What You Need to Know
- Congress watchers disagree about whether the bill can get through either the House or the Senate.
- One section would cap Medicare enrollee out-of-pocket drug spending at $2,000.
- Another section would extend current ACA premium tax credit subsidy eligibility rules through 2025.
The new Inflation Reduction Act of 2022 package could have an obvious effect on any insurance agents or financial advisors who help clients with health finance issues.
The 725-page package could also have an indirect effect on life and annuity advisors, through provisions that do not mention life insurers directly but that could increase some life insurers’ tax bills.
The package might also have an effect on advisors with estate planning practices, by creating opportunities for estates and trusts to use new tax credit programs.
Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., unveiled the proposal Wednesday.
What It Means
Some analysts are questioning whether congressional leaders can round up the votes needed to push the package onto the desk of President Joe Biden.
If it becomes law, the Schumer-Manchin proposal, and any amendments the proposal accumulates on the way to passage, could give agents and advisors a new conversation starter for their clients.
Corporate Tax Provisions
Section 10101 in the proposal, the Corporate Alternative Minimum Tax section, would require companies — including life insurers — with an average annual “adjusted financial statement income” over $1 billion to pay a minimum federal income tax rate of 15%.
The provision emphasizes that affected companies must pay the new federal “base erosion and anti-abuse tax,” which is supposed to keep multinational companies from using offshore affiliates to cut their federal income taxes.
Section 56A in the Corporate Alternative Minimum Tax section would set the rules for calculating “adjusted financial statement income.”
The section would exclude income and expenses related to defined benefit pension plans from the adjusted financial statement income calculations.
Schumer and Manchin are predicting in a proposal summary that the minimum corporate tax provision would raise $313 billion from all affected companies over 10 years.
Several life insurers and corporate groups with large life insurance operations have shown up on lists of large U.S. companies with what appear to be low federal income tax rates in recent years.
The lists have included names such as Berkshire Hathaway, Elevance, Lincoln Financial, Principal Financial, Prudential Financial, UnitedHealth and Unum.
But the compilers of the lists have generally crunched raw data, without seeking the insurers’ explanations for the low tax bills.
U.S. life, annuity and health issuers spent about $15 billion of their $55 billion in net gains from operations on U.S. federal and foreign income taxes and capital gains taxes in 2020, according to National Association of Insurance Commissioners data included in the American Council of Life Insurers’ latest Fact Book.