House Democrats on Friday passed a major climate, health care and spending bill that includes provisions to establish a 15% minimum corporate tax rate and levy a 1% excise tax on stock buybacks.
The Inflation Reduction Act of 2022 was passed in a 220-207 party-line vote. In the Senate, Democrats passed the bill Sunday in a 50-50 vote with Vice President Kamala Harris casting the tiebreaking vote.
The bill will now head to President Joe Biden's desk, securing a large portion of his agenda.
Unveiled July 27, the bill will require companies with more than $1 billion in annual profit to pay at least 15% in taxes, a provision the Joint Committee on Taxation forecasts will raise $222 billion over the next decade.
The 1% tax on stock buybacks is projected to raise $74 billion over a 10-year period, according go to the Joint Committee on Taxation.
Democrats say the bill's $369 billion in climate investments will reduce carbon emissions by roughly 40% by 2030.
Gregory Hershman, head of U.S. policy at the Principles for Responsible Investment, said in a statement that retirement savings are already under threat from climate impacts and the Inflation Reduction Act represents a step in the right direction to combat that threat.
"Now, we must ensure investors are equipped to consider climate risk, and to act accordingly to protect the financial interests of working families across the country," he said. "The passage of this bill signifies that we have crossed a major hurdle and can now come together to support additional climate action that ensures a just, inclusive and orderly transition to net zero."
When the bill was initially introduced, it included a provision titled, "Closing the carried interest loophole." Currently, the carried interest deduction treats income flowing to a private fund's general partner as capital gains, which are subjected to a lower tax rate — capped at 20% for long-term gains — as opposed to the top individual income tax bracket — 37%.
The bill proposed lengthening the time period investment funds must hold assets to five years, from three years, and adjust when the hold period begins. The provision would've applied only to individuals who make at least $400,000 a year.
But after negotiations with Sen. Kyrsten Sinema, D-Ariz., the carried interest provision was removed.
Democrats also nixed a provision included late in the Senate negotiation process that would've require private equity firms to aggregate the annual profits from their holdings and subject those businesses to the minimum corporate tax rate if the total surpassed $1 billion.