The Inflation Reduction Act’s Impact on Small Businesses
The Inflation Reduction Act of 2022 is a big win for the Biden Administration heading into a pivotal midterm election season this fall. For business owners and energy advocates, however, the IRA has more important – and longer-lasting – implications. Setting aside the political posturing, we’ve examined how the Inflation Reduction Act will impact small businesses and the future of EVs in the US.
What Is the Inflation Reduction Act?
The IRA is a trimmed, cut, and restructured version of the Build Back Better Act, which failed to pass the Senate. It’s easy to dismiss the IRA as “Build Back Better Light”, but it still addresses many of the environmental concerns of the previous bill and adds in some inflation-fighting measures as well. For many businesses, it’s an opportunity to evaluate the most impactful energy-saving solutions internally and then use the IRA to meet their energy goals.
Some of the key components of the Inflation Reduction Act include:
Expands Medicare benefits, caps out-of-pocket drug costs
Lowers residential energy bills by $500-1000 per year
Investments to reduce carbon emissions 40% by 2030 (from 2005 levels)
The average enrollee of an Affordable Care Act insurance plan will save $800 a year
Invests $60 billion for environmental clean-up initiatives in disadvantaged communities
Closes tax loopholes and enforces a 15% corporate minimum tax rate
The Inflation Reduction Act And Small Businesses
Small businesses are expected to benefit from this legislation in several ways. The biggest impacts will be focused on taxes (they won’t apply to you, but read on), healthcare, and energy efficiency.
Taxes
The 15% minimum tax on corporations won’t apply to small businesses or most businesses; only about 150 companies in the US will be subject to that new minimum. In some cases, small and mid-sized businesses may find a slightly more level playing field in certain industries.
For businesses facing behemoths like Amazon, it’s a start. Amazon paid an effective tax rate of just 6.1% in 2021, and paid no federal income tax at least twice since the company was founded.
Healthcare
The Inflation Reduction Act extends ACA subsidies through 2025 and will enable Medicare to negotiate drug prices. Negotiating drug prices is a big step, but it isn’t immediate. The process won’t start until 2026 and will be limited to just 10 drugs.
Americans often pay two times for subscription drugs than other industrialized nations and that average is inflated in part by the lack of negotiating power on behalf of patients.
The extension of ACA subsidies will have the biggest impact on small businesses. These subsidies make plans much more affordable. Families on ACA plans saw an average savings of $67 per person per month in 2021, with more than 90% of the 14.5 million Americans using the ACA qualifying for some kind of subsidy.
Energy
The Inflation Reduction Act includes $329 billion in incentives for renewable energy. A good portion of those funds are focused on residential opportunities for adding solar panels and energy-efficient HVAC equipment like heat pumps. Many of those same tax credits are also available for commercial entities. Contact us for help identifying commercial energy tax credits in your state.
The IRA also includes subsidies for electric vehicles. More and more small businesses are switching to EVs to save money and meet their corporate sustainability goals. Vehicles like the Ford F-150 Lightning are ideal fleet vehicles – if businesses can get them.
You Decide What Comes Next
Keen Technical Solutions is working with dozens of businesses from several industries to make the most of these incentives. Learn more about the biggest opportunities to lower energy costs and get your organization lean for the road ahead. Get in touch with Keen Technical Solutions today and let’s get started.