Infrastructure Investment and Jobs Act (the Infrastructure Act)

The bipartisan infrastructure bill that the House passed over the first weekend in November was sent to President Biden’s desk for signature. It included some tax-related provisions which are an early expiration of the Employee Retention Tax Credit and new rules for reporting on cryptocurrency transactions. $550 billion of the $1 trillion bill is slated for typical infrastructure, according to Robert Conzo, a former CPA, and CEO and managing director of The Wealth Alliance, an RIA based in Melville, New York. “That’s why it’s considered to be bipartisan,” he said. “Everyone can get on board with that. But as soon as it passed the Senate, the debate started on a budget reconciliation bill. The two bills go hand in hand to fund infrastructure. The bottom line is this will cost taxpayers money.”

The Whitehouse (.gov website) is happy to announce the bill will do the following: Deliver clean water to all American families and eliminate the nation’s lead service lines. Ensure every American has access to reliable high-speed internet. Repair and rebuild our roads and bridges with a focus on climate change mitigation, resilience, equity, and safety for all users. Improve transportation options for millions of Americans and reduce greenhouse emissions through the largest investment in public transit in U.S. history. Upgrade our nation’s airports and ports to strengthen our supply chains and prevent disruptions that have caused inflation. Make the largest investment in passenger rail since the creation of Amtrak. Build a national network of electric vehicle (EV) chargers. Upgrade our power infrastructure to deliver clean, reliable energy across the country and deploy cutting-edge energy technology to achieve a zero-emissions future. Make our infrastructure resilient against the impacts of climate change, cyber-attacks, and extreme weather events. Deliver the largest investment in tackling legacy pollution in American history by cleaning up Superfund and brownfield sites, reclaiming abandoned mines, and capping orphaned oil and gas wells.

Baker Newman Noyes’ Guarino is quoted, “Everyone agrees that at some point we’ll see tax law changes effective Jan. 1, 2022. The feeling is that when push comes to shove, they’ll be able to push through some kind of tax bill before the end of the year,” he continued. “There’s not 100 percent support among Democrats for every Biden proposal. For example, the capital gains rate will go up, but it’s unlikely that it will go up as high as the proposed 39.6% for taxpayers that earn over $1 million. Enough Democrats think that’s too high, so it will probably settle in at 25% to 28%.”

Luscombe agreed that the crypto tax provision could have a huge impact on the industry. “The infrastructure act provides an expansive definition of ‘broker,’” he observed. “Some say that it might apply to people who wouldn’t have the information to comply. A Senate amendment to narrow the definition of broker failed to be adopted but is likely to be addressed again by the House.”

Regarding the Employee Retention Credit, the American Rescue Plan Act extended the COVID-related credit to Dec. 31, 2021. “The IRS has just published guidance on handling the credit for the last two quarters of 2021,” Luscombe commented. “However, the Infrastructure Investment and Jobs Act legislation would terminate the credit for employers that shut down due to the COVID-pandemic after Sept. 30, 2021.”

Provisions not in the final bill

While focus is on the current proposed legislation, it is important to enumerate some previously discussed provisions that did not make it into the most recent bill:

• Individual tax rates:No increase to the individual regular or capital gains tax rates. However, as mentioned earlier, there is a surcharge on high-income individuals, trusts and estates.
• Billionaire wealth tax:No “mark to market” requirement for securities of wealthy taxpayers.
• Corporate tax rates:No increase in the regular corporate tax rate. As discussed above, there is a new corporate minimum tax for large companies.
• Section 199A qualified business income deduction:No new limitations on the section 199A deduction.
• Trusts and estates:No changes to the estate tax exemption level and no changes to the step-up in basis of assets at death.
• Grantor trusts: No changes to grantor trust taxation.
• Carried interests:No change in the treatment of or the three-year holding period for carried interests.
• Tax-free conversion from an S corporation to a partnership:The one-time ability to convert an S corporation to a partnership tax-free was not included in the current bill.
• Bank reporting to IRS:No new requirements for banks to report certain account activity to the IRS.
• Child and dependent care tax credit: No extension of the expanded child and dependent care tax credit.

One great aspect about being in accounting is the position of having true unbiased opinions. Regardless of political leanings, once a bill is passed into law, an accountant just wants to know the implications of said law and how to address them with their clients, creating the best outcome for that individual. While some things in life are not in our direct control, accountants can look at the needs of their clients and help make decisions in their best interest and for their benefit. It is our hope at Perfect Balance Accounting Services, LLC that when you come to us, we can look at your personal financial statements, use the tax laws in place, and direct you to a path that leaves you better off than where you were when you walked through our doors.