House Passes the Infrastructure Investment and Jobs Act
On November 5, 2021, the House passed the Infrastructure Investment and Jobs Act (the Act), which is expected to be signed by President Biden this week. The legislation contains few notable income tax related provisions. The most impactful income tax provisions are highlighted below.
Employee Retention Credits:
The current iteration of the Employee Retention Credits (ERC) provides a credit of up to $7,000 per employee per quarter for eligible businesses impacted by the pandemic. ERC originated in the Cares Act of 2020 and has been extended and expanded in subsequent legislation. Prior the Act, ERC was available through the 4th quarter of 2021. The Act eliminates the ERC for the 4th quarter of 2021 for most otherwise eligible businesses, retroactively ending the program on September 30th, 2021.
Businesses that meet the definition of a Recovery Startup Business will remain ERC eligible for the 4th quarter of this year. Generally, a Recovery Startup Business is an employer that:
- Began doing business after February 15, 2020, and
- Has average annual gross revenues of less than $1M for prior years.
Digital Asset (Cryptocurrency) Information Reporting:
The Act materially impacts information reporting requirements (i.e. Form 1099 reporting) in the digital asset industry by:
- Expanding the definition of a broker to include “any person who is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
- Naming digital assets as a specified security.
- Including transfers of digital assets from a broker to an account not maintained by the broker as a reportable transfer.
- Requiring businesses that receive more than $10,000 in digital assets in one or more related transactions to file an information return (i.e. treats digital assets as cash, under existing reporting rules for cash transactions).
The changes above are effective for returns and statements required to be furnished after December 31, 2023. Additional guidance is expected from the Department of Treasury with respect to these changes. The Cryptocurrency lobby will likely push for material exceptions and modifications to these provisions, prior to their effective date.
Many of the recent newsworthy income tax proposals being negotiated in Congress are contained in a companion bill, the Build Back Better Act, which is still being negotiated in Congress. We can expect more comprehensive tax law changes to be implemented in that act and possibly via the budget reconciliation process, as we move forward.
At Brown CPA Group, we are closely monitoring continuing developments and interpretations concerning this legislation. Please reach out to your Brown CPA Group professional team to discuss how we can assist your business needs.