Inflation Reduction Act of 2022
Sponsored By: Representative Rep. Yarmuth, John A. [D-KY-3]
Became Law
Summary
Creates a Medicare price‑negotiation program for high‑priced single‑source drugs. It also remakes taxes and incentives across health, energy, housing, and corporate taxes to lower some health costs and push clean‑energy investment.
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- Patients and Medicare enrollees see new drug price rules and Part D changes. The bill establishes a Part E Price Negotiation Program with initial lists starting in 2026 (10 drugs in 2026, 15 in 2027 and 2028, 20 in later years) and adds a manufacturer discount program beginning Jan 1, 2025. Insulin deductibles are removed starting 2023 and cost sharing is capped by 2025 at the lesser of $35 or 25% of the negotiated or maximum fair price.
- Households get funding to cut home energy costs. The law funds HOMES whole‑house rebates with $4.3 billion and HEHEP point‑of‑sale electrification rebates with $4.275 billion, and low‑income households can receive much larger or even full cost coverage.
- Businesses face new tax rules and big clean‑energy incentives. A 15% corporate alternative minimum tax applies to large corporations (generally over $1.0 billion of adjusted financial statement income) and a 1% excise tax applies to stock repurchases. The Act creates or expands many energy credits and allows direct payment or transfer of certain credits for producers and manufacturers.
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Bill Overview
Analyzed Economic Effects
49 provisions identified: 33 benefits, 8 costs, 8 mixed.
Lower drug costs, Part D discounts and cap
Starting in 2025 manufacturers that join required agreements must give big discounts on Part D drugs. The law sets a Part D out‑of‑pocket cap of $2,000 for 2025 and creates a monthly cap payment option to spread costs. Plans also get a 10% subsidy on some dispensed drugs. Drug price growth rebates and penalties apply to manufacturers for excessive price increases.
Marketplace premium tax credit extended
The law extends special premium tax credit rules through taxable years that cover 2021–2025. That means people who buy marketplace health plans may keep higher or expanded credits for tax years through 2025. The change applies to taxable years beginning after December 31, 2022.
Medicare drug price negotiation start
The law creates a Medicare drug price negotiation program that begins applying prices in 2026. HHS will rank high‑spend drugs, publish selected drug lists, and negotiate maximum fair prices. The statute sets yearly counts of selected drugs and strict timelines for manufacturer submissions and negotiation offers.
Home retrofit rebates and training
The HOMES program gives states $4.3 billion for whole-house energy retrofit rebates. Rebates are tiered by measured or modeled savings and offer larger help for low- and moderate-income households. The law also gives $200 million to states to train contractors and $1 billion to help states adopt stronger building energy codes. Funds must be used by specified deadlines and states may not combine a HOMES rebate with another federal rebate for the same upgrade.
Home energy credit and fixes
If you make qualifying home energy improvements, you can claim a 30% tax credit for costs after Dec 31, 2022. The yearly credit limit is $1,200 with item caps (for example, windows/skylights $600 total; doors $250 each up to $500 total). The law also treats some missing paperwork as a clerical error so it can be corrected more easily. These rules run through 2032.
Residential clean energy credit extended
The residential clean energy tax credit is extended and phased down over time. For property placed in service after Dec 31, 2021 the credit is 30%. The rate drops to 26% and 22% in later years. Home battery storage of at least 3 kWh now qualifies when installed with a home system.
Bigger research payroll tax credit
Small businesses can elect an extra $250,000 of their research credit for tax years after December 31, 2022. That electable amount can be used against employer payroll taxes. The payroll credit you claim cannot be more than the payroll tax due in that quarter and has timing limits tied to when you file the return.
Payments for farm conservation programs
USDA sets aside multi-year funding for conservation programs that pay farmers for practices that store soil carbon and reduce greenhouse gases. The law lists specific annual amounts for EQIP, CSP, ACEP, and RCPP for 2023–2026. NRCS also gets $1 billion for technical assistance and $300 million for carbon quantification. Funds remain available through September 30, 2031.
More tribal energy loan guarantees
The law adds $75 million for the Tribal Energy Loan Guarantee Program, available through September 30, 2028. It raises the program's guarantee cap from $2 billion to $20 billion and lets the program guarantee a wider set of private debt obligations. Guarantees still follow federal loan guarantee limits.
Big DOE lab construction funding
The Department of Energy gets about $1.85 billion for laboratory construction and infrastructure. The law lists account‑level amounts for science, high‑energy physics, fusion, nuclear physics, advanced computing, basic energy sciences, isotopes, and other program infrastructure. Funds are available through September 30, 2027.
Big grants for roads and permits
The law puts billions into surface transportation planning and project delivery. It funds $2.0 billion to help pay extra costs for low-carbon construction materials and $1.893 billion plus $1.262 billion for local access and equity projects. It adds $100 million for environmental review help, $50 million for local project delivery aid, $350 million for permitting improvements, and $100 million for interregional/offshore wind planning. Many grants can cover most or all project costs for disadvantaged communities.
Money to upgrade federal buildings and mail
The law gives large sums to modernize federal buildings and the Postal Service fleet. It deposits $250 million into the Federal Buildings Fund to convert GSA buildings to green standards, $2.15 billion to install low‑carbon materials in GSA buildings, $975 million for emerging sustainable technologies, and $1.29 billion plus $1.71 billion to buy zero‑emission USPS delivery vehicles and build their infrastructure. Funds are available for several years and go to federal facilities and USPS operations.
More National Park conservation money
The National Park Service and public lands get funding for deferred maintenance, conservation, restoration, and staff. The law provides $200 million for park maintenance, $250 million for conservation and habitat work, another $250 million for resilience projects, and $500 million to hire park employees. Funds are available through 2026–2031 and need no matching funds.
NOAA coastal and research funding
NOAA gets large funding to help coastal communities and improve weather and climate science. The law provides $2.6 billion for coastal resilience and habitat work and hundreds of millions more for new facilities, research, computing, and aircraft. Funds are available through 2026 and go to states, tribes, local governments, nonprofits, and institutions.
Water and drought help for communities
The law funds water projects and drought relief. It provides $550 million for disadvantaged communities to pay planning, design, or construction for domestic water supplies. It also gives $4.0 billion for drought mitigation (priority to the Colorado River Basin), $12.5 million for tribal drought relief, and $25 million for canal solar and related water‑efficiency projects. Most funds are available through 2026–2031 and need no cost share in many cases.
Big loan guarantees for energy projects
The law expands federal loan guarantee authority for energy projects. It provides $5 billion and up to $250 billion in guarantee commitments for infrastructure projects, and separately authorizes up to $40 billion in DOE guarantees with $3.6 billion to cover costs. It also adds a $2 billion direct-loan fund for transmission projects through Sept 30, 2030. The President must certify some projects and guarantees have time limits and guardrails.
Loans and grants for vehicle factories
The law provides $3 billion for direct loans to advanced vehicle manufacturing facilities through Sept 30, 2028. It also provides $2 billion in grants to build U.S. production for electric and advanced vehicles, with recipients required to provide at least a 50% cost share. Funds support factories that make low- or zero-emission vehicles.
Low-carbon product labels and grants
EPA gets $100 million to label low-embodied-carbon construction materials and $250 million to support environmental product declarations. The programs give grants and technical help to manufacturers to measure and report embodied greenhouse gas emissions. Funds are available through 2026 or 2031 as specified.
Big carbon capture tax credit rules
The law updates the carbon capture credit (45Q). It sets dollar rates per ton (higher for direct air capture), defines minimum annual capture thresholds, and lets the credit be 5 times larger if prevailing wage and apprentice rules are met. Facilities must begin construction by Jan 1, 2033 to qualify. Treasury will issue rules for reporting and baselines.
New and extended clean fuel tax rules
The law creates a sustainable aviation fuel (SAF) production credit and coordinates it with excise payment rules starting in 2024. It also extends biodiesel and renewable diesel credits and related payment rules through Dec 31, 2024, and directs Treasury to allow one‑time claims for early 2022 periods. Producers and importers must register and follow coordination rules so credits and excise payments do not double‑count.
Changes to SALT limit dates
The law adjusts the reference years in the state and local tax (SALT) deduction rules for itemizers. The changes apply to taxable years starting after Dec 31, 2022 and affect mainly higher‑income taxpayers who itemize their deductions.
Companies limited to 80% NOL use
The law limits how much financial‑statement net operating losses (FS NOLs) can reduce Adjusted Financial Statement Income (AFI). AFI can be reduced by FS NOL carryovers only up to 80% of AFI. Remaining loss amounts can carry forward. This applies to losses shown for tax years ending after Dec 31, 2019.
New minimum tax on big corporations
Very large corporations now face a new minimum tax equal to 15% of their adjusted financial statement income (AFI), after a foreign tax credit. A company is 'applicable' if its 3-year average AFI is over $1 billion. The law creates detailed AFI rules that change how financial income is computed. It also lists the new repurchase excise tax as nondeductible and keeps the Black Lung tax rate in place for affected coal sales.
New rules for clean vehicle credit
The clean vehicle tax credit is reorganized and limited. You can get up to $7,500 total, split into $3,750 for critical minerals sourcing and $3,750 for battery component sourcing, but the vehicle and buyer must meet income and MSRP limits. Buyers must include the VIN on their tax return. Vehicles that use parts or minerals from certain foreign entities can be excluded. The credit ends for vehicles placed in service after Dec 31, 2032.
New rules for home and vehicle credits
If you own a main home you can get up to $150 for a certified energy audit. For certain clean vehicle buyers you may get the vehicle credit paid by the dealer up front for cars placed in service after Dec 31, 2023. But the vehicle credit requires final assembly in North America and ends for vehicles placed in service after Dec 31, 2032. From Dec 31, 2024, many energy tax credits also need a manufacturer product ID on your return.
Higher retrofit tax break for buildings
Commercial building owners can elect a bigger tax deduction for retrofit plans that cut energy use by 25% or more. The deduction level rises with deeper energy savings and can be higher if installation timing or prevailing wage and apprenticeship rules are met. To get the bigger deduction, contractors and owners must meet prevailing wage and apprenticeship rules.
Drug price negotiation and penalties
The law creates new rules for negotiated Medicare drug prices and makes manufacturers give the agreed maximum fair price. HHS can fine drugmakers heavily for not following price or reporting rules. The statute also limits court review of some negotiation decisions and temporarily bars one OIG rebate rule until 2032. CMS gets implementation funding to run the new programs.
Big IRS funding for enforcement
The law gives the IRS many billions for services, enforcement, and computer upgrades. That includes multi‑billion appropriations for enforcement and operations and $500 million to help the IRS carry out this subtitle. Most funds are available through September 30, 2031.
New and changed clean energy credits
The law rewrites many clean-energy tax incentives for project owners and manufacturers. It creates new credits (for clean electricity investment and production, clean hydrogen, clean fuel, and an advanced manufacturing credit) and a $10 billion allocation pool for advanced energy projects. Some base credit amounts are reduced but projects can earn big bonus increases for meeting domestic content and prevailing wage rules. New rules also limit stacking of some energy credits and expand what counts for tax depreciation.
Free adult vaccines in Medicaid
One year after enactment, Medicaid and CHIP must cover certain adult vaccines and their administration with no cost-sharing. States that already covered those vaccines and barred cost-sharing get a 1 percentage point FMAP boost for eight fiscal quarters. The rule applies to expenses on or after the effective date.
High-deductible plans can cover insulin
Health plans that meet the HDHP rules can exclude selected insulin products from the deductible and still keep Health Savings Account eligibility. 'Selected insulin products' means insulin types that are licensed and still marketed. The change applies for plan years beginning after December 31, 2022.
Lower insulin costs for Medicare
Starting in 2023 Part D no longer applies the deductible to covered insulin. From 2023–2025 monthly cost-sharing for insulin is capped at $35. From 2026 the monthly cap is the smallest of $35, 25% of the government maximum fair price, or 25% of your plan's negotiated price. For insulin supplied through certain durable medical equipment, coinsurance is limited so you pay no more than $35 a month starting July 1, 2023.
Medicare Part B payment caps
When a drug is designated a 'selected drug', Medicare Part B payment is tied to the drug's maximum fair price and set at 106% of that price. For biosimilar products furnished on or after July 1, 2024, Part B payment during their initial period is limited to the lower of two statutory benchmarks. These caps can lower Medicare payment rates and may reduce patient cost-sharing tied to those payments.
Part B drug price growth rebates
Manufacturers of many Part B drugs must pay rebates when prices rise faster than inflation, and those rebates go to the Medicare Supplementary Medical Insurance Trust Fund. For drugs furnished on or after April 1, 2023, beneficiary coinsurance is tied to an inflation‑adjusted payment amount and is generally 20% of that amount.
Affordable housing and tribal upgrades
HUD gets $837.5 million to help upgrade HUD-assisted housing for energy, water, and resilience improvements and authorizes up to $4 billion in loan obligations. The law also gives $145.5 million to electrify Tribal homes with zero-emission systems and lets FEMA pay for low-carbon materials in disaster rebuilding through Sept 30, 2026. Recipients must accept longer affordability periods or meet program rules.
Grants for clean heavy-duty trucks
The EPA gets $600 million for grants and rebates to replace Class 6–7 vehicles with zero-emission trucks and fund infrastructure and training. Another $400 million is reserved for projects in air-quality nonattainment areas. Grants can cover up to 100% of eligible costs and funds are available through Sept 30, 2031.
Sustainable aviation fuel grants and rules
The law gives money for sustainable aviation fuel (SAF) projects and low-emission aviation technology ($244.5M and $46.5M respectively) and $5.94M for oversight. It also defines SAF rules, such as U.S. production, ASTM standards, and at least a 50% lifecycle GHG reduction, and requires a testing method within two years.
Exceptions to the buyback excise tax
The 1% excise tax on corporate stock repurchases does not apply in several cases. Exceptions include tax‑free reorganizations with no shareholder gain, contributions to retirement plans or ESOPs, small annual repurchases under $1,000,000, dealers in securities, and RICs/REITs. Repurchases treated as dividends are also excluded. Treasury can write rules to prevent abuse.
Higher Superfund cleanup fee
The Hazardous Substance Superfund per-unit fee rises from $0.097 to $0.164 on January 1, 2023. After 2023 the fee will increase each year for inflation using 2022 as the base, rounded down to the nearest cent. The law also extends authority for certain Superfund advances through December 31, 2032.
Higher fees for onshore oil leases
The law raises onshore oil and gas lease economics. It increases the royalty rate from 12.5% to 16 2/3%, raises minimum bids and staged rentals for a 10-year window, and creates a nonrefundable $5-per-acre Expression of Interest fee. It also changes bidding and lease-term rules for affected leases.
Higher offshore oil lease royalties
Royalty rules for certain Outer Continental Shelf leases rise. For a 10-year period after enactment the minimum royalty rate goes from 12.5% to 16 2/3%, and the law allows a cap up to 18 3/4% during that period. After the 10 years the minimum stays at 16 2/3%.
Excise tax on noncompliant drug sales
Drug manufacturers who sell a listed negotiation‑eligible drug during defined noncompliance periods can face a heavy excise tax. The tax rate rises over time: 65% (days 1–90), 75% (days 91–180), 85% (days 181–270), and 95% afterwards. The law defines when noncompliance days start and stops and includes anti‑abuse authorities.
One percent tax on buybacks
A 1% excise tax applies to a company's stock repurchases after December 31, 2022. The tax base is the fair market value of repurchased stock minus any stock issued by the company that year (including employee stock). The Treasury may issue rules to prevent avoidance.
Part D premiums, vaccines, and subsidies
The law expands Part D help and limits plan costs. Starting 2024 some low-income subsidy rules use 150% of poverty to expand eligibility. Adult vaccines recommended by ACIP are covered under Part D with no deductible or cost-sharing for plan years beginning in 2023, and plans get a temporary 2023 subsidy. The law also caps year‑to‑year base Part D premiums (at most 6% growth for 2024–2029) and limits negotiated prices for 'selected' drugs to their maximum fair price plus dispensing fees. Reinsurance rules change in 2025 and may shift costs between plans and manufacturers.
Medicare drug price timing and delays
The law requires advance publication of the negotiated maximum fair price for selected drugs two years before the price year and an explanation one year before. It also lets the agency delay negotiating a biologic's price for up to two years if a biosimilar is likely to launch; if the biosimilar fails to launch, rebates can be required for the delayed years. The rules affect when and how drug prices are negotiated and when manufacturers may owe rebates.
Climate help for Hawaiians and islands
The law provides targeted climate resilience funds for Native Hawaiians and U.S. Insular Areas. It gives $23.5 million plus $1.5 million for administration for Native Hawaiian programs (available through 2031) and $15 million plus $900,000 for technical assistance to Insular Areas (available through 2026). Funds may be used for grants, technical help, and contracts and need no cost share.
EPA compliance IT and grants
EPA gets money to update its compliance tracking system and give states and tribes tools to connect to it. The law provides $18 million for the system, $3 million for two‑way communication grants, and $4 million for inspection software and devices. Funds are available through September 30, 2031.
OMB funding to oversee the law
The Office of Management and Budget gets $25 million to oversee and track how this law is carried out. The funding supports tracking labor, equity, and environmental standards. Money is available through September 30, 2026.
Higher Medicare pay for biosimilars
Medicare Part B add-on payments for certain qualifying biosimilar drugs increase from 6% to 8% during each product's five-year period. For products paid as of September 30, 2022 the five years start October 1, 2022. For products first paid between October 1, 2022 and December 31, 2027 the five years start the first day of that quarter.
Sponsors & CoSponsors
Sponsor
Rep. Yarmuth, John A. [D-KY-3]
KY • D
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
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