Hot Topic | February 2023


IRA and CHIPS: Tax considerations

Our impressions on the accounting for key provisions in the recently enacted tax legislation.

Angie Storm

Angie Storm

Deputy Chief Accountant, Dept. of Professional Practice, KPMG US

+1 212-909-5488

Ashby Corum

Ashby Corum

Partner, Washington National Tax, KPMG US

+1 313-230-3361

Matt Drucker

Matt Drucker

Partner, Dept. of Professional Practice, KPMG US

+1 212-872-3584

Jenna Terrell

Jenna Terrell

Audit Managing Director, Dept. of Professional Practice, KPMG US

+1 617-988-5685

Micah White

Micah White

Senior Manager, Dept. of Professional Practice , KPMG US

+1 314-244-4013

The Inflation Reduction Act of 2022 (IRA) and the CHIPS and Science Act of 2022 (CHIPS),  signed into law by President Biden, introduce new options for monetizing certain credits, a corporate alternative minimum tax, and a stock repurchase excise tax.


Companies subject to US federal tax law

Relevant dates

Key impacts

Our guide includes preliminary guidance on US GAAP and IFRS® Accounting Standards considerations. This preliminary guidance is based on our current understanding of the IRA and CHIPS, and we will continue to analyze how the authoritative accounting guidance applies to some of the provisions.

We will update our views as further information becomes available, practice develops, and further research and analysis is completed. This guide has been most recently updated on Feb. 3, 2023. 

“While the Inflation Reduction Act is not the tax reform 2.0 that Biden campaigned on, it does include significant changes in tax policy, including a Corporate Alternative Minimum Tax, an excise tax on stock repurchases, and significant investment in IRS funding, which will impact individual and corporate taxpayers. The time is now for companies to get up to speed and prepare for implementation.”

— Jennifer Acuna, KPMG U.S. Principal, Federal Legislative & Regulatory Services, Washington National Tax

What’s in the new legislation?

  • A new 15% corporate alternative minimum tax (AMT)
  • A 1% excise tax on stock repurchases
  • Credits that are transferable to an unrelated taxpayer in exchange for cash
  • Credits that have a direct pay option (i.e. refundable credits)
  • Many other provisions on healthcare and clean energy

What's the accounting impact?

  • Companies should account for the incremental tax under the Corporate AMT as incurred and continue to measure their deferred taxes using regular tax rates.
  • The excise tax is not based on income and is therefore not in the scope of ASC 740 or IAS 12.
  • Certain credits will be considered and accounted for as government grants.
  • Other credits will be in the scope of ASC 740 and IAS 12.
  • There are US GAAP to IFRS Accounting Standards differences in the accounting for Corporate AMT and tax credits in certain circumstances.

What's next?

  • Companies can use our guide as a starting point for analysis. Ask the questions that we pose, which are meant to enable conversations on the impacts of the new legislation. 

Report contents

  • Corporate AMT
  • Excise tax on stock repurchases
  • New options for monetizing certain credits
  • Nonrefundable credits
  • Refundable credits
  • Transferable credits

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