October 4, 2022

Volume XII, Number 277

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October 04, 2022

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October 03, 2022

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The Inflation Reduction Act and Estate Planning

President Biden signed the Inflation Reduction Act of 2022 (H.R. 5376) into law on Tuesday, Aug. 16. The Inflation Reduction Act is much smaller than the sweeping $3.5 trillion package the Senate passed in August 2021 or the $2 trillion Build Back Better Act (“BBBA”) the House passed in November 2021. Some of the highlights of the Inflation Reduction Act include:

  • A 15% corporate alternative minimum tax.

  • A 1% excise tax on stock buybacks.

  • Extended and new renewable energy tax credits.

For the estate planning community, the most significant thing about the Inflation Reduction Act is what it does not contain. The BBBA contained many proposals that would have directly impacted high-net worth individuals and many of the wealth planning strategies that have been used for years by estate planners when advising their high-net worth clients. The proposals included:

  • A decrease in the estate, gift and generation-skipping transfer tax exemptions.

  • Changes to the grantor trust rules which would have, among other things, effectively eliminated the sale to an intentionally defective grantor trust planning technique.

  • The elimination of valuation discounts for nonbusiness property when valuing ownership interests in privately held companies.

  • A surcharge on high-income individuals.

  • Increases in the top marginal income tax rate.

  • Increases in the top long-term capital gains rate.

  • Reduction in the qualified small business stock gain exclusion under IRC Sec. 1202.

None of these provisions found their way in the Inflation Reduction Act. This does not mean that there could not be other tax legislation enacted this year but at this stage of the year and due to the fact that it is an election year, the likelihood of any significant tax law changes occurring before the end of the year is slim.

One area of the Inflation Reduction Act that is worth highlighting for high-net worth and high-income individuals and those professionals that advise them is the increase in the IRS budget of $80 billion to be funded over a 10 year period. Approximately $46 billion of this amount is to be dedicated to enforcement which is expected to increase the number of audits.

For anyone interested in more detail about some of the key tax provisions in the Inflation Reduction Act, we refer you to our previous reports on the Inflation Reduction Act.

Copyright ©2022 Nelson Mullins Riley & Scarborough LLPNational Law Review, Volume XII, Number 231
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About this Author

Maurice Holloway Tax Attorney Nelson Mullins
Partner

Maurice Holloway practices in the areas of corporate and business entity law, taxation, estate planning, and business law.

864.373.2300
Russell P. Love Estate and Tax Attorney Nelson Mullins Atlanta
Partner

Russell focuses his practice on estate planning, planned giving, and tax-exempt organizations. He represents clients in matters related to family wealth transfers for large estates, sophisticated estate and gift tax saving techniques, charitable planned giving, family private foundations, business succession planning, and complex probate and trust administrations. He also regularly represents tax-exempt organizations, both public and private, in formation, organizational, and operational issues.

As part of his estate planning practice, Russell ...

404-322-6520
Regina Rabitaille Estate Lawyer Orlando Nelson Mullins
Partner

Regina focuses her practice primarily in the areas of probate, trusts and estates, and transfer tax controversy matters.  This includes, without limitation, handling the full gamut of the administration of estates and trusts, preparing gift and estate tax returns, planning for the succession of closely held or family business, drafting sophisticated estate plan documents, asset protection planning and handling, contested tax matters in the transfer tax area, contested matters of will, and trust administration and interpretation.

407-839-4209
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