Tax Monitor
Inflation Reduction Act Expected to Cost Coal
August 12, 2022
By: Valerie F. Gainer
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>.