Tax Monitor
Inflation Reduction Act Expected to Cost Coal
August 12, 2022
The U.S. House of Representatives will soon take up the Inflation Reduction Act (“Act”), passed by the Senate earlier this week after a tie-breaking vote by Vice President Harris. The Act seeks to tackle various environmental and health care issues, allocating significant funds toward the reduction of greenhouse gas emissions and placing a cap on out-of-pocket prescription costs for individuals with Medicare. In an effort to increase revenue, the Act will also institute a 15% corporate alternative minimum tax on corporations with average annual adjusted financial statement income over $1 billion for applicable 3-year periods.
This corporate alternative minimum tax is expected to disproportionately impact the real estate and mining industries, with the real estate and mining industries predicted to experience a 12.7% and 4.6% net tax hike, respectively, from 2023 to 2032.1 The Act will also purportedly increase coal production taxes, with the tax rate on coal from underground mines increasing to $1.10 and the tax rate on coal from surface mines increasing to $0.55.2
[1] Tax Foundation, Who Gets Hit by the Inflation Reduction Act Book Minimum Tax, August 10, 2022 <https://taxfoundation.org/book-minimum-tax-analysis/>.
[2] Fox Business, Manchin-Schumer spending bill estimated to hurt coal workers the most, August 1, 2022 < https://www.foxbusiness.com/politics/manchin-schumer-spending-bill-estimated-hurt-coal-workers>.