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What's in the Inflation Reduction Act?

On Tuesday, President Biden signed the Inflation Reduction Act of 2022 after it passed two party-line votes in the House (Final Vote: 220-207) and the Senate (Final Vote: 51-50) where Vice President Kamala Harris cast the tiebreaking vote.

The legislation includes a number of major healthcare, energy, and climate change provisions. Key provisions of the bill are detailed below.

The bill increases taxes for the largest companies, makes significant drug pricing reforms, and provides historic funding for clean energy infrastructure. 

Corporate Tax Provisions 

The bill makes a number of changes to the corporate tax code. Though it’s not a sweeping reform (like the Tax Cuts and Jobs Act of 2017) and a last-minute effort removed a controversial proposal on the so-called carried interest loophole, its changes will have an impact on mid-to-large-sized corporations and a measured knock-on impact on the rest of the economy.

  • Corporate Alternative Minimum Tax. Establishes a 15% alternative minimum tax on book income on both (a) U.S.-based corporations with at least $1 billion in revenue over a three-year average and (b) foreign-headquartered groups with at least $100 million in revenue over a three-year average.
  • Excise Tax on Stock Buybacks. Imposes a 1% excise tax on the fair market value of stock repurchased by publicly traded companies (with exceptions).
  • Funding for Internal Revenue Service Enforcement. Provides $79 billion in new funding for Internal Revenue Service enforcement over the next 10 years, which has been equated to roughly 87,000 additional IRS hires by political pundits.

Healthcare Provisions

The bill represents one of the most significant pieces of healthcare legislation in recent years by allowing the government to negotiate drug prices and restructuring how drugs are covered under Medicare, significantly impacting drug manufacturers, pharmacy benefit managers, and health insurers.

  • Government Drug Price Negotiations. Allows the Secretary of HHS (Dept. of Health and Human Services) to negotiate maximum fair prices for 50 drugs in Medicare Part D and 50 drugs in Medicare Part B on a phased schedule. Notably, drugs that are less than nine years (for small-molecule drugs) or 13 years (for biological products) from their U.S. Food and Drug Administration (FDA)-approval or licensure date would be held exempt from negotiation. To enforce the negotiation, the bill imposes a monetary penalty of 10 times the difference between the offered price and the maximum fair price (MFP) for all applicable units.
  • Delays Trump-era Rebate Rule. Delays the implementation of the Trump era so-called “rebate rule” that was implemented in November 2020 until 2032. That rule eliminated the safe harbor for Part D drugs and enforced the discounts at the point of sale.  
  • Drug Price Inflation Rebates. Imposes rebates on drug manufacturers that increase prices faster than inflation to limit annual increases in drug prices for people with Medicare. The rebate is based on the Average Sales Price beginning in 2023 relative to Q3 2021 – the Notably, the inflation rebates only apply to drugs in Medicare Part B without competition and Part D drugs that cost more than $100 a year.
  • Medicare Part D Reforms. Makes a number of changes to the structure of Medicare Part D by (a) eliminating the five percent cost-sharing in the catastrophic phase of Part D in 2024, (b) capping out-of-pocket costs at $2,000 in 2025, and (c) limiting premium growth to 6% each year for the next five years.
  • Insulin Price Caps in Medicare Part D. In addition to the above reforms, the bill caps the out-of-pocket costs for insulin at $35 a month.
  • Increases Biosimilar Add-On Payments. Increases the Medicare Part B add-on payment for biosimilars to 8% (up from 6%) of the average sales prices.

Energy and Climate Change Provisions

The bill includes roughly $369 billion in incentives for energy and climate-related programs, including 1) tax rebates and credits to lower energy costs for households; 2) tax credits, research loans, and grants to increase domestic manufacturing capacity for wind turbines, solar panels, batteries, and other essential components of clean energy production and storage; 3) tax credits to reduce carbon emissions; 4) programs to reduce the environmental impact of agriculture; and more.

  • Expansion of Production Tax Credit (PTC) and Restoration of the Investment Tax Credit (ICT). Expands the Production Tax Credit to include energy storage and restores the Investment Tax Credit (30% tax credit) to 2024.
  • Extension and Expansion of Carbon Capture Tax Credit. Extends the carbon capture tax credit to include facilities that start construction before 2033. It also increases the rates for the credit – more specifically, the rates for the credit are now set between $60/MT and $85/MT (compared to the current level of $35/MT-$50/MT), though there are additional wage and apprenticeship requirements. The bill also lowers the annual threshold of eligible carbon capture facilities to 12,500MTs – 18,750 MTs (down from the current 500,000 MT requirement) depending on the type of capture facility.
  • Hydrogen Production and Investment Tax Credit. Establishes a tax credit of $0.60 per kg for hydrogen production that goes up to $3 per kg if wage and registered apprentice requirements are met for facilities that start construction before 2033.
  • Advanced Manufacturing Production Tax Credit. Establishes a tax credit for advanced energy projects of up to 75% (dependent on that reduce the emissions of a manufacturing facility by more than 20%.)
  • Electric Vehicles Tax Credit. Provides a $7,500 income tax credit for new EVs and $4,000 for previously owned EVs. The bill also provides a 30% tax credit for the purchase of clean commercial electric vehicles as well as $1 billion in grants for the purchase of clean heavy-duty vehicles (e.g., buses, etc.). In addition, the bill lifts the cap on the total number of tax credits that automakers can receive and broadens the eligibility for the credit from “plug in” vehicles to include fuel cell vehicles. Eligibility for these tax credits is limited, however, due to what is seen as stringent sourcing requirements.
  • Advanced Industrial Facilities Program ($5.812 billion). Creates a $5.812 billion program to invest in advanced manufacturing facilities with a target of reducing emissions in energy intensive industries. The program will cover the purchase, installation, or implementation of advanced industrial technology or the retrofitting or upgrading of a current facility.
  • Energy Infrastructure Reinvestment Financing ($5 billion). Provides $5 billion to finance up to $250 billion in projects for energy infrastructure, including repurposing or replacing energy infrastructure
  • Electric Transmission Loan/Grant Program ($2.9 billion). Includes roughly $2.9 billion in funding for electric transmission development including $2 billion in direct loans for transmission projects and $760 million in grants for siting for transmission line projects.
  • Domestic Manufacturing Conversion Grants ($2 billion). Provides $2 billion in grants for the production of various types of electric vehicles.
  • Modified Energy Efficiency Tax Credits. Reduces the level of efficiency that a building must demonstrate to 25% (down from 50%) to be eligible for the deduction (50 cents to $5 per square foot depending on level of efficiency gains and wage/apprenticeship requirements). The bill, however, modifies the life of the credit from a lifetime cap to a three-year cap.
  • Streamlined Environmental Permitting. While not codified in the Inflation Reduction Act, after the language was announced, Sen. Joe Manchin (D-WV) announced a list of environmental permitting changes that reportedly the White House and Congressional leaders on both sides of the aisle have agreed to pass before the end of this fiscal year. These changes include a two-year limit on environmental reviews, deadlines for agencies and courts to review environmental permits, as well as limitations on court challenges. These provisions are expected to be considered in the fall.

The bill will have little impact on inflation but will lower drug prices and reduce the budget deficit.

Despite its name, recent estimates and analysis suggest that the bill will actually have little to no impact on inflation. After all, while it is likely to have a significant impact on the costs of prescription drugs for consumers, the percentage of spend for consumers on drugs is comparatively low when compared to food and gas. Unlike previous fiscal stimulus packages that were passed during the COVID-19 pandemic (e.g, Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (H.R.6074), Families First Coronavirus Response Act, and Coronavirus Aid, Relief, and Economic Security Act), the Inflation Reduction Act does not include any direct stimulus, so it should not fan the flame of an already white hot U.S. economy (at 8.5% inflation (U.S. Bureau of Labor Statistics, 2022)).

For example, the Penn Wharton Budget Model (PWBM) suggests the bill will have no impact on GDP or inflation but will result in a $248 billion cumulative deficit. In addition, the Congressional Budget Office suggested that the bill will have no impact on GDP or inflation but suggested a lower deficit reduction of $102 billion.

Inflation Reduction Act Cost/Savings Breakdown


Cost (-)/Savings (2022-2031)

Energy and Climate

-$386 billion

Clean Electricity Tax Credits-$161 billion
Air Pollution, Hazardous Materials, Transportation and Infrastructure-$40 billion
Individual Clean Energy Incentives-$37 billion
Clean Manufacturing Tax Credits-$37 billion
Clean Fuel and Vehicle Tax Credits-$36 billion
Conservation, Rural Development, Forestry-$35 billion
Building Efficiency, Electrification, Transmission, Industrial, DOE Grants and Loans-$27 billion
Other Energy and Climate Spending-$14 billion


-$98 billion

Extension of Expanded ACA Subsidies (three years)-$64 billion
Part D Re-Design, LIS Subsidies, Vaccine Coverage-$34 billion

Total, Spending and Tax Breaks

-$485 billion


Health Savings

$322 billion

Repeal Trump-Era Drug Rebate Rule$122 billion
Drug Price Inflation Cap$101 billion
Negotiation of Certain Drug Prices$99 billion


$468 billion

15 Percent Corporate Minimum Tax$313 billion
IRS Tax Enforcement Funding*$124 billion
Closure of Carried Interest Loophole$13 billion
Methane Fee, Superfund Fee, Other Revenue$18 billion

Total, Savings and Revenue

$790 billion


Net Deficit Reduction

$305 billion

Memo: Deficit reduction with permanent ACA subsidy extension~$155 billion

Source: The Committee for a Responsible Federal Budget Analysis of Congressional Budget Office Estimate

Note: The Congressional Budget Office has yet to release its final score on the Inflation Reduction Act. 

 Relevant Resources 


117th Congress. (2022, August 8). H.R.5376 - Inflation Reduction Act of 2022. Retrieved from

Cochrane, E. (2022, August 7). Retrieved from New York Times:

Ewig, J. (2022, August 12). For Electric Vehicle Makers, Winners and Losers in Climate Bill. Retrieved from New York Times:

Kim, J. (2022, August 11). What the Inflation Reduction Act does and doesn't do about rising prices. Retrieved from NPR:

Penn Wharton Budget Model. (2022, July 29). Inflation Reduction Act: Preliminary Estimates of Budgetary and Macroeconomic Effects. Retrieved from Penn Wharton Budget Model:

Steny Hoyer. (2022). Points to Know: Build Back Better Act. Retrieved from Steny Hoyer:

U.S. Bureau of Labor Statistics. (2022, July). 12-month percentage change, Consumer Price Index, selected categories. Retrieved from U.S. Bureau of Labor Statistics:

© Copyright 2022. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.


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