs

VII.C.  Estate and Gift Provisions Not Included

  • Reduction of the personal exemption from current $11.7/$23.4 million to half those amounts
  • Changes to treatment of grantor trust rules as applied to decedents
  • Eliminating valuation discounts for nonbusiness assets

For more information, please contact us.


Headshot_Nate Smith_2Nate Smith is a Director in the CBIZ National Tax Office. He can be reached at 727.572.1400 or



Headshot_Bill Smith

Bill Smith is a Managing Director for CBIZ MHM’s National Tax Office. He can be reached at 301.907.2412 and




Don Reiser s a Managing Director and National leader for the CBIZ International Tax Practice. He can be reached at 212.790.5724 and




Eric Strawder is a Tax Manager at the National Tax Office at CBIZ. He can be reached at 816.945,5500 or



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