House Resolution 5376—known as the Inflation Reduction Act of 2022 (the “IRA”)—was signed into law by the President Biden on August 16, 2022. Among other legislative changes, the IRA imposes a 15% alternative minimum tax on any “applicable corporation” based upon an “average annual adjusted financial statement income test” as defined by the IRA, for taxable years beginning after December 31, 2022. The corporate alternative minimum tax was previously repealed by the Tax Cuts and Jobs Act passed in 2017. The applicable corporations will pay the higher of the minimum corporate tax established under the IRA or the regular tax rate.

Within the public finance sector, the alternative minimum tax may affect taxpayers such as banks, insurance companies, and property and casualty insurers. Interest on Municipal Bonds will be taken into account in calculating the adjusted financial statement income that may be subject to the alternative minimum tax applicable to certain corporations for taxable years beginning after December 31, 2022. In addition, the tax disclosure language within offering statements and tax opinion language will likely be revised to reflect this change under the IRA.

It is unclear how much of an impact this will have on corporate demand for municipal securities at this time.  Please contact any member of our Public Finance team for additional guidance at Public Finance Law | Kline Alvarado Veio, PC (