Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
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Tax Provisions in the Build Back Better Act:
Rules Committee Print 117-18
November 9, 2021
Congressional Research Service
https://crsreports.congress.gov
R46960
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Contents
Tables
Table 1. Subtitle E—Infrastructure Financing and Community Development ............................... 4
Table 2. Subtitle F—Green Energy ................................................................................................. 8
Table 3. Subtitle G—Social Safety Net ......................................................................................... 28
Table 4. Subtitle H—Responsibly Funding Our Priorities ............................................................ 40
Table A-1. Estimated Budgetary Effects of Tax Provisions in Subtitle E “Infrastructure
and Community Development” of H.R. 5376, “Build Back Better Act,” with
Modifications ............................................................................................................................. 60
Table A-2. Estimated Budgetary Effects of Tax Provisions in Subtitle F “Green Energy”
of H.R. 5376, “Build Back Better Act,” with Modifications ...................................................... 62
Table A-3. Estimated Budgetary Effects of Tax Provisions in Subtitle G “Social Safety
Net” of H.R. 5376, “Build Back Better Act,” with Modifications ............................................. 67
Table A-4. Estimated Budgetary Effects of Tax Provisions in Subtitle H “Responsibly
Funding Our Priorities” of H.R. 5376, “Build Back Better Act,” with Modifications ............... 70
Appendixes
Appendix. Cost Estimates ............................................................................................................. 59
Contacts
Author Information........................................................................................................................ 78
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
n October 28, 2021, and again on November 3, 2021, the House Rules Committee
released text of a modified version of H.R. 5376, commonly referred to as the Build Back
Better Act.1 Subtitles E, F, G, and H of Title XIII of the Build Back Better Act contain tax
provisions, and are hereby identified as the “tax provisions in the Build Back Better Act,”
pursuant to the reconciliation instructions provided in S.Con.Res. 14, the Concurrent Budget
Resolution for FY2022. The October 28 and November 3 texts modify an earlier version of H.R.
5376. For more on the provisions in the earlier version of this legislation, see CRS Report
R46923, Tax Provisions in the “Build Back Better Act:” The House Ways and Means
Committee’s Legislative Recommendations, coordinated by Molly F. Sherlock.2
O
This report summarizes the tax provisions in the November 3, 2021, version of the Build Back
Better Act. A number of the provisions are designed to raise additional federal tax revenue, and
those with the largest revenue effects include
modifications to individual income taxes levied on high-income individuals,
including
the application of the net investment income tax to trade or business income
for certain filers;
making limitations on excess business losses of noncorporate taxpayers
permanent; and
establishing a surcharge on high-income individuals, trusts, and estates;
the addition of a 15% alternative minimum corporate tax based on financial
statement income;
a new excise tax on corporate stock repurchases; and
modifications to the treatment of international taxes, including changes to
the deduction for foreign-derived intangible income;
the base erosion and anti-abuse tax; and
the tax on global intangible low-taxed income.
Other provisions would reduce tax liability for individual taxpayers or businesses engaged in
certain types of economic activities. Among these provisions, those with the largest revenue
effects include
for individuals, a temporary extension of enhancements made to the child tax
credit in the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) through
2022, with a permanent extension of full refundability beginning in 2023; and
for businesses, tax credits for investment in or production of renewable
electricity.
All tax provisions in the November 3, 2021, modification of the Build Back Better Act are
summarized in a series of tables below. References to relevant CRS reports are included where
applicable.
Table 1 includes the provisions in Subtitle E;
1 The modified legislative text is available at https://rules.house.gov/bill/117/hr-5376.
2 A section-by-section staff summary of the Build Back Better Act as reported by the House Committee on the Budget
and a comparative staff print showing subsequent modifications are available for both the October 28 and November 3
versions of the legislation at https://rules.house.gov/bill/117/hr-5376.
Congressional Research Service
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Table 2 includes the provisions in Subtitle F;
Table 3 includes the provisions in Subtitle G; and
Table 4 includes the provisions in Subtitle H.
Revenue estimates from the Joint Committee on Taxation (JCT) are included in the Appendix.3
JCT estimates that the tax provisions in the November 3 modification will generate $944.5 billion
in additional revenue between 2022 and 2031. It estimates that Subtitle H, Responsibly Funding
Our Priorities, will increase revenue by $1,476.1 billion between 2022 and 2031. Provisions in
the other subtitles are estimated to result in a reduction in revenues, on net, with Subtitle E,
Infrastructure Financing and Community Development, reducing revenue by $28.7 billion;
Subtitle F, Green Energy, reducing revenue by $300.5 billion; and Subtitle G, Social Safety Net,
reducing revenue by $202.4 billion, all over the 2022 through 2031 budget window.
The effective date for most of the proposed tax provisions would be after December 31, 2021.
This is generally the case unless otherwise noted in the description of the provision. Additionally,
provisions would be permanent unless otherwise noted.
As previously noted, the November 3, 2021, version of the Build Back Better Act modifies text
previously released on October 28, 2021.4 Key changes made between the two versions are
discussed in the text box below. Table 1 through Table 4 note how the tax provisions in the
November 3 version of the Build Back Better Act compare to H.R. 5376, as reported by the
House Committee on the Budget on September 27, 2021.5
3 Joint Committee on Taxation, Estimated Budget Effects Of The Revenue Provisions Of Title XIII—Committee On
Ways And Means, Of H.R. 5376, The “Build Back Better Act,” As Reported By The Committee On The Budget, With
Modifications (Rules Committee Print 117-18), JCX-45-21, November 4, 2021, at
https://www.jct.gov/publications/2021/jcx-45-21/.
4 The version of the text released October 28 is available at https://rules.house.gov/bill/117/hr-5376.
5 For the purposes of this comparison, a provision is identified as being identical or nearly identical if the change would
not have had a substantial or substantive policy impact.
Congressional Research Service
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Comparing the November 3 Build Back Better Act Tax Provisions to Earlier
Versions
The November 3, 2021, version of the Build Back Better Act modifies text previously released on October 28,
2021.
Newly Added Provisions
Several provisions were added to the November 3, 2021, legislation that did not appear in the October 28 version
or in H.R. 5376 as reported by the House Committee on the Budget. These provisions include a proposal to raise
the current limit on deductions for state and local taxes paid (the SALT deduction), and then extend the new,
higher deduction to apply after the current-law deduction was scheduled to expire. The November 3 text also
includes additional funding for the IRS and Treasury to administer the child tax credit and advance payments of the
child tax credit and energy-related tax credits. Another newly added proposal would create a temporary abovethe-line deduction for employee uniforms.
Provisions from H.R. 5376 as Reported by the House Committee on the Budget
Several provisions or groups of provisions that were in the Build Back Better Act (H.R. 5376), as reported by the
House Committee on the Budget, but were not included in the October 28, 2021, version of the legislation, were
included in the November 3 version. These include provisions that would modify the low-income housing tax
credit (LIHTC) and enact the Neighborhood Homes Investment Act. Five provisions that collectively raise
revenue modifying rules related to individual retirement plans were added back to the November 3 version of the
Build Back Better legislation. Modified taxes on nicotine that would raise revenue were also added back to the
November 3 version. Another provision that was added back would allow an above-the-line deduction for up to
$250 in union dues; it had appeared in the initial Build Back Better legislation before being excluded in the
October 28 modification.
Modifications
Many provisions were modified between the October 28, 2021, and November 3, 2021, versions of the tax
provisions in the Build Back Better Act (the House Rules Committee provides resources to facilitate detailed
comparison, at https://rules.house.gov/bill/117/hr-5376). There were numerous technical changes to various
parameters associated with the energy-related tax credits. Separately, changes to the health insurance premium
tax credit that would have been permanent in the October 28 version of the bill were made temporary in the
November 3 version.
Deletions
The November 3 bill does not include a proposed reduction in the excise tax on investment income for certain
colleges and universities that was included in the October 28 version of the bill.
Congressional Research Service
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Table 1. Subtitle E—Infrastructure Financing and Community Development
Section Title
Description
CRS Resources
Part 1—Low Income Housing Credit
Increases in State
Allocations
Section 135101
Tax Exempt Bond
Financing
Requirement
Section 135102
Buildings Designated
to Serve Extremely
Low-Income
Households
Section 135103
This provision would increase state low-income
housing credit allocation authority for calendar years
2022 through 2024. States would receive $3.14 per
person in 2022, with a small population state
allocation of $3,629,096; $3.54 per person in 2023,
with a small population state allocation of
$4,081,825; $3.97 per person in 2024, with a small
population state allocation of $4,582,053. In 2025,
the allocation amount would be reduced to $2.65
per person, with a small population state allocation
of $3,120,000. The 2025 allocation amounts are
lower than the current law 2021 allocation amounts
of $2.8125 per person, with a small population state
allocation of $3,245,625.
The allocation amounts for calendar years after 2025
would be the 2025 allocation amount, adjusted for
inflation.
This provision is a modification of Section 135501 in
H.R. 5376, as reported on September 27, 2021.
For background, see
This provision would reduce the 50% tax-exempt
bond financing requirement to 25% for bond
obligations issued in calendar years 2022 through
2026. Credits awarded to projects where the bond
financing threshold is met do not reduce a state’s
annual housing credit.
This provision is a modification of Section 135502 in
H.R. 5376, as reported on September 27, 2021.
For background, see
This provision would require that at least 8% of a
state’s annual low-income housing credit allocation
authority be set-aside for projects that serve
extremely low-income households. The set-aside
would apply to projects where at least 20% of the
units are rent-restricted and occupied by households
whose income does not exceed the greater of 30%
of area median income or 100% of the federal
poverty line.
Projects requiring an increase in credits to be
financially feasible would receive a 50% basis boost. A
state could not award more than 13% of its credit
authority to such projects, and, if such a project
utilizes tax-exempt bond financing (and meets the
bond financing threshold), a state could not award
more than 8% of its private activity bond authority.
This provision would apply to allocations made after
December 31, 2021.
This provision is a modification of Section 135503 in
H.R. 5376, as reported on September 27, 2021.
For background, see
Congressional Research Service
CRS Report RS22389, An
Introduction to the Low-Income
Housing Tax Credit, by Mark
P. Keightley.
CRS In Focus IF11335, The
Low-Income Housing Tax
Credit: Policy Issues, by Mark
P. Keightley.
CRS Report RS22389, An
Introduction to the Low-Income
Housing Tax Credit, by Mark
P. Keightley.
CRS In Focus IF11335, The
Low-Income Housing Tax
Credit: Policy Issues, by Mark
P. Keightley.
CRS Report RS22389, An
Introduction to the Low-Income
Housing Tax Credit, by Mark
P. Keightley.
CRS In Focus IF11335, The
Low-Income Housing Tax
Credit: Policy Issues, by Mark
P. Keightley.
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title
Repeal of Qualified
Contract Option
Section 135104
Modification and
Clarification of
Rights Relating to
Building Purchase
Section 135105
Description
CRS Resources
This provision would repeal the qualified contract
option, and thus limit the ability of a property owner
to exit the low-income housing tax credit (LIHTC)
program after the first 15 years. The qualified
contract option allows a property owner to sell a
LIHTC property after 15 years. To exercise this
option, a property owner must request that the state
housing credit authority locate a buyer who will
purchase the property and keep it in the program for
another 15 years. The purchase price is determined
by statute. If the housing credit authority cannot
locate a qualified buyer, the affordability restrictions
on the property are phased out over three years.
This provision would apply to buildings that received
a credit allocation before January 1, 2022, or, in the
case of properties utilizing tax-exempt bonds, that
received a determination that the building was
eligible to receive tax credits.
This provision is identical or nearly identical to
Section 135505 in H.R. 5376, as reported on
September 27, 2021.
For background, see
Under current law, a property may exit the lowincome housing tax credit program after 15 years if a
right of first refusal option is exercised whereby the
holder of the right (typically, a nonprofit organization
who helped develop the property) purchases the
property. There appears to be a lack of clarity under
current law over whether a third-party offer to
purchase the property is a necessary prerequisite to
the authority to exercise the right of first refusal.
This provision would clarify that a third party offer is
not needed by changing the right of first refusal to a
purchase option. Among other changes, the
provision would also clarify that establishing a
qualified purchase option would not disallow any of
the federal tax benefits of the low-income housing
tax credit.
This provision is identical or nearly identical to
Section 135506 in H.R. 5376, as reported on
September 27, 2021.
For background, see
CRS Report RS22389, An
Introduction to the Low-Income
Housing Tax Credit, by Mark
P. Keightley.
CRS In Focus IF11335, The
Low-Income Housing Tax
Credit: Policy Issues, by Mark
P. Keightley.
CRS Report RS22389, An
Introduction to the Low-Income
Housing Tax Credit, by Mark
P. Keightley.
CRS In Focus IF11335, The
Low-Income Housing Tax
Credit: Policy Issues, by Mark
P. Keightley.
Part 2—Neighborhood Homes Investment Act
Neighborhood
Homes Credit
Section 135201
This provision would provide new federal tax credits
to offset the cost of constructing or rehabilitating
owner-occupied homes. The credits would be
awarded to project sponsors (e.g., developers),
which would either use the credits directly to offset
development and rehabilitation costs or sell the
credits to investors to raise capital for home
construction. Each state would be allowed to
annually award an amount of credits equal to the
greater of $6 multiplied by its population, or $8
million. Annual allocation authority would be
adjusted for inflation. The credit amount would be
limited to no more than 35% of the lesser of qualified
development costs or 80% of the national median
sales price for new homes as determined by the
Congressional Research Service
For background, see
CRS In Focus IF11884,
Neighborhood Homes
Investment Act: Overview and
Policy Considerations, by Mark
P. Keightley.
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title
Description
CRS Resources
most recent census data. Credits would be restricted
to properties with occupants whose income did not
exceed 140% of an area’s or state’s median income,
and to properties located in a qualified census tract.
This provision is identical or nearly identical to
Section 135511in H.R. 5376, as reported on
September 27, 2021.
Part 3—Investments in Tribal Infrastructure
Treatment of Indian
Tribes as States with
Respect to Bond
Issuance
Section 135301
New Markets Tax
Credit for Tribal
Statistical Areas
Section 135302
Inclusion of Indian
Areas as Difficult
Development Areas
for Purposes of
Certain Buildings
Section 135303
This provision would modify the treatment of Indian
tribes so that they are generally treated as states for
the purposes of issuing qualified private activity
bonds. This provision would direct the Secretary of
the Treasury to establish a national bond volume cap
based on tribal population data for qualifying bonds
issued in tribal areas.
This provision is identical or nearly identical to
Section 135511 in H.R. 5376, as reported on
September 27, 2021.
For background, see
This provision would create a temporary New
Markets Tax Credit (NMTC) allocation for lowincome tribal areas and for projects that serve or
employ tribal members. The annual allocation
amount would be $175 million per year for calendar
years 2022-2025.
This provision is a modification of Section 138146 in
H.R. 5376, as reported on September 27, 2021.
For background, see
CRS Report RL31457,
Private Activity Bonds: An
Introduction, by Steven
Maguire and Joseph S.
Hughes.
CRS Report RL34402, New
Markets Tax Credit: An
Introduction, by Donald J.
Marples and Sean Lowry.
This provision would modify the definition of difficult
development areas (DDAs) for purposes of the lowincome housing tax credit to include “Indian areas.”
Projects in DDAs are eligible for a 30% basis boost
under current law. An Indian area would be any
Indian area as defined in Section 4(11) of the Native
American Housing Assistance and Self Determination
Act of 1996.
If an area were to be a DDA solely because it is an
Indian area, then a project would not be treated as
being located in a DDA unless it were assisted or
financed under the Native American Housing
Assistance and Self Determination Act of 1996, or
the project sponsor were an Indian tribe, a tribally
designated housing entity, or wholly owned or
controlled by an Indian tribe or a tribally designated
housing entity.
This provision would apply to buildings placed in
service after December 31, 2021.
This provision is identical or nearly identical to
Section 135603 in H.R. 5376, as reported on
September 27, 2021.
Congressional Research Service
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title
Description
CRS Resources
Part 4—Other Provisions
Possessions
Economic Activity
Credit
Section 135401
Tax Treatment of
Certain Assistance to
Farmers, Etc.
Section 135402
Exclusion of
Amounts Received
from State-Based
Catastrophe Loss
Mitigation Programs
Section 135403
This provision would create a new tax credit for
certain domestic corporations actively conducting
business in American Samoa, the Commonwealth of
the Northern Mariana Islands, Puerto Rico, Guam,
and the Virgin Islands. For these corporations, the
credit amount would be equal to 20% of wage and
benefit expenses in the possessions. The amount of
creditable wages and benefits would be capped at
$50,000 per full time equivalent employee per year.
The credit is increased to 50% with a cap of
$142,800 for certain small businesses.
This provision is identical or nearly identical to
Section 135701 in H.R. 5376, as reported on
September 27, 2021.
Under normal tax rules, recipients of loan repayment
programs must recognize the amounts repaid as
either income or a reduction in the basis of the
asset.
This provision would exclude from recognition
certain payments to socially disadvantaged farmers
and others enacted in the American Rescue Plan Act
of 2021 (P.L. 117-2). The provision would also
provide that no deduction would be denied by
reason of the exclusion.
This provision did not appear in H.R. 5376, as
reported on September 27, 2021.
Current law excludes qualified disaster relief and
qualified disaster mitigation payments from gross
income (Section 139). Starting in 2021, this provision
would exclude qualified catastrophe mitigation
payments made by state or local government
programs from gross income. Qualified catastrophe
mitigation payments would be amounts received by
individuals to make improvements to the individual's
residence that would reduce the damage that would
be done to the residence by a windstorm,
earthquake, or wildfire. Taxpayers receiving these
payments would not be required to adjust their basis
in property for which payment is received.
This provision is a modification of Section 135401 in
H.R. 5376, as reported on September 27, 2021.
For background, see
CRS Report R45864, Tax
Policy and Disaster Recovery,
by Molly F. Sherlock and
Jennifer Teefy.
Source: November 3, 2021, modified version of the Build Back Better Act (BBBA; H.R. 5376) as posted on the
House Rules Committee website.
Notes: Provisions are effective in 2022 unless otherwise noted. The changes that would be made by the
provision are permanent, unless otherwise noted. Within the description, “Section” citations refer to the section
within the Internal Revenue Code (IRC), 26 U.S.C., unless otherwise noted.
Congressional Research Service
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Table 2. Subtitle F—Green Energy
Section Title and
Number
Description
CRS Resources
Part 1—Renewable Energy and Reducing Carbon Emissions
Extension and
Modification of
Credit for
Electricity Produced
from Certain
Renewable
Resources
Section 136101
Current law provides a production tax credit (PTC), at a
rate of 2.5 cents or 1.3 cents per kilowatt hour (kWh)
depending on the technology used, for the first 10 years of
production at qualifying renewable electricity production
facilities that begin construction before 2022. The credit
amount is adjusted annually for inflation from a statutory
rate of 1.5 cents per kWh, with some technologies qualifying
for a half-credit amount. This provision would extend the
PTC for wind, biomass, geothermal, solar (which previously
expired at the end of 2005), landfill gas, trash, qualified
hydropower, and marine and hydrokinetic resources
through 2026.
The base credit amount for the PTC would be set in statute
at 0.3 cents per kWh (0.5 cents per kWh in 2021, or 0.3
cents for half-credit technologies, after being adjusted for
inflation). Facilities that pay prevailing wages during the
construction phase and first 10 years of operation and meet
registered apprenticeship requirements are eligible for a
PTC that is five times the base amount, or 2.5 cents or 1.3
cents per kWh after being adjusted for inflation. Facilities
with a maximum net output of less than one megawatt are
also eligible for the five times base credit amount (e.g., 2021
rates of 2.5 cents or 1.3 cents per kWh).
A “bonus credit” amount would be provided for projects
that meet domestic content requirements to certify that
certain steel, iron, and manufactured products used in the
facility were domestically produced. The bonus credit
amount would be 10% of the credit amount.
The credit amount could be increased by 10% for facilities
located in an energy community. An energy community is
defined as being a census tract or any adjoining tract in
which a coal mine closed after December 31, 1999, or a
coal-fired electric power plant was retired after December
31, 2009.
Large facilities not meeting domestic content requirements
would be limited in the amount of the credit that could be
received as direct pay (see “Elective Payment for Energy
Property and Electricity Produced from Certain Renewable
Resources, Etc.”). The limit would be 90% in 2024, 85% in
2025, and zero afterward. This limit could be waived if
materials are not available domestically or if including
domestic materials would increase the facility’s construction
cost by more than 25%.
The provision provides that for facilities financed with taxexempt bonds, the credit amount would be reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
The proposal also extends the option to claim the energy
investment tax credit (ITC) in lieu of the PTC.
This provision is a modification of Section 136101 in H.R.
5376, as reported on September 27, 2021.
Congressional Research Service
For background, see
CRS Report R43453, The
Renewable Electricity
Production Tax Credit: In
Brief, by Molly F.
Sherlock.
CRS Report R46865,
Energy Tax Provisions:
Overview and Budgetary
Cost, by Molly F.
Sherlock.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
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Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Extension and
Modification of
Energy Credit
Section 136102
Description
Current law provides a temporary investment tax credit
(ITC) for investments in certain energy property. This
provision would extend and modify the ITC, with the credit
generally extended through the end of 2026, with the credit
for certain technologies extended through 2033.
The ITC would be extended through 2026 at a base rate of
6% for solar, fuel cells, and small wind property and 2% for
microturbine property. These amounts would be increased
to 30% and 10%, respectively, if projects pay prevailing
wages during the construction phase and during the first five
years of operation and meet registered apprenticeship
requirements. The higher credit rates are also available to
any project with a maximum net output of less than one
megawatt of electrical or thermal energy.
The ITC for geothermal heat pumps, combined heating and
power (CHP), and waste energy recovery property would
be extended through 2031 with a 6% base credit rate with
the 30% credit rate allowed for projects meeting wage and
workforce requirements or for projects below the
maximum net output threshold. The credit would phase
down after 2031, with the rates being 5.2% and 26% in 2032
and 4.4% and 22% in 2033, with no credit allowed for
property beginning construction after 2033.
This list of qualifying property would be expanded to include
energy storage technology, qualified biogas property,
electrochromic glass, and microgrid controllers at the 6% or
30% rate. Linear generator assemblies would be added to
the definition of qualifying fuel cells. The credit would also
be available for interconnection property.
A “bonus credit” amount would be provided for projects
that meet domestic content requirements to certify that
certain steel, iron, and manufactured products used in the
facility were domestically produced. The bonus credit
amount would be 2% of the credit amount, or 10% for
projects that meet wage and workforce requirements.
An increased credit amount would be available to projects in
an energy community, with the credit increase being 10
percentage points for projects meeting wage and workforce
requirements or 2 percentage points otherwise. An energy
community is defined as being a census tract or any adjoining
tract in which a coal mine closed after December 31, 1999,
or a coal-fired electric power plant was retired after
December 31, 2009.
Large facilities not meeting domestic content requirements
would be limited in the amount of the credit that could be
received as direct pay (see “Elective Payment for Energy
Property and Electricity Produced from Certain Renewable
Resources, Etc.”). The limit would be 90% in 2024, 85% in
2025, and zero afterward. This limit could be waived if
materials are not available domestically or if including
domestic materials would increase the facility’s construction
cost by more than 25%.
The provision provides that for facilities financed with taxexempt bonds, the credit amount would be reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
Congressional Research Service
CRS Resources
For background, see
CRS In Focus IF10479,
The Energy Credit or
Energy Investment Tax
Credit (ITC), by Molly F.
Sherlock.
CRS Report R46865,
Energy Tax Provisions:
Overview and Budgetary
Cost, by Molly F.
Sherlock.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
9
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
This provision is a modification of Section 136102 in H.R.
5376, as reported on September 27, 2021.
Increase in Energy
Credit for Solar
Facilities Placed in
Service in
Connection with
Low-Income
Communities
Section 136103
Elective Payment
for Energy Property
and Electricity
Produced from
Certain Renewable
Resources, Etc.
Section 136104
This provision would allow for the allocation of 1.8 gigawatts
for “environmental justice solar and wind capacity” credits
annually from 2022 through 2026. Taxpayers receiving a
capacity allocation may be entitled to tax credits in addition
to otherwise allowed ITCs. Specifically, projects receiving an
allocation that are located in a low-income community or on
Indian land would be eligible for a 10% bonus investment tax
credit, while projects that are part of a low-income
residential building project or qualified low-income
economic benefit project would be eligible for a 20% bonus
investment credit. No facility could receive more than a
maximum 20% bonus investment credit under this provision.
Qualifying solar and wind facilities would include those with
a nameplate capacity of 5 megawatts or less, and qualifying
property would include energy storage property installed in
connection with the solar property and interconnection
property.
When determining which facilities to select for allocations,
the Treasury Secretary would be directed to consider which
facilities would result in the greatest health and economic
benefits for individuals in low-income communities, including
the ability to withstand extreme weather events; the
greatest employment and wages for individuals in lowincome communities; and the greatest engagement with,
outreach to, or ownership by, individuals in low-income
communities. Facilities receiving an allocation would have
certain information disclosed to the public and be required
to have the facility placed in service within four years.
This provision is a modification of Section 136103 in H.R.
5376, as reported on September 27, 2021.
For background on the ITC,
see
This provision would allow taxpayers to treat certain tax
credit amounts as payments of tax. Payments in excess of
tax liability can be refunded to the taxpayer, allowing the
credits to be received as “direct pay.” This direct payment
would be allowed for the Section 30C credit for alternative
fuel refueling property, the Section 45 renewable electricity
production credit, the Section 45Q carbon oxide
sequestration credit, the Section 48 energy investment tax
credit, and the Section 48C qualifying advanced energy
project credit. The direct pay election would also be
available for the new Section 48D investment credit for
electric transmission property; new Section 48E advanced
manufacturing investment credit; new Section 48F clean
electricity investment credit; new Section 45W zeroemission nuclear power production credit; new Section 45X
clean hydrogen production credit; new Section 45AA
advanced manufacturing production credit; new Section
45BB clean electricity production credit; and new Section
45CC clean fuel production credit.
Tax-exempt entities, including state and local governments
and Indian tribal governments, would be treated as
For background, see
Congressional Research Service
CRS In Focus IF10479,
The Energy Credit or
Energy Investment Tax
Credit (ITC), by Molly F.
Sherlock CRS In Focus
IF10479.
For background on housing
assistance programs, see
CRS Report RL34591,
Overview of Federal
Housing Assistance
Programs and Policy, by
Maggie McCarty, Libby
Perl, and Katie Jones.
CRS Report R45693, Tax
Equity Financing: An
Introduction and Policy
Considerations, by Mark
P. Keightley, Donald J.
Marples, and Molly F.
Sherlock.
10
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Section Title and
Number
Description
CRS Resources
taxpayers eligible to elect a direct payment. There would be
a gross-up of payments in the case of budget sequestration.
This provision would not apply to territories with mirrorcode tax systems.
This provision is a modification of Section 136104 in H.R.
5376, as reported on September 27, 2021.
Investment Credit
for Electric
Transmission
Property
Section 136105
Extension and
Modification of
Credit for Carbon
Oxide
Sequestration
Section 136106
This provision would create a new ITC for qualifying electric
transmission property, which includes property that is
capable of transmitting at least 275 kilovolts or is a
superconducting line, with a capacity of not less than 500
megawatts. Upgrades of existing lines would be treated as
replacements. The new ITC would be 6% of qualifying
investments, with a 30% ITC available for projects that pay
prevailing wages during the construction phase and during
the first five years of operation and that meet registered
apprenticeship requirements.
“Bonus credit” amounts for domestic content and limits on
direct pay related to domestic content would apply, similar
to those applying to the ITC (see “Extension and
Modification of Energy Credit”). Projects financed with taxexempt bonds would have the credit amount reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
The credit would be available for property placed in service
before December 31, 2031, unless the property began
construction prior to January 1, 2022, or was selected for
cost allocation in a regional transmission plan.
This provision is a modification of Section 136105 in H.R.
5376, as reported on September 27, 2021.
For background, see
Under current law, industrial carbon capture or direct air
capture facilities that begin construction by December 31,
2025, can qualify for the Section 45Q tax credit for carbon
oxide sequestration. This tax credit can be claimed for
carbon oxide captured during the 12-year period following a
qualifying facility’s being placed in service. Currently, the per
metric ton tax credit for geologically sequestered carbon
oxide is set to increase to $40 per ton by 2026 ($35 per ton
for carbon oxide that is reused, such as for enhanced oil
recovery) and adjusted for inflation thereafter. This
provision would extend the start of construction deadline to
December 31, 2031.
The amount of carbon oxide that must be captured at a
qualifying facility would be reduced to 1,000 metric tons
annually for a direct air capture (DAC) facility, 18,750
metric tons annually (not less than 75% of which would
otherwise have been released into the atmosphere) for an
electricity generating facility, and 12,500 metric tons for any
other facility (not less than 50% of which would otherwise
have been released into the atmosphere).
Base credit amounts would be $17 per metric ton for
carbon oxide that is captured and geologically sequestered
and $12 per metric ton for carbon oxide that is reused.
Increased credit amounts of $85 per ton and $60 per ton,
respectively, would be available for facilities that pay
For background, see
Congressional Research Service
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
CRS In Focus IF11455,
The Tax Credit for Carbon
Sequestration (Section
45Q), by Angela C. Jones
and Molly F. Sherlock.
CRS Insight IN11710,
Carbon Capture and
Sequestration Tax Credit
(“Section 45Q”) Legislation
in the 117th Congress, by
Molly F. Sherlock and
Angela C. Jones.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
11
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Section Title and
Number
Green Energy
Publicly Traded
Partnerships
Section 136107
Zero-Emission
Nuclear Power
Production Credit
Section 136108
Description
CRS Resources
prevailing wages during the construction phase and during
the first 12 years of operation and meet registered
apprenticeship requirements.
The credit amount for DAC would be increased to a base
rate of $36 per metric ton, with a credit of $180 per metric
ton for projects that meet wage and workforce
requirements. These amounts would be $26 and $130 per
metric ton for carbon oxide captured using DAC that is
beneficially reused.
Projects financed with tax-exempt bonds would have the
credit amount reduced by the lesser of (1) 15%; or (2) the
fraction of the proceeds of a tax-exempt obligation used to
finance the project over the aggregate amount of the
project’s financing costs. The provision would also provide
flexibility with respect to the period in which credits can be
claimed for projects affected by federally declared disasters.
This provision is a modification of Section 136107 in H.R.
5376, as reported on September 27, 2021.
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
If 90% of a business’s gross income is qualifying income, the
business can elect to be treated as a master limited
partnership (MLP), allowing the business to be taxed as a
partnership while ownership interests are tradable in
financial markets. Qualifying income currently includes
mining and natural resource income. This provision would
expand the definition of qualifying income to include income
derived from green and renewable energy. These additions
include income from certain activities related to energy
production eligible for the PTC, energy property eligible for
the ITC, renewable fuels, and carbon sequestration projects
eligible for credits under Section 45Q.
This provision is identical or nearly identical to Section
136108 in H.R. 5376, as reported on September 27, 2021.
For background, see
This provision would create a new tax credit for qualifying
zero-emission nuclear power produced and sold after
December 31, 2021. Qualified nuclear power facilities are
taxpayer-owned facilities that use nuclear power to generate
electricity that did not receive an advanced nuclear
production tax credit allocation under Section 45J, and are
placed in service before the date of enactment (i.e., are
existing nuclear power plants).
The PTC amount would be 0.3 cents per kWh. Taxpayers
that satisfy prevailing wage and registered apprenticeship
requirements would be eligible for a tax credit of 1.5 cents
per kWh.
The credit would be reduced when the price of electricity
increases. Credits would be reduced by a “reduction
amount,” which is 16% of the excess of gross receipts
(excluding certain state and local zero-emissions grants)
from electricity produced by the facility and sold over the
product of 2.5 cents times the amount of electricity sold
during the taxable year.
Credit amounts and amounts in the phaseout formula would
be adjusted for inflation. Taxpayers could elect to receive
the credit as direct pay (discussed above).
For background, see
Congressional Research Service
CRS Report R41893,
Master Limited
Partnerships: A Policy
Option for the Renewable
Energy Industry, by Molly
F. Sherlock and Mark P.
Keightley.
CRS Report R42853,
Nuclear Energy: Overview
of Congressional Issues, by
Mark Holt.
CRS Insight IN10725,
The Advanced Nuclear
Production Tax Credit, by
Molly F. Sherlock and
Mark Holt.
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
12
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Section Title and
Number
Description
CRS Resources
The credit would terminate on December 31, 2027.
This provision is a modification of Section 136109 in H.R.
5376, as reported on September 27, 2021.
Part 2—Renewable Fuels
Extension of
Incentives for
Biodiesel,
Renewable Diesel,
and Alternative
Fuels
Section 136201
Extension of
Second Generation
Biofuel Incentives
Section 136202
Sustainable Aviation
Fuel Credit
Section 136203
Current law provides a 50-cents-per-gallon tax credit for
alternative fuels and alternative fuel mixtures through 2021
and a $1.00-per-gallon tax credit for biodiesel and
renewable diesel (with an additional $0.10-per-gallon tax
credit for agri-biodiesel) through 2022. The biodiesel and
renewable diesel mixtures tax credit may be claimed as an
immediate excise tax credit against the blender’s motor and
aviation fuels excise taxes. Credits in excess of excise tax
liability may be refunded. The biodiesel and small agribiodiesel credits may be claimed as income tax credits. The
alternative fuels credit can be claimed as an excise tax credit
or received as an outlay. The alternative fuels mixture credit
is an excise tax credit.
This provision would extend the existing tax credits for
alternative fuels and alternative fuel mixtures and biodiesel
and renewable diesel through December 31, 2026.
This provision is a modification of Section 136201 in H.R.
5367, as reported on September 27, 2021.
For background, see
Current law provides a $1.01-per-gallon income tax credit
for second-generation biofuel production through 2021. This
provision would extend the second-generation biofuel
producer tax credit through December 31, 2026.
This provision is a modification of Section 136202 in H.R.
5276, as reported on September 27, 2021.
For background, see
This provision would create a new tax credit for the sale or
mixture of sustainable aviation fuel starting in 2023. The tax
credit would have a base amount of $1.25 per gallon, with a
supplemental credit amount of $0.01 per gallon for each
percentage point by which the lifecycle greenhouse gas
emissions reduction percentage for the fuel exceeds 50%
(with a maximum supplemental credit of $0.50 per gallon).
Sustainable aviation fuel is defined as liquid fuel that (1)
meets the requirements of either ASTM International
Standard D7566 or the Fischer Tropsch provisions of ASTM
International Standard D1655, Annex; (2) is not derived
from palm fatty acid distillates or petroleum; and (3) has
been certified to achieve at least a 50% lifecycle greenhouse
gas reduction percentage as defined according to the most
recent Carbon Offsetting and Reduction Scheme for
International Aviation adopted by the International Civil
Aviation Organization and agreed to by the United States
Congressional Research Service
CRS Report R46865,
Energy Tax Provisions:
Overview and Budgetary
Cost, by Molly F.
Sherlock.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
CRS Report R46865,
Energy Tax Provisions:
Overview and Budgetary
Cost, by Molly F.
Sherlock.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
For background, see
CRS In Focus IF11696,
Aviation and Climate
Change, by Richard K.
Lattanzio.
13
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Section Title and
Number
Description
CRS Resources
(or a similar methodology which satisfies criteria in the
Clean Air Act), as compared with petroleum-based jet fuel.
The sustainable aviation fuel credit would require claimants
to be registered with the Secretary of the Treasury, and
could be used to offset fuel excise tax liability or, in the case
of insufficient fuel excise tax liability, be received as a
payment. Like the tax credit for biodiesel and renewable
diesel, there would be a coordinated income tax credit.
Credit amounts would be included in a taxpayer’s gross
income for income tax purposes.
The credit would expire after December 31, 2026.
This provision is a modification of Section 136203 of H.R.
5376, as reported on September 27, 2021.
Clean Hydrogen
Section 136204
This provision would create a new credit for the qualified
production of clean hydrogen. The credit would be available
for qualified clean hydrogen produced at a qualifying facility
during the facility’s first 10 years of operation. The base
credit amount would be $0.60 per kilogram (kg) times the
applicable percentage. The credit would be $3.00 per kg
times the applicable percentage if the clean hydrogen is
produced at a facility that meets prevailing wage and
registered apprenticeship requirements. Credit amounts
would be indexed for inflation.
The applicable percentage would be determined by the
lifecycle greenhouse gas emissions rate achieved in
producing clean hydrogen. The applicable percentage would
be 100% for hydrogen achieving a lifecycle greenhouse gas
emissions rate of less than 0.45 kilograms of carbon dioxide
equivalent (CO2e) per kg. The applicable percentage would
be 33.4% for hydrogen achieving a lifecycle greenhouse gas
emission rate of less than 1.5 kilograms of CO2e per kg (but
not less than 0.45 kilograms). For hydrogen with a lifecycle
greenhouse gas emission rate of less than 2.5 kgs of CO2e
per kg (but not less than 1.5), the applicable percentage
would be 25%, and for hydrogen with a lifecycle greenhouse
gas emissions rate of less than 4 kgs of CO2e per kg (but
not less than 2.5), the applicable percentage would be 20%.
For facilities placed into service before 2027 producing
hydrogen with a greenhouse gas emissions rate of no more
than 6 kg of CO2e per kg (but not less than 4), the
applicable percentage would be 15%.
Taxpayers could elect to receive the credit as direct pay
(see “Elective Payment for Energy Property and Electricity
Produced from Certain Renewable Resources, Etc.”).
Taxpayers could not claim credits for clean hydrogen
produced at facilities that claimed credits under Section
45Q. Taxpayers could elect to claim the energy investment
tax credit (ITC) in lieu of the clean hydrogen production
credit. Taxpayers may claim the Section 45 PTC for
electricity produced from renewable resources by the
taxpayer if the electricity is used at a qualified clean
hydrogen facility to produce qualified clean hydrogen.
The provision would terminate the alternative fuel excise
tax credit for hydrogen after December 31, 2021.
Congressional Research Service
For background, see
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
14
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
The provision provides that for facilities financed with taxexempt bonds, the credit amount would be reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
The credit would not be available to facilities that start
construction after December 31, 2028.
This provision is a modification of Section 136204 of H.R.
5376, as reported on September 27, 2021.
Part 3—Green Energy and Efficiency Incentives for Individuals
Extension, Increase,
and Modifications of
Nonbusiness Energy
Property Credit
Section 136301
Residential Energy
Efficient Property
Section 136302
Current law provides a 10% tax credit for qualified energyefficiency improvements and expenditures for residential
energy property on a taxpayer’s primary residence through
2021. The credit is subject to a $500 per taxpayer lifetime
limit. This provision would extend the tax credit through
December 31, 2031, and make additional modifications.
The proposed modifications would increase the credit rate
to 30% with an annual per-taxpayer limit of $1,200 and a
$600 per item limit (geothermal and air source heat pumps
and biomass stoves would be excluded from this cap). The
credit would be allowed for expenditures made on any
dwelling unit used by the taxpayer (not limited to primary
residences). Limits for expenditures on windows and doors
would also be increased. Required energy efficiency
standards would be modified, and changed to update over
time without additional legislative action. Qualifying building
envelope components would no longer include roofs, but
would include air sealing insulation. Biomass stoves would be
made eligible for tax credits. A 30% credit, up to $150,
would be allowed for home energy audits. Treasury would
be given the authority to treat errors related to this section
as mathematical or clerical errors. Starting in 2024,
taxpayers would be required to submit a product
identification number to claim the tax credit.
This provision is a modification of Section 136301 in H.R.
5376, as reported on September 27, 2021.
For background, see
Current law provides a tax credit for the purchase of solar
electric property, solar water heating property, fuel cells,
geothermal heat pump property, small wind energy
property, and qualified biomass fuel property. The credit
rate is 26% through 2022 (it was 30% through 2019), and is
scheduled to be reduced to 22% in 2023 before expiring.
This provision would extend the credit through December
31, 2033, restoring the 30% credit rate after 2021 and
through 2031, and then reducing the credit rate to 26% in
2032 and 22% in 2033. Qualified battery storage technology
would be added to the list of eligible property.
The credit would be made refundable after 2023. Starting in
2024, only property installed by qualified installers would be
eligible for the credit and taxpayers would be required to
report the qualified installation identification number to
claim the credit.
For background, see
Congressional Research Service
CRS Report R42089,
Residential Energy Tax
Credits: Overview and
Analysis, by Margot L.
Crandall-Hollick and
Molly F. Sherlock.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
CRS Report R42089,
Residential Energy Tax
Credits: Overview and
Analysis, by Margot L.
Crandall-Hollick and
Molly F. Sherlock.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
15
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Section Title and
Number
Description
CRS Resources
Payments would be made to territories for the revenue loss
associated with providing the residential energy efficient
property credit.
This provision is a modification of Section 136302 in H.R.
5376, as reported on September 27, 2021.
Energy Efficient
Commercial
Building Deduction
Section 136303
Extension, Increase,
and Modifications of
New Energy
Efficient Home
Credit
Section 136304
Under current law, a permanent deduction of up to $1.80
per square foot is allowed for certain energy-saving
commercial building property installed as part of (1) the
interior lighting system; (2) the heating, cooling, ventilation,
or hot water system; or (3) the building envelope. This
provision would temporarily modify the energy-efficient
commercial building deduction, with the modifications
effective through 2031.
The temporary modifications would reduce the amount by
which a building must increase its efficiency relative to a
reference building, from 50% to 25%. They would further
provide that the per-square-foot deduction of $0.50 be
increased by $0.02 for each percentage point by which the
certified efficiency improvements reduce energy and power
costs, with a maximum amount of $1.00 per square foot.
For projects that meet prevailing wage requirements and
registered apprenticeship requirements, the base credit is
$2.50, which would be increased by $0.10 for each
percentage point increase in energy efficiency, with a
maximum credit amount of $5.00 per square foot. The
maximum credit amount would be the total deduction a
building can claim over a four-year period (the current tax
year plus the three preceding tax years). Taxpayers making
energy-efficiency retrofits that are part of a qualified retrofit
plan on a building that is at least five years old would be able
to deduct their adjusted basis in the retrofit property (so
long as that amount does not exceed a per-square foot value
determined on the basis of energy usage intensity). Any taxexempt organization would be allowed to allocate the
deduction to the designer or the building or retrofit plan.
This provision is a modification of Section 136303 in H.R.
5376, as reported on September 27, 2021.
For background, see
Under current law, through 2021, a tax credit is available for
eligible contractors for building and selling qualifying energyefficient new homes. The credit is equal to $2,000, with
certain manufactured homes qualifying for a $1,000 credit.
This provision would extend the energy-efficient new home
credit through December 31, 2031, and increase and modify
the credit amount. For homes acquired after 2021, a $2,500
credit would be available for new homes that meet certain
Energy Star efficiency standards, and a $5,000 credit would
be available for new homes that are certified as zero-energy
ready homes. Multifamily dwellings that meet certain Energy
Star efficiency standards could be eligible for a $500 credit
per unit, with a $1,000 per unit credit available for eligible
zero-energy ready multifamily dwellings. The credits for
multifamily dwelling units would be increased to $2,500 and
$5,000, respectively, if the taxpayer ensures that the
laborers and mechanics employed by contractors and
For background, see
Congressional Research Service
CRS Committee Print
CP10004, Tax
Expenditures:
Compendium of
Background Material on
Individual Provisions — A
Committee Print Prepared
for the Senate Committee
on the Budget, 2020, by
Jane G. Gravelle et al.
(pp. 99-104).
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
16
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Section Title and
Number
Description
CRS Resources
subcontractors in the construction of the residence are paid
prevailing wages.
This provision is identical or nearly identical to Section
136304 in H.R. 5376, as reported on September 27, 2021.
Modifications to
Income Exclusion
for Conservation
Subsidies
Section 136305
Credit for Qualified
Wildfire Mitigation
Expenditures
Section 136306
Under current law, subsidies provided by public utilities to
customers for the purchase or installation of energy
conservation measures are excluded from taxable income.
This provision would provide that amounts provided for
water conservation or efficiency, storm water management,
or wastewater management could also be excluded. For
wastewater management, the property purchased or
installed would need to be on the taxpayer’s principal
residence. The provision would be effective for amounts
received after December 31, 2018.
This provision is identical or nearly identical to Section
136305 in H.R. 5376, as reported on September 27, 2021.
For background, see
This provision would create a tax credit for 30% of qualified
wildfire mitigation expenditures made after the date of
enactment. Qualified wildfire mitigation expenditures would
be specified wildfire mitigation expenditures made under a
state wildfire mitigation program that requires wildfire
mitigation expenditures be paid by the taxpayer and the
state, for property owned or leased by the taxpayer. The
credit rate would be reduced below 30% if the taxpayer’s
percentage of the wildfire mitigation expenditure (as
opposed to the state’s share) were to fall below 30%. For
business expenditures, the credit would be part of the
general business credit. For nonbusiness expenditures, the
credit would be a nonrefundable individual income tax
credit. If basis of property includes qualified wildfire
mitigation expenditures, the property’s basis would be
reduced by the amount of any tax credits claimed.
This provision is identical or nearly identical to Section
135403 in H.R. 5376, as reported on September 27, 2021.
For background, see
CRS Committee Print
CP10004, Tax
Expenditures:
Compendium of
Background Material on
Individual Provisions — A
Committee Print Prepared
for the Senate Committee
on the Budget, 2020, by
Jane G. Gravelle et al.
(pp. 121-124).
CRS In Focus IF10244,
Wildfire Statistics, by
Katie Hoover and Laura
A. Hanson.
CRS In Focus IF10732,
Federal Assistance for
Wildfire Response and
Recovery, by Katie
Hoover.
Part 4—Greening the Fleet and Alternative Vehicles
Refundable New
Qualified Plug-In
Electric Drive
Motor Vehicle
Credit for
Individuals
Section 136401
This provision would create a new refundable tax credit for
plug-in electric vehicles (EVs), effective beginning in 2022.
The credit would be $4,000 for vehicles with a battery
capacity of 10 kilowatt hours that can be charged by an
external source of electricity, plus $3,500 for vehicles with a
battery capacity of at least 40 kilowatt hours (50 kilowatt
hours after 2026) that have a gas tank capacity of no more
than 2.5 gallons. An additional amount of $4,500 would be
available for domestically assembled vehicles assembled at a
facility that operates under a union-negotiated collective
bargaining agreement, and an additional amount of $500
would be available for vehicles powered by battery cells
meeting domestic content requirements. The maximum pervehicle credit would be up to $12,500, not to exceed 50% of
the vehicle purchase price. Vehicles subject to depreciation
would be ineligible. Taxpayers would be allowed to claim the
credit for one vehicle per year.
The credit would phase out for married taxpayers filing a
joint return with modified AGI above $500,000 ($375,000 in
Congressional Research Service
For background, see
CRS In Focus IF11017,
The Plug-In Electric Vehicle
Tax Credit, by Molly F.
Sherlock.
CRS Report R46864,
Alternative Fuels and
Vehicles: Legislative
Proposals, by Melissa N.
Diaz.
CRS Report R46231,
Electric Vehicles: A Primer
on Technology and
Selected Policy Issues, by
Melissa N. Diaz.
17
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Number
Description
CRS Resources
the case of head of household filers; $250,000 in the case of
other filers). The credit would be reduced by $200 for each
$1,000 (or fraction thereof) by which the taxpayer’s
modified AGI exceeds the threshold amount. The taxpayer’s
modified AGI would be the lesser of modified AGI in the
taxable year or prior year.
Credits would only be allowed for vehicles that have a
manufacturer’s suggested retail price of less than $80,000
for vans, SUVs, or pickup trucks, and $55,000 for other
vehicles.
Starting in 2027, the $4,000 plus $3,500 base credit would
be available only for EVs with final assembly occurring in the
United States.
Two- and three-wheeled electric vehicles would be allowed
a 30% tax credit, up to $7,500.
Starting in 2022, taxpayers purchasing eligible vehicles could
elect to transfer the tax credit to the dealer, so long as the
dealer meets registration, disclosure, and other
requirements.
Taxpayers would be required to include the vehicle
identification number (VIN) on their tax return to claim a
tax credit.
Payments would be made to territories for the revenue loss
associated with providing the EV credit.
The existing nonrefundable tax credit for plug-in electric
vehicles under Section 30D would be repealed. The credit
would not apply to vehicles acquired after December 31,
2031.
This provision is a modification of Section 136401 in H.R.
5376, as reported on September 27, 2021.
Credit for
Previously Owned
Qualified Plug-In
Electric Drive
Motor Vehicles
Section 136402
This provision would create a new refundable tax credit for
previously owned qualified plug-in electric and fuel cell
vehicles. The credit would be up to $4,000 (a base credit of
$2,000 plus $2,000 for vehicles propelled by a battery with a
capacity of 40 kilowatt hours [50 kilowatt hours after 2026]
having a gas tank with a capacity of less than 2.5 gallons).
The credit would be limited to 50% of the vehicle purchase
price.
The credit would phase out for married taxpayers filing a
joint return with modified AGI above $150,000 ($112,500 in
the case of head of household filers; $75,000 in the case of
other filers). The credit would be reduced by $200 for each
$1,000 (or fraction thereof) by which the taxpayer’s
modified AGI exceeds the threshold amount. The taxpayer’s
modified AGI would be the lesser of modified AGI in the
taxable year or prior year.
Credits would only be allowed for vehicles with a sale price
of $25,000 or less with a model year that is at least two
years earlier than the calendar year in which the vehicle is
sold. This credit could only be claimed for the first transfer
of a qualifying vehicle. Taxpayers would be required to
include the VIN on their tax return to claim a tax credit.
Congressional Research Service
For background, see
CRS In Focus IF11017,
The Plug-In Electric Vehicle
Tax Credit, by Molly F.
Sherlock.
CRS Report R46864,
Alternative Fuels and
Vehicles: Legislative
Proposals, by Melissa N.
Diaz.
CRS Report R46231,
Electric Vehicles: A Primer
on Technology and
Selected Policy Issues, by
Melissa N. Diaz.
18
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Number
Description
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Taxpayers purchasing eligible vehicles could elect to transfer
the tax credit to the dealer, so long as the dealer meets
registration, disclosure, and other requirements.
Payments would be made to territories for the revenue loss
associated with providing the EV credit.
The credit would not apply to vehicles acquired after
December 31, 2031.
This provision is a modification of Section 136402 in H.R.
5376, as reported on September 27, 2021.
Qualified
Commercial
Electric Vehicles
Section 136403
Qualified Fuel Cell
Motor Vehicles
Section 136404
Alternative Fuel
Refueling Property
Credit
Section 136405
This provision would create a new tax credit for qualified
commercial electric vehicles. The credit would be the lesser
of (1) 15% of the vehicle’s cost (30% for vehicles not
powered by a gasoline or diesel internal combustion engine);
or (2) the incremental cost of the vehicle relative to a
comparable vehicle. Eligible vehicles would have a battery
capacity of not less than 15 kilowatt hours and be charged
by an external source of electricity. Mobile machinery and
qualified commercial fuel cell vehicles would also be eligible
for this credit. Leasing companies could elect to determine
the credit using the rules under Section 36C for individuals if
the vehicle is leased to an individual. Qualifying vehicles
would be depreciable property.
Tax-exempt entities would have the option of electing to
receive direct payments.
Taxpayers would be required to include the VIN on their
tax return to claim a tax credit.
The credit would not apply to vehicles acquired after
December 31, 2031.
This provision is a modification of Section 136403 in H.R.
5376, as reported on September 27, 2021.
Current law allows, through 2021, a tax credit of up to
$8,000 for fuel cell vehicles (the base credit amount is
$4,000, with up to an additional $4,000 available based on
fuel economy). Heavier vehicles qualify for up to a $40,000
credit. This provision would modify the definition of
qualified fuel cell motor vehicles to exclude vehicles subject
to depreciation (commercial vehicles), and extend the credit
through December 31, 2031. Commercial fuel cell vehicles
would be eligible for the new credit for qualified commercial
electric vehicles.
This provision is identical or nearly identical to Section
136404 in H.R. 5376, as reported on September 27, 2021.
For background, see
Current law allows, through 2021, a tax credit for the cost
of any qualified alternative fuel vehicle refueling property
installed by a business or at a taxpayer’s principal residence.
The credit is equal to 30% of these costs, limited to $30,000
for businesses at each separate location with qualifying
property, and $1,000 for residences. This provision would
extend the credit through December 31, 2031, and make
additional modifications. For residential property, the credit
would be extended at the 30% rate, with the credit limit
For background, see
Congressional Research Service
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
CRS Report R46864,
Alternative Fuels and
Vehicles: Legislative
Proposals, by Melissa N.
Diaz.
CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Molly F.
Sherlock, Margot L.
Crandall-Hollick, and
Donald J. Marples.
19
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Description
increased to $3,333.33. For business property (property
subject to depreciation), the credit would be extended at a
rate of 6% (30% if prevailing wage and registered
apprenticeship requirements were met), with the credit limit
increased to $100,000.
A supplemental 4% credit (20% if prevailing wage and
registered apprenticeship requirements are met) would be
available for costs above the $100,000 limit for business
property that refuels using only electricity or fuel consisting
of at least 85% hydrogen by volume. To qualify for the
supplemental credit, the property would need to be
intended for general public use (i.e., no fee or payment
arrangement required) and accept payments via a credit card
reader (including contactless technology) or be exclusively
used by commercial or government vehicles.
The definition of qualifying property would be modified to
include bidirectional charging equipment.
The credit would not apply to property placed in service
after December 31, 2031.
This provision is a modification to Section 136405 in H.R.
5376, as reported on September 27, 2021.
Reinstatement and
Expansion of
Employer-Provided
Fringe Benefit for
Bicycle Commuting
Section 136406
Credit for Certain
New Electric
Bicycles
Section 136407
CRS Resources
CRS Report R46864,
Alternative Fuels and
Vehicles: Legislative
Proposals, by Melissa N.
Diaz.
CRS Report R46231,
Electric Vehicles: A Primer
on Technology and
Selected Policy Issues, by
Melissa N. Diaz.
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
Before 2018, up to $20 per month in employer
reimbursements for qualifying bicycle commuting expenses
were excludable from an employee’s income and wages and
hence not subject to income or employment taxes. P.L. 11597, commonly called the Tax Cuts and Jobs Act (TCJA),
temporarily suspended, through 2025, the exclusion for
employer-provided bicycle commuter fringe benefits. This
provision would repeal the suspension and expand the
exclusion for bicycle commuting benefits to include
employer provision or reimbursement for purchase, lease or
rental (including bikeshare), improvement, repair, or storage
of bikes or scooters for commuting purposes. The amount
excluded could be up to 30% of the monthly dollar limit on
qualified transportation fringe benefits ($270 in 2021). This
provision would allow employees to elect a salary
contribution for bicycle commuting benefits (similar to other
qualified transportation fringe benefits).
This provision is identical or nearly identical to Section
136406 in H.R. 5376, as reported on September 27, 2021.
This provision would create a new refundable 30% tax credit
for qualified electric bicycles. The maximum credit amount
would be $900. The credit could be claimed for one bike
per three-year period per taxpayer (two bikes in the case of
a joint return).
Qualified electric bicycles include those made by a qualified
manufacturer and that include a VIN, cost no more than
$4,000, have an electric motor of less than 750 watts, and
where the motor does not provide assistance at higher
speeds. Qualified manufacturers are those that assign a VIN
to electric bicycles produced and provide that information
to the Secretary of the Treasury.
The credit would phase out for married taxpayers filing a
joint return with modified AGI above $150,000 ($112,500 in
Congressional Research Service
20
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the case of head of household filers; $75,000 in the case of
other filers). The credit would be reduced by $200 for each
$1,000 (or fraction thereof) by which the taxpayer’s
modified AGI exceeds the threshold amount. Prior-year
modified AGI could be used for the purposes of determining
the phaseout if it was less than current-year modified AGI.
Taxpayers would be required to include the VIN on their
tax return to claim a tax credit.
Payments would be made to territories for the revenue loss
associated with this credit.
Beginning after December 31, 2022, taxpayers purchasing
qualified electric bicycles could elect to transfer the credit
to the retailer selling the bicycle if the retailer is registered
with the Secretary of the Treasury, reports certain
information to the taxpayer, and makes a payment to the
taxpayer equal to the amount of the credit. Such payments
would be excluded from the taxpayer’s gross income.
The credit would not apply to bicycles acquired after
December 31, 2025.
This provision is a modification of Section 136407 in H.R.
5376, as reported on September 27, 2021.
Part 5—Investment in the Green Workforce and Manufacturing
Extension of the
Advanced Energy
Project Credit
Section 136501
This provision would provide additional allocations of the
qualified advanced energy manufacturing tax credit, which is
a 30% tax credit for investments in projects that reequip,
expand, or establish certain energy manufacturing facilities.
The American Recovery and Reinvestment Act (P.L. 111-5)
provided $2.3 billion in allocations, which have been fully
allocated.
An additional $5 billion in allocations would be provided in
2022 and 2023 and an additional $1.875 billion would be
allocated in each year from 2024 through 2031. In 2022 and
2023, $800 million in annual allocations would be for
projects in automotive communities, with $300 million set
aside in each of the subsequent years. The same amounts
would be set aside for projects in energy communities
(defined as communities in or adjacent to a census tract that
had a coal mine close after 1999, or a coal-fired electric
generating unit retired after 2009).
The base rate for the credit would be 6%, with the 30%
credit rate allowed for projects meeting prevailing wage and
registered apprenticeship requirements.
The Secretary would be directed to consider which projects
will have the greatest net impact on avoiding or reducing
emissions; will provide the greatest domestic job creation;
will provide the greatest job creation in the vicinity of
projects in low-income communities and communities with
dislocated manufacturing or coal-industry workers; and will
provide the greatest job creation in areas with populations
more at risk for adverse health or environmental effects,
where a significant portion of such population is comprised
of communities of color, low-income communities, tribal
and Indigenous communities, or individuals formerly
employed in the fossil fuel industry; and to give the highest
Congressional Research Service
For background, see
CRS Committee Print
CP10004, Tax
Expenditures:
Compendium of
Background Material on
Individual Provisions — A
Committee Print Prepared
for the Senate Committee
on the Budget, 2020, by
Jane G. Gravelle et al.
(pp. 221-224).
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
21
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Description
CRS Resources
priority to projects that manufacture (rather than assemble)
products and have the greatest potential for commercial
deployment. Recipients of tax credit allocations will be
publicly disclosed.
This provision is a modification of Section 136501 in H.R.
5376, as reported on September 27, 2021.
Labor Costs of
Installing Mechanical
Insulation Property
Section 136502
Advanced
Manufacturing
Investment Credit
Section 136503
Advanced
Manufacturing
Production Credit
Section 136504
This provision would create a new tax credit for 2% of the
labor cost of installing mechanical insulation (10% if
prevailing wage and registered apprenticeship requirements
are met).
The credit would not apply to costs incurred after
December 31, 2027.
This provision is a modification of Section 136502 in H.R.
5376, as reported on September 27, 2021.
This provision would create a new advanced manufacturing
investment tax credit for taxpayers investing in advanced
manufacturing facilities to manufacture semiconductors or
semiconductor tooling equipment. The tax credit would
have a base amount of 5%, with the credit rate increasing to
25% for facilities that pay prevailing wages and meet
registered apprenticeship requirements.
Taxpayers would be able to elect to receive the credit as
direct pay.
For property for which construction began before January 1,
2022, only the basis attributable to construction taking place
after December 31, 2021, would be eligible for the credit.
To qualify for this credit, construction on a facility must
begin by December 31, 2025.
This provision did not appear in H.R. 5376, as reported on
September 27, 2021.
For background, see
CRS Report R46581,
Semiconductors: U.S.
Industry, Global
Competition, and Federal
Policy, by Michaela D.
Platzer, John F. Sargent
Jr., and Karen M. Sutter.
This provision would create a new production tax credit
that could be claimed for the domestic production and sale
of qualifying solar and wind components.
Credits for solar components would include (1) for a thin
photovoltaic cell or crystalline photovoltaic cell, 4 cents per
direct current watt of capacity; (2) for photovoltaic wafers,
$12 per square meter; (3) for solar grade polysilicon, $3 per
kilogram; and (4) for solar modules, 7 cents per direct
current watt of capacity.
Credits for wind components would be computed as an
applicable amount times the total rated capacity of the
completed wind turbine for which the component was
designed. The applicable amount would be 2 cents for
blades, 5 cents for nacelles, 3 cents for towers, 2 cents for
fixed platform offshore wind foundations, and 4 cents for
floating platform offshore wind foundations.
The total credit amount would be increased by 10% for
components manufactured in facilities operating under a
collective bargaining agreement.
Taxpayers would be able to elect to receive the credit as
direct pay.
The credit would phase out for components sold after
December 31, 2026. Components sold in 2027 would be
Congressional Research Service
22
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eligible for 75% of the full credit amount. Components sold
in 2028 and 2029 would be eligible for 50% and 25% of the
full credit amount, respectively. No credit would be available
for components sold after December 31, 2029.
This provision did not appear in H.R. 5376, as reported on
September 27, 2021.
Part 6—Environmental Justice
Qualified
Environmental
Justice Program
Credit
Section 136601
This provision would create a new refundable tax credit for
eligible educational institutions that received an allocation
from the Treasury and incur costs associated with a qualified
environmental justice program. The credit would be 30% for
a program involving material participation of faculty and
students of an institution described in Section 371(a) of the
Higher Education Act of 1965, and 20% otherwise. The
Secretary would be directed to select programs for
allocations from (1) institutions with high participation in
Section 371(a) of the Higher Education Act of 1965; (2)
programs where expected health and economic outcomes
would benefit low-income areas or areas that experience or
are at risk for environmental stressors; and (3) applicants
that would create or significantly expand qualified
environmental justice programs. Applications would be
made public and the Secretary would disclose allocation
recipients.
Up to $1 billion per year could be allocated from 2022
through 2031. The program would be effective upon the
date of enactment.
There would be a gross-up of payments in the case of
budget sequestration.
This provision is a modification of Section 136601 in H.R.
5376, as reported on September 27, 2021.
Part 7—Superfund
Reinstatement of
Superfund
Section 136701
This provision would permanently reinstate the Hazardous
Substance Superfund financing rate for certain excise taxes
starting on July 1, 2022, but would not reauthorize the
Superfund special environmental tax on corporate income
that also once financed this trust fund.
This provision would permanently reinstate Superfund
excise taxes on domestic crude oil and imported petroleum
products at the rate of 16.4 cents per barrel in 2022, with
adjustments for inflation annually thereafter. The previous
tax rate was 9.7 cents per barrel when this tax last expired
at the end of 1995.
Generally, the tax is paid by refineries that receive crude oil
or by the person using or importing a petroleum product.
The Infrastructure Investment and Jobs Act (H.R. 3684)
separately renews other excise taxes that contribute to the
Superfund. H.R. 3684 increases the tax rate on domestically
produced chemical feedstocks and imported chemical
derivatives and renews those taxes from July 1, 2022,
through December 31, 2031. H.R. 3684 also removes the
statutory link between the dates of applicability of the crude
oil and chemical products taxes.
Congressional Research Service
For background, see
CRS Report R41039,
Comprehensive
Environmental Response,
Compensation, and
Liability Act: A Summary of
Superfund Cleanup
Authorities and Related
Provisions of the Act, by
David M. Bearden.
23
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Revenues from the excise tax finance the Hazardous
Substance Superfund Trust Fund. Borrowing would be
authorized through repayable advances from the General
Fund of the U.S. Treasury until the end of 2031.
This provision is a modification of Section 136701 in H.R.
5376, as reported on September 27, 2021.
Part 8—Incentives for Clean Electricity and Clean Transportation
Clean Electricity
Production Credit
Section 136801
This provision would create a new clean electricity
production tax credit (PTC). This new PTC would be for
the sale of domestically produced electricity with a
greenhouse gas emissions rate not greater than zero. To
qualify for a tax credit, electricity would need to be
produced at a qualifying facility for which construction began
after December 31, 2026.
The base PTC amount would be 0.3 cents per kWh, with
the tax credit amount increased to 1.5 cents per kWh for
facilities that pay prevailing wages and meet registered
apprenticeship requirements (0.5 cents and 2.5 cents,
respectively, in 2021, applying the inflation adjustment
factor; the amounts would be adjusted for inflation annually).
Facilities with a maximum net output of less than 1
megawatt would also qualify for the full 1.5 cents per kWh
amount. The PTC would be available for electricity
produced during the facility’s first 10 years of operation.
The credit amount would be increased by 10% for electricity
produced in energy communities. An energy community is
defined as being a census tract or any adjoining tract in
which a coal mine closed after December 31, 1999, or a
coal-fired electric power plant was retired after December
31, 2009.
A 10% domestic content bonus would be available for
electricity produced at facilities that certify that certain steel,
iron, and manufactured products used in the facility were
domestically produced.
The provision would provide that for facilities financed with
tax-exempt bonds, the credit amount is reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
Taxpayers would be able to elect to receive the credit as
direct pay, effectively making the tax credit refundable.
Taxpayers would not be able to claim the clean electricity
production credit if the facility or electricity produced from
the facility claimed certain other energy-related investment
or production tax credits. Taxpayers would choose between
the clean electricity PTC and ITC, and could not claim both.
The tax credit would phase out when emissions reduction
target levels are achieved or after 2031 (the later of the
two). The emissions target phaseout will begin after the
calendar year in which greenhouse gas emissions from the
electric power sector are equal to or less than 25% of 2021
electric power sector emissions. Once phaseout begins, the
full credit amount would remain available for facilities that
begin construction the following year. The credit amount for
facilities beginning construction in the second year would be
Congressional Research Service
24
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75% of the full credit amount. This would be reduced to
50% for facilities beginning construction in the third year,
and zero afterward.
This provision did not appear in H.R. 5376, as reported on
September 27, 2021.
Clean Electricity
Investment Credit
Section 136802
Increase in Clean
Electricity
Investment Credit
for Facilities Placed
in Service in
Connection with
Low-Income
Communities
Section 136803
This provision would create a new clean electricity
investment tax credit (ITC). This new ITC would be for
investment in qualifying zero-emissions electricity generation
facilities or grid improvement property. Qualifying grid
improvements would include stand-alone energy storage.
Costs of interconnection property are eligible for clean
electricity projects smaller than 5 megawatts. This credit
would be available for facilities and property for which
construction begins after December 31, 2026.
The base ITC amount would be 6%, with the tax credit rate
increased to 30% for facilities that pay prevailing wages and
meet registered apprenticeship requirements. Facilities with
a maximum net output of less than 1 megawatt would also
qualify for the 30% credit.
The clean electricity ITC is increased by one-third (2
percentage points or 10 percentage points) for property
placed in service in an energy community (as defined above
for the purposes of the clean electricity PTC). Similarly, a
10% domestic content bonus also applies for the clean
electricity ITC.
The provision would provide that for facilities financed with
tax-exempt bonds, the credit amount is reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
Taxpayers would be able to elect to receive the credit as
direct pay, effectively making the credit refundable.
Taxpayers would not be able to claim the clean electricity
production credit if the facility or electricity produced from
the facility claimed certain other energy-related investment
or production tax credits. Taxpayers would choose between
the clean electricity PTC and ITC, and could not claim both.
The clean electricity ITC would phase out according to the
same schedule as would apply to the clean electricity PTC.
This provision did not appear in H.R. 5376, as reported on
September 27, 2021.
For background, see
This provision would allow for the allocation of 1.8 gigawatts
for “environmental justice solar and wind capacity” credits
annually from 2027 through 2031. Taxpayers receiving a
capacity allocation may be entitled to tax credits in addition
to otherwise allowed clean electricity ITCs. Specifically,
projects receiving an allocation that are located in a lowincome community or on Indian land would be eligible for a
10% bonus investment tax credit, while projects that are
part of a low-income residential building project or qualified
low-income economic benefit project would be eligible for a
20% bonus investment credit. No facility could receive more
than a maximum 20% bonus investment credit under this
provision.
For background, see
Congressional Research Service
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
25
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Number
Description
CRS Resources
Qualifying clean electricity projects would include those with
a nameplate capacity of 5 megawatts or less (other than
facilities producing electricity through combustion or
gasification).
The Secretary of the Treasury would consult with the
Secretary of Energy and EPA Administrator in determining
allocations. In selecting facilities for allocations, the Secretary
would be directed to consider which facilities would result
in the greatest health and economic benefits for individuals
in low-income communities, including the ability to
withstand extreme weather events; the greatest
employment and wages for individuals in low-income
communities; and the greatest engagement with, outreach
to, or ownership by, individuals in low-income communities.
Facilities receiving an allocation would have certain
information disclosed to the public and be required to have
the facility placed in service within four years.
This provision would take effect on January 1, 2027.
This provision did not appear in H.R. 5376, as reported on
September 27, 2021.
Cost Recovery for
Qualified Facilities,
Qualified Property,
and Grid
Improvement
Property
Section 136804
Clean Fuel
Production Credit
Section 136805
This provision would provide that any facility qualifying for
the clean electricity PTC or any facility or property
qualifying for the clean electricity ITC would be treated as 5year property under the modified accelerated cost recovery
system (MACRS), making it so that cost recovery for
renewable energy investments is generally similar to current
law.
This provision would apply to facilities and property placed
in service after December 31, 2026.
This provision did not appear in H.R. 5376, as reported on
September 27, 2021.
This provision would create a tax credit for domestic clean
fuel production starting in 2027. The tax credit per gallon of
transportation fuel would be calculated as the applicable
amount multiplied by the emissions factor of the fuel. To
qualify, the fuel must be produced by the taxpayer at a
qualified facility (excluding facilities that receive credits for
producing clean hydrogen or carbon oxide sequestration)
and sold by the taxpayer. Qualified producers must be
registered with the IRS.
The “applicable amount” would be determined by the type
of fuel and the producer’s labor practices. The base credit
amount for zero-emissions fuels would be $0.20 for
nonaviation fuel and $0.35 for aviation fuel. If the producer
meets prevailing wage and registered apprenticeship
requirements, then the applicable amount would be $1.00
for nonaviation fuel and $1.75 for aviation fuel. These
amounts would be adjusted annually for inflation.
The “emissions factor” would be calculated according to the
formula: [(50 kilograms of CO2-equivalent (CO2e) global
warming potential per metric million British Thermal Units
(mmBTU) – emissions rate of fuel produced) / 50 kilograms
of CO2e per mmBTU]. For example, suppose a producer
met the labor practices and other requirements and
Congressional Research Service
For background, see
CRS Report R45171,
Registered Apprenticeship:
Federal Role and Recent
Federal Efforts, by
Benjamin Collins.
CRS In Focus IF11927,
Federally Funded
Construction and the
Payment of Locally
Prevailing Wages, by
David H. Bradley and Jon
O. Shimabukuro.
26
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Number
Description
CRS Resources
produced a nonaviation fuel with an emissions factor of 25
kg of CO2e emissions per mmBTU. That producer’s credit
per gallon would be $1.00 * [(75-25)/75] = $0.70 per gallon.
The Treasury Secretary would publish tables of emissions
rates for various fuel types that would be used in the
calculation.
Qualifying transportation fuel would be fuel with an
emissions rate not greater than 50 kilograms of CO2e per
mmBTU for fuel sold in 2027 through 2030. For sustainable
aviation fuel the emission rate could not be greater than 35
kilograms of CO2e per mmBTU. For fuel sold after 2030,
qualifying fuel could not have an emissions rate greater than
25 kilograms of CO2e per mmBTU.
The tax credit would phase out when emissions reduction
target levels are achieved or after 2031 (the later of the
two). The emissions target phaseout would begin after the
calendar year in which greenhouse gas emissions from the
transportation sector are equal to or less than 25% of 2021
transportation sector emissions. Once phaseout begins, the
full credit amount would remain available for facilities that
begin construction the following year. The credit amount for
facilities beginning construction in the second year would be
75% of the full credit amount. This would be reduced to
50% for facilities beginning construction in the third year,
and zero afterward.
Taxpayers would be able to elect to receive the credit as a
direct payment.
This provision did not appear in H.R. 5376, as reported on
September 27, 2021.
Source: November 3, 2021, modified version of the Build Back Better Act (BBBA; H.R. 5376) as posted on the
House Rules Committee website.
Notes: Part 9 of Subtitle F would appropriate $4,073,433,000 billion to the IRS, to remain available through
2031, to administer the provisions in this subtitle.
Provisions are effective in 2022 unless otherwise noted. The changes that would be made by the provisions are
permanent, unless otherwise noted. Within the description, “Section” citations refer to the section within the
Internal Revenue Code (IRC), 26 U.S.C., unless otherwise noted.
Congressional Research Service
27
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Table 3. Subtitle G—Social Safety Net
Section Title and
Number
Description
CRS Resources
Part 1—Child Tax Credit
Modifications
Applicable
Beginning in 2021
Section 137101
The bill would make several changes to current law
applicable to the 2021 child credit (and the 2022 credit as
described in Section 137102 below), including:
Safe Harbor
Under current law, low- and moderate-income taxpayers
who receive excess advance child credit payments may, in
certain situations, be protected from repayment as a
result of a safe harbor provision. Excess advance
payments are equal to the value of the credit a taxpayer is
eligible to claim on their tax return minus amounts
received as advance payments. The safe harbor applies in
cases where there is a change in the number of qualifying
children used to estimate the advance payment in
comparison to the number of children taken into account
when claiming and calculating the credit on the applicable
income tax return (assuming this information is not
updated with the IRS during the year).a
This provision would amend the existing safe harbor such
that the safe harbor would not apply in cases where the
qualifying child taken into account in determining the
advance payment amount was done so either fraudulently
or due to intentional disregard of the rules and
regulations. This would include cases where two
taxpayers knowingly set up an arrangement whereby one
taxpayer receives advance payments (equaling up to 50%
of the 2021 credit), while the other claims the full amount
of the credit on their 2021 return.
Joint Returns
Under current law, to determine the amount of the credit
a taxpayer will receive when they file their 2021 tax
return, the taxpayer first calculates the total amount of
the 2021 child credit they are eligible for. The taxpayer
then subtracts from this amount the sum of all the
advance payments of the 2021 credit they received. The
difference is the amount they will receive with their 2021
return (generally filed in 2022).
For the purposes of calculating the amount of the credit a
taxpayer will receive with their 2021 return, the provision
would provide that each spouse would be assumed to
have received half of the advance amount. This may be
relevant, for example, in cases where the taxpayer’s
marital status differs between the year used to calculate
the advance payments (2020 or 2019) and 2021. The
provision would apply to advance payments issued by
territorial governments.
Information Used to Determine Advance
Payment Amounts
The provision would clarify that the data available to the
IRS to calculate advance payments of the 2021 credit
include “any information known to the [Treasury]
Secretary.”
Congressional Research Service
For more information, see
CRS Insight IN11786,
The Child Tax Credit in the
November 3 Modified
Version of the Build Back
Better Act: Summary
Table, by Margot L.
Crandall-Hollick.
For background, see
CRS Report R46900, The
Expanded Child Tax Credit
for 2021: Frequently
Asked Questions (FAQs),
by Margot L. CrandallHollick.
CRS Insight IN11752,
The Impact of a “Fully
Refundable” Child Tax
Credit, by Margot L.
Crandall-Hollick.
CRS Insight IN11656,
The Child Tax Credit: How
Would the Biden
Administration’s Proposed
American Families Plan
Change the Child Tax
Credit?, by Margot L.
Crandall-Hollick.
28
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
Disclosure of Information Relating to Joint
Returns and Advanced Payments
In the case of an individual who receives an advance
payment, and who was a married joint filer during the
reference year (e.g., generally 2020 for the 2021
expanded child credit, or 2019 if data for 2020 are not
available), the Treasury may disclose to their spouse
information used to determine eligibility for and the
amount of the advanced payment (including principal place
of abode).
These provisions are generally applicable beginning in
2021 (including to advance payments made in 2021). The
provision related to disclosure of information relating to
joint returns and advance payments shall take effect after
the date of enactment.
Overall, these provisions are a modification of Section
137101 in H.R. 5376, as reported on September 27, 2021.
Extensions and
Modifications
Applicable
Beginning in 2022
Section 137102
The American Rescue Plan Act of 2021 (ARPA; P.L. 1172) temporarily increased (for 2021) the child credit for
many taxpayers with children. Specifically, the law
increased the maximum child credit from $2,000 per child
to $3,000 per child ($3,600 for children under 6 years
old); expanded the eligibility age for children to include
17-year-olds; and made the credit “fully refundable.”
The bill would extend the 2021 ARPA-expanded child
credit to 2022 (as modified by Section 137101 above),
with additional changes to the 2021 credit in effect for
2022 summarized below.b The parameters of the credit in
2022 would not be adjusted for inflation.
Modifications of Advance Payment Program
Under current law, the advance payment program for the
2021 child credit advances up to 50% of the estimated
2021 credit amount in equal periodic payments between
July 1, 2021, and December 31, 2021. (The IRS is issuing
advance payments in six monthly payments between July
15, 2021, and December 15, 2021.)
This provision would advance all (100%) of the estimated
2022 child credit through the end of December 31, 2022,
in 12 monthly payments.
Under current law, otherwise-eligible taxpayers are
automatically issued an advance payment, irrespective of
their income level, though they may opt out of advance
payments with the IRS.
This provision would generally limit eligibility for the
advance payment program to taxpayers whose income in
the reference year is below the initial phaseout. (The
reference taxable year is generally the prior taxable year,
or if such data are not available, the year preceding the
prior year. For the 2022 child tax credit, the reference
taxable year would be 2021, or if data from that year are
not available, 2020.) Those initial phaseout thresholds are
$150,000 for married joint filers, $112,500 for head of
household filers, and $75,000 for single filers.
Congressional Research Service
For more information, see
CRS Insight IN11786,
The Child Tax Credit in the
November 3 Modified
Version of the Build Back
Better Act: Summary
Table, by Margot L.
Crandall-Hollick.
For background, see
CRS Report R46900, The
Expanded Child Tax Credit
for 2021: Frequently
Asked Questions (FAQs),
by Margot L. CrandallHollick.
CRS Insight IN11752,
The Impact of a “Fully
Refundable” Child Tax
Credit, by Margot L.
Crandall-Hollick.
CRS Insight IN11656,
The Child Tax Credit: How
Would the Biden
Administration’s Proposed
American Families Plan
Change the Child Tax
Credit?, by Margot L.
Crandall-Hollick.
CRS Report R43840,
Federal Income Taxes and
Noncitizens: Frequently
Asked Questions, by Erika
K. Lunder and Margot L.
Crandall-Hollick.
29
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
Under current law, residents of Puerto Rico are generally
ineligible to receive advance payments. Instead, they must
file a 2021 tax return with the IRS to receive their 2021
child credit.
The provision would allow the Treasury Secretary to
make advanced payments of the 2022 child credit to
residents of Puerto Rico between July and December of
2022. If in effect, this would effectively allow Puerto Rican
residents to receive up to half of their total 2022 credit in
advance payments, and claim the remainder on their 2022
tax return, filed in early 2023.
Repeal of Temporary SSN Requirement for
Qualifying Children
Under current law (enacted as part of P.L. 115-97 and in
effect from 2018 to 2025), a taxpayer can only receive the
child credit for an otherwise-eligible child if they provide
the child’s Social Security Number (SSN). This SSN must
be associated with work authorization, meaning an SSN
issued solely to receive a public benefit does not qualify.
These types of work-authorized SSNs are generally
provided to all U.S. citizen children and certain noncitizen
children, including legal permanent residents (i.e., “green
card holders”), refugees, and asylees. As a result of this
provision, for example, taxpayers cannot claim the child
credit for otherwise-eligible children with individual
taxpayer identification numbers (ITINs).
The provision would repeal the temporary “workauthorized” SSN requirement for qualifying children.
Hence, eligible taxpayers with children with ITINs could
claim the credit for those children (assuming those
children meet all the other eligibility requirements). This
would apply for 2022-2025. Since this temporary
requirement is scheduled to expire at the end of 2025,
this provision would effectively permanently repeal the
temporary SSN requirement for children.
Income Lookback
Under current law, when a taxpayer calculates their child
credit for a given year on their income tax return, they
use the income for that year to determine whether and to
what extent the credit is subject to phaseout.c For
example, a taxpayer would generally use their annual 2022
income to calculate their 2022 child credit amount, if
subject to the phaseout.
The provision would allow taxpayers to elect to use the
preceding year’s income to determine their current year’s
credit amount, if subject to the phaseout. Specifically,
under this provision a taxpayer could elect to use their
2021 income to calculate their 2022 credit for purposes
of the phaseout. This provision would limit the amount
taxpayers would need to pay back in advance payments of
the credit due to annual fluctuations in their income.
Modification of Safe Harbor
Under current law, low- and moderate-income taxpayers
who receive excess advance payments may, in certain
situations, be protected from repayment as a result of a
Congressional Research Service
30
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
safe harbor provision in Section 137101 of the bill, as
described above. The maximum amount of the safe
harbor for 2021 is $2,000 multiplied by the difference in
the number of qualifying children between 2021 and 2020
(2019, if 2020 data are unavailable). This amount then
gradually phases out as income rises. The prior-year
data—in this case 2020 data, or if they are unavailable
2019 data—used to administer the advance payments is
generally referred to as the “reference year” data.
For 2022, the maximum safe harbor would be larger.
Specifically, the maximum safe harbor would be calculated
as $3,600 times the number of young children taken into
consideration during the reference year to determine the
advance payment amounts who are not claimed on 2022
returns plus $3,000 times the number of older children
taken into consideration during the reference year (to
determine the advance payment amounts) who are not
claimed on 2022 returns. (In this case, the reference year
would be 2021, or if those data are unavailable, 2020.)d
The phaseout of the safe harbor would be unchanged
under the law in effect for 2021.
Overall, these provisions are a modification of Section
137102 in H.R. 5376, as reported on September 27, 2021.
Refundable Child
Tax Credit After
2022
Section 137103
Under current law, the child credit is scheduled to revert
to levels in effect under prior law, including as amended
by P.L. 115-97. The changes made by P.L. 115-97 were in
effect from 2018 to 2025, and most of them would be in
effect for 2023-2025 under this bill. Specifically, under
current law from 2023 to 2025, the credit is scheduled to
equal a maximum of $2,000 per qualifying child. Lowerincome taxpayers will receive their credit, whether all or
part of the credit, as the refundable portion of the credit.
From 2023 to 2025, the refundable portion will generally
be calculated under the earned income formula as 15% of
earned income above $2,500, not to exceed $1,400 per
qualifying child.e From 2023 to 2025, the credit will begin
to phase out when a taxpayer’s income exceeds $400,000
for married joint filers and $200,000 for unmarried
taxpayers (e.g., head of household). From 2023 to 2025,
taxpayers can only receive the credit for children for
whom they have furnished a work-authorized SSN.
Beginning in 2026, the child credit is scheduled to revert
to levels in effect before P.L. 115-97 under current law. In
other words, beginning in 2026 the credit is scheduled to
equal a maximum of $1,000 per qualifying child. Beginning
in 2026, the refundable portion of the credit would
generally be calculated as 15% of earned income over
$3,000, not to exceed $1,000 per qualifying child.e
Beginning in 2026, the credit starts to phase out when
income exceeds $110,000 for married joint filers and
$75,000 for unmarried taxpayers (e.g., head of
household). Beginning in 2026, taxpayers can only receive
the credit for children for whom they have furnished a
taxpayer ID, which includes an SSN, an ITIN, or an
adoption taxpayer ID number (ATIN).
Congressional Research Service
For more information, see
CRS Insight IN11786,
The Child Tax Credit in the
November 3 Modified
Version of the Build Back
Better Act: Summary
Table, by Margot L.
Crandall-Hollick.
For background, see
CRS Report R46900, The
Expanded Child Tax Credit
for 2021: Frequently
Asked Questions (FAQs),
by Margot L. CrandallHollick.
CRS Insight IN11752,
The Impact of a “Fully
Refundable” Child Tax
Credit, by Margot L.
Crandall-Hollick.
CRS Report R45124, The
Child Tax Credit:
Legislative History, by
Margot L. CrandallHollick.
31
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Appropriations
Section 137104
Description
CRS Resources
Finally, under current law, beginning in 2023, a qualifying
child will revert permanently to being a dependent child
0-16 years old, meaning 17-year-olds would not be
eligible. (This age limit of a qualifying child is a permanent
provision that was not temporarily changed by P.L. 11597.)
This provision would modify current law beginning in
2023 by making the credit “fully refundable.” Specifically,
for taxpayers with a principal place of abode in the United
States for more than half the year, the provision would
eliminate the formula(s) for calculating the refundable
portion of the child credit. Hence, the child credit would
be the same amount per child for low- and moderateincome taxpayers, irrespective of their income. The
maximum credit would be $2,000 per child from 2023 to
2025 and $1,000 per child beginning in 2026. (Higherincome taxpayers would still be subject to a phaseout of
the credit, as scheduled to be in effect for a given year.)
Full refundability would also be available to taxpayers who
are residents of Puerto Rico.
The temporary SSN requirement for qualifying children
would be repealed for 2023-2025 by Section 137102 of
this bill.
Under this provision, the credit’s advance payment
program would no longer be in effect beginning in 2023.
This provision is a modification of Sections 137103 and
137104 in H.R. 5376, as reported on September 27, 2021.
The provision would provide for an additional
appropriation of $3.9633 billion for the IRS for
administrative expenses of the child tax credit and
advance payments of the child tax credit, and $1 billion
for the Treasury Department for outreach efforts to
increase enrollment of eligible families in the child tax
credit and the advance payments of the child tax credit.
These amounts would be available upon enactment and
through September 30, 2026.
This provision is a modification of Section 137105 in H.R.
5376, as reported on September 27, 2021.
Part 2—Earned Income Tax Credit
Certain
Improvements to
the Earned Income
Tax Credit
Extended Through
2022
Section 137201
ARPA (P.L. 117-2) temporarily increased for 2021 the
earned income tax credit (EITC) for workers without
qualifying children (often referred to as the “childless
EITC”). Specifically, the law modified several parameters
of the credit that in combination tripled the maximum
amount of the childless EITC from about $500 to about
$1,500 per taxpayer. The law also temporarily reduced
the eligibility age of the childless EITC for young workers
and eliminated the age limit for older workers. The bill
would temporarily extend the changes to the childless
EITC enacted by the ARPA for one year—2022, as
described below
Regarding the credit amount, for 2022 this provision
would increase the childless EITC amount by making
several modifications to the credit formula: (1)
increasing—to $9,820—the minimum earned income
Congressional Research Service
For background, see
CRS Insight IN11610,
The “Childless” EITC:
Temporary Expansion for
2021 Under the American
Rescue Plan Act of 2021
(ARPA; P.L. 117-2), by
Margot L. CrandallHollick.
CRS Report R43805, The
Earned Income Tax Credit
(EITC): How It Works and
Who Receives It, by
Margot L. Crandall-
32
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Funds for
Administration of
Earned Income Tax
Credits in the
Territories
Section 137202
Description
CRS Resources
necessary to receive the maximum credit amount (i.e.,
“the earned income amount”); (2) increasing—to
$11,610—the highest income level at which taxpayers
receive the maximum credit amount before it begins to
phase out; and (3) doubling the phase-in and phaseout
rates from 7.65% to 15.3%.f Combined, these changes
would effectively triple the maximum EITC for childless
workers. (Like other aspects of the EITC under current
law, the $9,820 and $11,610 amounts would be indexed
for inflation in 2022.)
Regarding eligibility age, for 2022, this provision would
temporarily expand eligibility for the childless EITC—by
reducing the minimum eligibility age from 25 to 19 for
most workers. In other words, this change would allow
most eligible workers ages 19 to 24 to claim the childless
EITC for 2022. For students who are attending school at
least part-time, the age limit would be reduced from 25 to
24 for 2022.g For former foster children and youth who
are homeless, the minimum age would be reduced from
25 to 18. The provision would also temporarily eliminate
the upper age limit for 2022, so workers aged 65 and
older would be eligible.
The provision also includes a temporary earned income
lookback for 2022 (a similar provision was temporarily
enacted for 2021 under ARPA whereby taxpayers could
use their 2019 income). Under this provision, if a
taxpayer’s earned income in 2022 was less than their
earned income in 2021, the taxpayer could elect to use
their 2021 earned income in calculating their EITC. This
income lookback would be applicable to all EITC
recipients—those with and without children.
This provision is a modification of Section 137401 in H.R.
5376, as reported on September 27, 2021.
Hollick, Gene Falk, and
Conor F. Boyle.
Under current law, residents of the territories may be
eligible to receive an EITC under their own territorial tax
law. These territories are Puerto Rico, American Samoa,
the Commonwealth of the Northern Mariana Islands
(CNMI), the United States Virgin Islands (USVI), and
Guam. These territorial EITCs are paid by the local
territorial government, with the Treasury making
aggregate payments to territorial governments for the
total cost of these benefits. (Territorial residents are
generally ineligible for the federal EITC.) From 2021 to
2025 under current law, the Treasury is also required to
pay to territorial governments amounts that these
governments spend on education efforts regarding the
EITC—up to $1 million per year for Puerto Rico, and up
to $50,000 per year for the other territories.
This provision would permanently provide additional
funding for territorial governments to cover
administrative expenses of their territorial EITCs—up to
$4 million per year for Puerto Rico and up to $200,000
per year for the other territories.
This provision would apply beginning in 2022.
Congressional Research Service
33
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
This provision is identical or nearly identical to Sections
137402 in H.R. 5376, as reported on September 27, 2021.
Part 3—Expanding Access to Health Coverage and Lowering Costsh
Improve
Affordability and
Reduce Premium
Costs of Health
Insurance for
Consumers
Section 137301
Modification of
EmployerSponsored
Coverage
Affordability Test in
Health Insurance
Premium Tax
Credit
Section 137302
Under current law, certain individuals without access to
subsidized health insurance coverage may be eligible for
the premium tax credit (PTC). In order to be eligible to
receive the premium tax credit in 2021, individuals must
have annual household income at or above 100% of the
federal poverty level; not be eligible for certain types of
health insurance coverage, with exceptions; file federal
income tax returns; and enroll in a plan through an
individual exchange.
This provision would temporarily extend expanded
eligibility for and the amount of the PTC originally
enacted under ARPA by modifying the income eligibility
criteria and credit formula for 2021 through 2025.
Regarding income eligibility, the provision would
temporarily eliminate the phaseout for households with
annual incomes above 400% of the federal poverty level
(FPL).
Regarding the formula, the provision would temporarily
establish the percentage of annual income that eligible
households may be required to contribute toward the
premium. The percentages would range from 0.0% to
8.5% of household income, with higher-income groups
subject to larger percentages, as specified. The provision
would temporarily strike the existing indexing provision
that would apply to the formula beginning in 2023 through
2026.
This provision is a modification of Section 137501 in H.R.
5376, as reported on September 27, 2021.
For background, see
Under current law, individuals who are eligible for
minimum eligible coverage from their employer are
generally ineligible for the PTC. An exception is provided
to an individual whose employer-provided health benefits
are unaffordable or inadequate. In 2021, coverage is
considered unaffordable if an employee’s share of the
premium for self-only coverage under the plan exceeds
9.83% of the employee’s household income. This
affordability test is annually adjusted.
For 2022 through 2025, this provision would reduce the
percentage of household income used to determine
affordability of eligible employer-sponsored plans and
qualified small employer health reimbursement
arrangements from 9.83% to 8.5%. Hence, more
households with unaffordable employer health benefits
could be eligible for the PTC compared to current law.
The provision would temporarily strike the annual
adjustment process through 2026.
This provision is a modification of Section 137502 in H.R.
5376, as reported on September 27, 2021.
For background, see
Congressional Research Service
CRS Report R44425,
Health Insurance Premium
Tax Credit and CostSharing Reductions, by
Bernadette Fernandez.
CRS Report R44425,
Health Insurance Premium
Tax Credit and CostSharing Reductions, by
Bernadette Fernandez.
34
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Treatment of
Lump-Sum Social
Security Benefits in
Determining
Household Income
Section 137303
Temporary
Expansion of Health
Insurance Premium
Tax Credits for
Certain LowIncome Populations
Section 137304
Special Rule for
Individuals
Receiving
Unemployment
Compensation
Section 137305
Description
CRS Resources
Beginning in 2022, this provision would exclude from
household income—for purposes of determining PTC
eligibility and amount for a given year—any lump-sum
Social Security benefit payment attributable to a prior
year. This provision would allow taxpayers to elect to
include as part of their income the excludable amount, as
specified, beginning in 2026.
This provision is identical or nearly identical to Section
137503 in H.R. 5376, as reported on September 27, 2021.
For background, see
For 2022 through 2025, this provision would expand PTC
eligibility for lower-income households and make other
temporary changes.
The provision would temporarily disallow income criteria
to be used to determine PTC eligibility. For households
with incomes not exceeding 138% of FPL, the provision
would temporarily disregard the affordability test
applicable to eligible employer-sponsored plans and
qualified small employer health reimbursement
arrangements for PTC eligibility purposes.
For households with incomes less than 200% of FPL, the
provision would temporarily cap the dollar amount such
households would pay back in advanced PTC (APTC)
payments that were provided in excess.
For a household that would not be required to file a tax
return except to reconcile APTC payments, the provision
would temporarily repeal the requirements to file a
return and pay back excess APTC if an exchange
projected such household’s income would not exceed
138% of FPL.
For applicable large employers of employees with
household incomes projected to not (or that do not)
exceed 138% of FPL, the provision would temporarily
repeal the requirement that such employers pay a penalty
if at least one full-time employee enrolls in an exchange
plan and is eligible for a PTC or cost-sharing reduction
(CSR).
This provision is identical or nearly identical to Section
137504 in H.R. 5376, as reported on September 27, 2021.
For background, see
For 2021 and 2022, this provision would deem individuals
who receive unemployment compensation for any week
during a given year to have met the PTC income eligibility
criteria. The provision would temporarily disregard any
household income above 150% of FPL in 2022 (133% of
FPL in 2021).
This provision is a modification of Section 137507 in H.R.
5376, as reported on September 27, 2021.
For background, see
Congressional Research Service
CRS Report R44425,
Health Insurance Premium
Tax Credit and CostSharing Reductions, by
Bernadette Fernandez.
CRS Report R44425,
Health Insurance Premium
Tax Credit and CostSharing Reductions, by
Bernadette Fernandez.
CRS Report R45455, The
Affordable Care Act’s
(ACA’s) Employer Shared
Responsibility Provisions
(ESRP), by Ryan J. Rosso.
CRS Report R44425,
Health Insurance Premium
Tax Credit and CostSharing Reductions, by
Bernadette Fernandez.
35
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Permanent Credit
for Health
Insurance Costs
Section 137306
Exclusion of
Certain Dependent
Income for
Purposes of
Premium Tax
Credit
Section 137307
Description
CRS Resources
For the health coverage tax credit (HCTC), this provision
would strike the sunset date of January 1, 2022, to
authorize it on a permanent basis. The provision would
increase the HCTC’s subsidy rate to 80% of the premium
for qualifying health plans, for coverage months beginning
after December 31, 2021.
This provision is identical or nearly identical to Section
137508 in H.R. 5376, as reported on September 27, 2021.
For background, see
For 2023 through 2026, this provision would exclude
income of a dependent under 24 years old from the
calculation of the PTC and determination of eligibility for
cost-sharing reductions. An exception to this exclusion
would apply to aggregate income from all dependents
younger than 24 in a given household that exceeds
$3,500; the dollar level would be annually adjusted
beginning in 2024.
This provision did not appear in H.R. 5376, as reported
on September 27, 2021.
For background, see
CRS Report R44392, The
Health Coverage Tax
Credit (HCTC): In Brief, by
Bernadette Fernandez.
CRS Report R44425,
Health Insurance
Premium Tax Credit and
Cost-Sharing
Reductions, by
Bernadette Fernandez.
Part 5—Higher Education
Credit for Public
University Research
Infrastructure
Section 137501
This provision would create a new tax credit for
donations to public educational institutions for research
infrastructure, in lieu of claiming the charitable
contribution deduction for these amounts.
Specifically, taxpayers would be able to claim a credit
equal to 40% of cash contributions for a qualifying project
of a certified educational institution, subject to credit
allocation limits. This tax credit would be part of the
general business credit.
The Secretary of the Treasury, in consultation with the
Secretary of Education, would establish a program to
designate a group of certified educational institutions and
allocate credit amounts for their qualifying projects. These
designations would be based on the institution’s expected
expansion in science, technology, engineering and math
(STEM) research, ensuring consideration for smaller
institutions (those with fewer than 12,000 full time
students). A qualifying project would be defined as a
project to purchase, construct, or improve research
infrastructure property. Eligible institutions would
generally be limited to state colleges and universities.
Certified educational institutions would be awarded a
credit allocation, with qualified cash contributions not to
exceed 250% of this allocation. A certified educational
institution’s annual allocation could not exceed $50
million per year. Total allocations would be limited to
$500 million per year for 2022 through 2026.
For example, a certified educational institution could be
allocated $20 million in credits for a qualifying project.
The institution could then designate up to $50 million
(250% of $20 million) in qualifying cash contributions for
that project. These qualifying cash contributions would
then generate up to $20 million (40% of $50 million) in
credits for taxpayers.
Congressional Research Service
For background, see
CRS Report R45922, Tax
Issues Relating to
Charitable Contributions
and Organizations, by
Jane G. Gravelle, Donald
J. Marples, and Molly F.
Sherlock.
36
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
The Treasury Secretary would be required to publicly
disclose credit applicants (i.e., certified institutions) and
their associated credit allocations. Certified institutions
would be required to publicly disclose donors and the
amount of their contributions designated for qualifying
projects for this tax credit.
This provision is identical or nearly identical to Sections
137701 in H.R. 5376, as reported on September 27, 2021.
Treatment of
Federal Pell Grants
for Income Tax
Purposes
Section 137502
Repeal of Denial of
American
Opportunity Tax
Credit on Basis of
Felony Drug
Conviction
Section 137503
Modification of
Limitation on
Deduction for State
and Local taxes,
etc.j
Section 137601
Under current law, the portion of a scholarship (including
a Pell Grant) that covers qualified tuition and fees is
generally excludable from income and hence not taxable.i
In contrast, the portion of a scholarship that covers room
and board and other living expenses is taxable. Pell Grants
may be used to pay for tuition and fees, room and board,
and other educational expenses. In addition, under
current law, when calculating an education tax credit,
taxpayers must reduce their credit-eligible education
expenses by any amounts received as tax-free
scholarships. Since the amount of an education tax credit
depends on expenses incurred for tuition and fees, then
all else being equal, receipt of a tax-free scholarship
reduces the amount of credit-eligible expenses, and may
reduce the amount of their education credit.
This provision would temporarily modify the current
exclusion for scholarship income such that any amount of
a Pell Grant—not just the portion that pays for qualified
tuition and fees—would be excluded from income, and
hence not be taxable. In addition, under this provision,
expenses eligible for education tax credits would
temporarily not be reduced by any amount of a Pell Grant.
Both of these changes would apply to Pell Grants received
in 2022 through 2025.
This provision is a modification of Section 137703 in H.R.
5376, as reported on September 27, 2021.
For background, see
Under current law, the American Opportunity Tax Credit
(AOTC) cannot be claimed for a student convicted of a
federal or state felony drug possession or distribution
offense. This lifetime prohibition generally applies
beginning with the year in which the conviction occurs.
The provision would repeal this ban, allowing the AOTC
to be claimed for an otherwise eligible student convicted
of a felony drug offense.
This provision is identical or nearly identical to Section
137704 in H.R. 5376, as reported on September 27, 2021.
For background, see
Under current law, taxpayers who itemize their
deductions may claim a deduction for certain state and
local taxes paid (the SALT deduction). P.L. 115-97 limited
nonbusiness SALT deduction claims for tax years 2018
through 2025, set to $10,000 for single taxpayers and
married couples filing jointly and $5,000 for married
taxpayers filing separately. That law also excluded foreign
real property taxes paid from SALT deduction claims over
the same time frame.
For background, see
Congressional Research Service
CRS Report R45418,
Federal Pell Grant Program
of the Higher Education
Act: Primer, by Cassandria
Dortch.
CRS Report R41967,
Higher Education Tax
Benefits: Brief Overview
and Budgetary Effects, by
Margot L. CrandallHollick.
CRS Report R42561, The
American Opportunity Tax
Credit: Overview, Analysis,
and Policy Options, by
Margot L. CrandallHollick.
CRS Report R42561, The
American Opportunity Tax
Credit: Overview, Analysis,
and Policy Options, by
Margot L. CrandallHollick.
CRS Report R46246, The
SALT Cap: Overview and
Analysis, by Grant A.
Driessen and Joseph S.
Hughes.
CRS Report RL32781,
Federal Deductibility of
State and Local Taxes, by
37
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
The provision would increase the SALT deduction
limitation from $10,000 to $72,500 for single taxpayers
and married couples filing jointly, and from $5,000 to
$36,250 for married individuals filing separately. The
increase would be effective for tax years beginning after
2020.
The provision would also extend the deduction (as
modified in this proposal) an additional six tax years,
through tax year 2031.
This provision did not appear in H.R. 5376, as reported
on September 27, 2021.
Grant A. Driessen and
Steven Maguire.
Source: November 3, 2021, modified version of the Build Back Better Act (BBBA; H.R. 5376) as posted on the
House Rules Committee website.
Notes: Provisions are effective in 2022 unless otherwise noted. The changes that would be made by the
provision are permanent, unless otherwise noted. Within the description, “Section” citations refer to the section
within the Internal Revenue Code (IRC), 26 U.S.C., unless otherwise noted. This subtitle is a modified version of
Subtitle H in H.R. 5376, as reported on September 27, 2021. For more information on Subtitle H, see CRS
Report R46923, Tax Provisions in the “Build Back Better Act:” The House Ways and Means Committee’s
Legislative Recommendations, coordinated by Molly F. Sherlock.
Part 4 of Subtitle F of the October 28 modified legislative text of the Build Back Better Act would also establish
new Pathway to Practice Training Programs, which are beyond the scope of this report and not included in the
table above. Part 4, Section 137403 includes a new refundable tax credit (under Section 36G of the Internal
Revenue Code) for qualifying educational institutions to offset amounts paid or incurred by the institution for
each eligible student who receives a Pathway to Practice medical scholarship voucher.
a. For example, the advance payments of the 2021 credit will be based on an estimate of the 2021 credit
amount generally using 2020 tax data (the year of the data used to estimate the credit amount is referred to
as the “reference year”). Differences in the number of qualifying children between 2021 and 2020 may
occur when children move between taxpayers from year to year or if a child is born in 2021.
b. Territorial residents would be eligible to receive this larger child credit for 2022 from their territorial
revenue authority, with the IRS making aggregate payments to the territory for the larger 2022 credit
amount under existing law, IRC Section 24(k).
c. Income for purposes of phasing out the child credit is equal to Adjusted Gross Income (AGI) increased by
foreign earned income of U.S. citizens abroad, including income earned in Guam, American Samoa, the
Northern Mariana Islands, and Puerto Rico.
d. The age of the children would be based on their age at the end of 2022. When issuing advance payments in
2022, the IRS could project a child’s age under IRC Section 7527A(b)(1)(D). In other words, a qualifying
child who is 5 years old in 2021 and 6 years old in 2022 would result in the taxpayer being eligible for a
maximum credit of $3,000, or $250 per month advanced in 2022. Hence, for the purposes of the safe
harbor, the child would be considered an older child.
e. Under IRC Section 24(d)(1)(B)(ii), taxpayers with three or more qualifying children can calculate the
refundable portion of the child credit—the additional child tax credit or ACTC—using an alternative
formula. Under this formula, the ACTC equals the difference in the employee’s share of Social Security
taxes and Medicare taxes (i.e., 7.65% of earned income) and their EITC, up to the maximum ACTC. The
maximum ACTC in 2021 before ARPA was $1,400 per qualifying child and is scheduled under current law
to revert to that level from 2022 to 2025. Beginning in 2026, the maximum ACTC is scheduled to be
$1,000 per qualifying child. In most cases, the ACTC calculated under the earned income formula is greater
than the ACTC calculated under the alternative formula.
f.
Under current law, beginning in 2022 the statutory earned income amount and the phaseout threshold
amount for childless EITC recipients will revert to their levels prior to ARPA, $4,220 and $5,280
respectively, and be annually adjusted for inflation. For reference, in 2021, prior to ARPA these amounts
after inflation adjustment would have been $7,100 and $8,880, respectively. The phaseout threshold amount
for married joint filers with a given number of qualifying children is $5,000 more than for unmarried filers. In
2021, once adjusted for inflation, this amount equals $5,940 for childless EITC recipients ($5,950 for those
with children). See IRS Revenue Procedure (RP) 2020-45.
Congressional Research Service
38
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
g.
h.
i.
j.
The definition of a student would be someone carrying half or more of the normal full-time workload for
their program of study, as defined under IRC Section 25A(b)(3).
The November 3 version of the bill includes two new health provisions that are not summarized in this
table. These provisions did not appear in H.R. 5376 as reported on September 27, 2021, or in the October
28 version of the bill. Section 137308 would limit patient cost sharing (e.g., copays) on insulin to no more
than $35 per month beginning in 2023. Section 137309 would require new information reporting beginning
in 2023, so that group health plan sponsors would receive a semiannual report from pharmacy benefit
managers on costs, fees, and rebates associated with pharmacy benefit manager contracts.
Under current law, taxpayers may elect to have a tax-free scholarship (including a Pell Grant) included in
income and hence subject to tax. This may increase a taxpayer’s education credit and lower their total tax
(or increase their refund).
A manager’s amendment, released November 4, 2021, to the Rules Committee Print 117-18 would increase
the SALT cap limit to $80,000 ($40,000 married taxpayers filing separately) through 2030. The cap would
then return to $10,000 for 2031, and would expire for 2032 and all future years.
Congressional Research Service
39
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Table 4. Subtitle H—Responsibly Funding Our Priorities
Section Title and
Number
Description
CRS Resources
Part 1—Corporate and International Tax Reforms
Subpart A—Corporate Provisions
Corporate
Alternative
Minimum Tax
Section 138101
Excise Tax on
Repurchase of
Corporate Stock
Section 138102
This provision would impose an alternative minimum tax
of 15% on corporations based on financial income. It
would apply to corporations with $1 billion or more in
earnings in the previous three years. In the case of U.S.
corporations that have foreign parents, it would apply
only to income earned in the United States of $100
million or more (and apply when the international
financial reporting group has income of $1 billion or
more). It would apply to a new corporation in existence
for less than three years based on the earnings in the
years of existence.
The provision would exclude Subchapter S corporations,
regulated investment companies (RICs), and real estate
investment trusts (REITs).
Firms that file consolidated returns would include income
allocable to the firm from related firms including
controlled foreign corporations (and any disregarded
entities); for other related firms, dividends would be
included. The provision would allow special deductions
for cooperatives and Alaska native corporations.
The additional tax would equal the amount of the
minimum tax in excess of the regular income tax plus the
additional tax from the Base Erosion and Anti-Abuse tax.
Income would be increased by federal and foreign income
taxes to place income on a pretax basis.
Losses would be allowed in the same manner as with the
regular tax, with loss carryovers limited to 80% of taxable
income.
Domestic credits under the general business tax (such as
the R&D credit) would be allowed to offset up to 75% of
the combined regular and minimum tax. Foreign tax
credits would be allowed based on the allowance for
foreign taxes paid in a corporation’s financial statement.
A credit for additional minimum tax could be carried over
to future years to offset regular tax when that tax is
higher.
This provision did not appear in H.R. 5376, as reported
on September 27, 2021.
This provision would impose a 1% excise tax on the
repurchase of stock by a publicly traded corporation. The
amount subject to tax would be reduced by any new
issues to the public or stock issued to employees. The tax
would not apply if repurchases are less than $1 million or
are contributed to an employee pension or similar plan.
The tax would not apply if the repurchases are treated as
a dividend. It also would not apply to repurchases by
regulated investment companies (RICs) or real estate
investment trusts (REITs). Further, it would not apply to
repurchases that are treated as dividends or to purchases
Congressional Research Service
For background, see
CRS Report R46887,
Minimum Taxes on
Business Income:
Background and Policy
Options, by Molly F.
Sherlock and Jane G.
Gravelle.
CRS Insight IN11646, A
Look at Book-Tax
Differences for Large
Corporations Using
Aggregate Internal
Revenue Service (IRS)
Data, by Molly F.
Sherlock and Jane G.
Gravelle.
For background, see
CRS In Focus IF11960,
An Excise Tax on Stock
Repurchases and Tax
Advantages of Buybacks
over Dividends, by Jane G.
Gravelle.
CRS Legal Sidebar
LSB10266, Stock
Buybacks: Background and
40
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
by a dealer in securities in the ordinary course of
business.
The excise tax would apply to purchases of corporation
stock by a subsidiary of the corporation (a corporation or
partnership that is more than 50% owned). The tax would
also apply to purchases by a U.S. subsidiary of a foreignparented firm. It would apply to newly inverted (after
September 20, 2021) or surrogate firms (firms that
merged to create a foreign parent with the former U.S.
shareholders owning more than 60% of shares).
The tax would not be deductible.
This provision did not appear in H.R. 5376, as reported
on September 27, 2021.
Reform Proposals, by Jay
B. Sykes.
CRS In Focus IF11393,
Stock Buybacks: Concerns
over Debt-Financing and
Long-Term Investing, by
Gary Shorter.
CRS In Focus IF11506,
Stock Buybacks and
Company Executives’
Profits, by Gary Shorter.
Subpart B—Limitations on Deduction for Interest Expense
Limitations on
Deduction for
Interest Expense
Section 138111
Section 163(j) of the IRC limits interest deductions to
30% of earnings before interest and taxes (EBIT). Before
2022, the income base is earnings before interest, taxes,
depreciation, and amortization (EBITDA). Excess interest
is carried forward. The limit applies at the partnership or
corporate level for partnerships and Subchapter S
corporations.
This provision would add an additional interest limitation
under Section 163(n). The share of interest deducted by
firms with operations in other countries would be limited
to 110% of the allocated share of worldwide interest; the
allocated share is the same as the U.S. firm’s share of
worldwide EBITDA. This provision would apply to firms
with an average excess interest of $12 million over three
years. This limit would not apply to small businesses with
average earnings over three years of less than $25 million,
partnerships, Subchapter S corporations, real estate
investment trusts (REITs), or regulated investment
companies (RICs).
The Section 163(j) limit applies at the partner or
shareholder level for partnerships and Subchapter S
corporations.
The provision would be effective for taxable years
beginning after December 31, 2022.
This provision is a modification of Section 138111 in H.R.
5376, as reported on September 27, 2021.
For background see
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
CRS In Focus IF11809,
Trends and Proposals for
Corporate Tax Revenue,
by Donald J. Marples and
Jane G. Gravelle.
Subpart C—Outbound International Provisions
Modifications to
Deduction for
Foreign-Derived
Intangible Income
and Global
Intangible LowTaxed Income
Section 138121
Current law imposes a minimum tax on global intangible
low-taxed income (GILTI) of controlled foreign
corporations (CFCs), after allowing a deduction for 10%
of tangible assets and 50% of the remainder. A deduction
is also allowed for foreign-derived intangible income
(FDII) for 10% of tangible assets and 37.5% of the
remainder. These deduction amounts for the remainder
are scheduled to fall to 37.5% for GILTI and 21.875% for
FDII after 2025. With the current 21% tax rate, these
deductions result in a rate of 10.5% (13.125% after 2025)
for GILTI and 13.125% (16.4% after 2025) for FDII.
Congressional Research Service
For background see
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
CRS In Focus IF11809,
Trends and Proposals for
Corporate Tax Revenue,
41
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
The combined GILTI and FDII deductions are limited to
taxable income and any unused deduction cannot be
carried back or forward.
This provision would reduce the deduction for GILTI to
28.5% and the deduction for FDII to 24.8%. With the
current 21% rate, these deductions would result in a tax
rate of 15.015% for GILTI and 15.792% for FDII. The
proposal would allow amounts in excess of taxable
income to be deducted and increase net operating losses,
effectively allowing them to be carried forward.
This provision would be effective for taxable years
beginning after December 31, 2022.
This provision is a modification of Section 138121 in H.R.
5376, as reported on September 27, 2021.
Repeal of Election
for 1-Month
Deferral in
Determination of
Taxable Year of
Specified Foreign
Corporations
by Donald J. Marples and
Jane G. Gravelle.
Under current law, controlled foreign corporations are
generally required to have the same tax year as the U.S.
parent, but there is an election to begin the tax year one
month earlier. This provision would repeal that election.
It would apply to tax years beginning after November 30,
2022.
This provision is a modification of Section 138122 in H.R.
5376, as reported on September 27, 2021.
Section 138122
Modifications of
Foreign Tax Credit
Rules Applicable to
Certain Taxpayers
Receiving Specific
Economic Benefits
Section 138123
Modifications to
Foreign Tax Credit
Limitations
Section 138124
Under current law, a credit for foreign taxes paid offsets
U.S. tax on foreign-source income dollar for dollar,
whereas a deduction is less valuable. Dual-capacity
taxpayers are taxpayers who receive a benefit from a
foreign government (such as a right to extract oil). These
taxpayers also sometimes pay higher taxes that may not
be distinguishable from payments for benefits (such as
royalties) that would be deductible. Under this provision,
taxes would only be creditable up to the amount that
would be paid under rules generally applicable to
corporations in that country, and the excess could be
deducted.
This provision is identical or nearly identical to Section
138123 in H.R. 5376, as reported on September 27, 2021.
Current law allows a credit for foreign taxes paid (80% of
foreign taxes can be credited for GILTI). The credit is
limited to U.S. tax on foreign-source income. The code
allocates a share of interest and head office expenses of
the U.S. parent company to foreign-source income, which
reduces the limit. Any excess credits are carried back one
year and carried forward 10 years. This limit applies on an
overall basis for all countries (within separate overall
limits, or baskets, for GILTI, branch, passive, and general
income). This overall limit allows taxes in excess of the
U.S. tax in high-tax countries to offset U.S. tax due in lowor no-tax countries.
This provision would impose the limit separately in each
county (referred to as a per-country limit). The provision
would also eliminate the branch basket, eliminate
allocation of interest and head office expenses to foreignsource income, eliminate the foreign tax credit carryback,
Congressional Research Service
For background see:
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
CRS In Focus IF11809,
Trends and Proposals for
Corporate Tax Revenue,
by Donald J. Marples and
Jane G. Gravelle.
42
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
and allow excess credits for GILTI to be carried forward
five years for tax years beginning after December 31,
2022, and before January 1, 2031. It would also modify the
treatment of certain foreign asset dispositions.
This provision would be effective for tax years beginning
after December 31, 2022.
This provision is a modification of Section 138124 in H.R.
5376, as reported on September 27, 2021.
Foreign Oil and Gas
Extraction Income
and Foreign Oil
Related Income to
Include Oil Shale
and Tar Sands
Section 138125
Modifications to
Inclusion of Global
Intangible LowTaxed Income
Section 138126
Modifications to
Determination of
Deemed Paid
Credit for Taxes
Properly
Attributable to
Tested Income
Section 138127
Under current law, foreign oil and gas extraction income
is not taxed (although another section would include this
income in GILTI), and foreign oil-related income (such as
a distribution) is included in GILTI. This provision would
amend the definition of these incomes to include oil shale
and tar sands.
This provision is identical or nearly identical to Section
138125 in H.R. 5376, as reported on September 27, 2021.
For background, see
Current law imposes a minimum tax on global intangible
low-taxed income (GILTI) of CFCs, after allowing a
deduction for 10% of tangible assets and 50% of the
remainder (this percentage would be reduced by the
section described above). GILTI (including profits and
losses) is measured on an overall basis, so that losses in
one jurisdiction can offset income in another. Any overall
losses cannot be carried forward. Foreign oil and gas
extraction income is not included in GILTI and not taxed.
This provision would provide for a per-country measure
of GILTI income and loss, reduce the deduction for
tangible assets to 5%, allow losses to be carried forward
for one year, and include foreign oil and gas extraction
income in GILTI. The reduction in the 10% deduction for
tangible assets would not apply to the territories.
This provision would be effective for taxable years
beginning after December 31, 2022.
This provision is a modification of Section 138126 in H.R.
5376, as reported on September 27, 2021.
For background, see
Under current law, credits for foreign taxes paid on GILTI
are limited to 80% of these taxes. This provision would
increase the amount to 95%. It would also provide that
CFCs must have direct U.S. shareholders and would apply
special rules to foreign-owned U.S. shareholders.
This provision would be effective for tax years beginning
after December 31, 2022.
This provision is a modification of Section 138127 in H.R.
5376, as reported on September 27, 2021.
For background, see
Congressional Research Service
CRS Report R43128, Oil
Sands and the Oil Spill
Liability Trust Fund: The
Definition of “Oil” and
Related Issues for
Congress, by Jonathan L.
Ramseur.
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
CRS In Focus IF11809,
Trends and Proposals for
Corporate Tax Revenue,
by Donald J. Marples and
Jane G. Gravelle.
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
CRS In Focus IF11809,
Trends and Proposals for
Corporate Tax Revenue,
by Donald J. Marples and
Jane G. Gravelle.
43
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Deduction for
Foreign Source
Portion of
Dividends Limited
to Controlled
Foreign
Corporations, etc.
Section 138128
Limitation on
Foreign Base
Company Sales and
Services Income
Section 138129
Description
CRS Resources
On adoption of the GILTI regime in 2017, dividends from
foreign corporations became deductible by shareholders
with a 10% interest beginning in 2018. The GILTI regime
and Subpart F, which taxes certain easily shifted income at
full rates, apply only to CFCs. CFCs are 50% owned by
U.S. shareholders, each with at least 10% ownership. This
provision would limit dividend deductions by 10%
shareholders to dividends of CFCs. Foreign corporations
that are not CFCs could elect CFC status with the
agreement of all U.S. shareholders. The provision would
also largely reverse the elimination of downward
attribution where CFC status could result from tracing
ownership by a U.S. corporation up through a foreign
parent. Currently, these downward attribution rules apply
to a U.S. person at least 10% controlled by a foreign
person; the revision would raise that share to 50%. These
provisions would apply to distributions made after the
date of enactment and to taxable years beginning after the
date of enactment.
This provision is a modification of Section 138128 in H.R.
5376, as reported on September 27, 2021.
For background, see
Under current law, subpart F imposes current taxes on
certain income that is easily shifted, including foreign base
company sales and service income. This income is earned
in a jurisdiction where the product or service is neither
produced nor consumed (i.e., in an intermediary). It
applies to transactions with related parties. This provision
would limit the definition of related parties to taxable
units resident in the United States. It also would close
certain tax planning techniques that allow U.S.
shareholders to avoid tax.
This provision is a modification of Section 138129 in H.R.
5376, as reported on September 27, 2021.
For background, see
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
Subpart D—Inbound International Provisions
Modifications to
Base Erosion and
Anti Abuse Tax
Section 138131
Under current law, the base erosion and anti-abuse tax
(BEAT) provides for an alternative calculation of tax by
adding certain payments to related foreign parties (such as
interest and royalties) and taxing this income at 10%.
Payments for the cost of goods sold are not included.
BEAT does not allow tax credits, including the foreign tax
credit, except for a temporary allowance of the research
credit along with 80% of the low-income housing credit
and two energy credits. After 2025, the rate will rise to
12.5% and no credits will be allowed.
This provision would raise the tax rate to 10% in 2022,
12.5% in 2023, 15% in 2024 and 18% after 2025. Tax
credits would be allowed. The base would also include
payments to foreign related parties for inventory that is
required to be capitalized (such as inventory to produce
tangible property) and payments for inventory in excess
of cost.
This provision is a modification of Section 138129 in H.R.
5376, as reported on September 27, 2021.
Congressional Research Service
For background, see
CRS Report R45186,
Issues in International
Corporate Taxation: The
2017 Revision (P.L. 11597), by Jane G. Gravelle
and Donald J. Marples.
44
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Description
CRS Resources
Subpart E—Other Business Tax Provisions
Credit for Clinical
Testing of Orphan
Drugs Limited to
First Use or
Indication
Section 138141
Modifications to
Treatment of
Certain Losses
Section 138142
Adjusted Basis
Limitation for
Divisive
Reorganization
Section 138143
Under current law, businesses investing in the
development of drugs to diagnose, treat, or prevent rare
diseases and conditions—sometimes referred to as
“orphan drugs”—have been able to claim a nonrefundable
tax credit for a portion of the qualified clinical testing
expenses they incur or pay.
This provision would modify the credit to limit the
eligibility of drugs to their first use or indication. In
addition, expenses eligible for the credit must be incurred
prior to the receipt of any other use or indication.
This provision is identical or nearly identical to Section
138141 in H.R. 5376, as reported on September 27, 2021
Under this provision, a worthless security would be
considered a loss from the sale or exchange at the time it
became worthless, as opposed to on the last day of the
taxable year. The rules relating to worthless securities
would be expanded to include partnership indebtedness
so that partnership indebtedness would be treated the
same as corporate indebtedness. A worthless partnership
interest would be considered a loss from the sale or
exchange of a capital asset and recognized at the time it
became worthless. The tax treatment of corporate
subsidiary liquidations would be modified.
This provision is identical or nearly identical to Section
138142 in H.R. 5376, as reported on September 27, 2021.
Corporations that reorganize have rules about whether
the corporation will realize gain in the transaction. If these
reorganizations only involve the exchange of stock, the
reorganization is tax free. However, if money or property
is transferred, the corporation receiving the property can
be subject to tax on gain in the value of assets as long as
they are not distributed to shareholders. If the property is
transferred to creditors, it is treated as a distribution.
This provision would apply to reorganizations that involve
a corporation (the distributing corporation) separating
from its controlled corporation. In this case, where the
controlled corporation receives property from the
distributing corporation and transfers debt securities to
the creditors of the distributing corporation, any gain on
the property is subject to tax.
This provision would apply to reorganizations after the
date of enactment with a transition rule for transactions
already subject to binding agreements or announced.
This provision is a modification of Section 138143 in H.R.
5376, as reported on September 27, 2021.
Congressional Research Service
45
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Rents From Prison
Facilities Not
Treated as
Qualified Income
for Purposes of
REIT Income Tests
Section 138144
Modifications to
Exemption for
Portfolio Interest
Section 138145
Certain Partnership
Interest Derivatives
Section 138146
Adjustments to
Earnings and Profits
of Controlled
Foreign
Corporations
Section 138147
Description
A real estate investment trust (REIT) is a real estate
company that would otherwise be taxed as a corporation,
except that it meets certain tests and faces a number of
restrictions. Among the tests is the requirement that at
least 75% of REIT income be passively derived from real
estate (e.g., rents, mortgages).
This provision would exclude prison facility rental income
from being qualified income for the income test.
This provision is identical or nearly identical to Section
138144 in H.R. 5376, as reported on September 27, 2021.
CRS Resources
For background, see
CRS Report R44421,
Real Estate Investment
Trusts (REITs) and the
Foreign Investment in Real
Property Tax Act (FIRPTA):
Overview and Recent Tax
Revisions, by Jane G.
Gravelle.
Under current law, an exemption for portfolio interest
allows foreign corporations (and nonresidents) to invest
in certain U.S. debt without being subject to U.S. income
tax (or withholding). This exemption is not allowed for
10% shareholders—individuals who own 10% of the
voting stock of the corporation.
This provision would expand the definition of 10%
shareholder to also include any individual who owns 10%
of the value of the corporation.
This provision would apply to obligations issued after the
date of enactment.
This provision is identical or nearly identical to Section
138145 in H.R. 5376, as reported on September 27, 2021.
Under current law, income arising from notional principal
contracts is generally sourced to the residence of the
recipient of the payment—unless the income is effectively
connected with U.S. trade or business activity. Publicly
traded partnerships, however, are not subject to the rules
on effectively connected income.
The provision would treat notional principal contract
income of publicly traded partnerships as “dividend
equivalent amounts” that would be sourced based on the
residence of the payor.
This provision would apply to payments made after
December 31, 2022.
This provision is a modification of Section 138146 in H.R.
5376, as reported on September 27, 2021.
Under current law, earnings and profits determine
whether a distribution is a dividend (which may be taxed),
return of capital (not taxed), or capital gain (taxed).
Earnings and profits are adjusted by various items, but
controlled foreign corporations are not subject to certain
inventory adjustments, installment sales, or the completed
contract method of accounting.
This provision would relocate the current law provision in
the tax code and would not include the former language
that these rules do not apply if they increase earnings and
profits above distributions, expanding its applicability to all
controlled foreign corporations regardless of the level of
distributions.
This provision is identical or nearly identical to Section
138125 in H.R. 5376, as reported on September 27, 2021.
Congressional Research Service
46
Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18
Section Title and
Number
Certain Dividends
of Controlled
Foreign
Corporations
Treated as
Extraordinary
Dividends
Section 138148
Limitation on
Certain Special
Rules for Section
1202 Gains
Section 138149
Constructive Sales
Section 138150
Description
CRS Resources
Under
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