The Infrastructure Investment and Jobs Act, signed by the President on Nov. 15, 2021, presents a number of issues for taxpayers to consider.
The act, first passed by the Senate in August, was passed by the House on Nov. 5, 2021 with an estimated cost of $1.2 trillion. Although the act includes fewer tax provisions than originally introduced, taxpayers should be aware of several provisions, according to Mark Luscombe, principal federal tax analyst for Wolters Kluwer Tax & Accounting, particularly those around:
- Cryptocurrency. The act expands cryptocurrency reporting requirements in an effort to stem underreporting of cryptocurrency transactions. These provisions have raised some concerns that the reporting requirements are so broad that they apply to people who generate cryptocurrency and to people who do not have the information needed to comply with the reporting requirements.
- The Employee Retention Credit. The American Rescue Plan Act of 2021 extended the Employee Retention Credit to Dec. 31, 2021. The Infrastructure Investment and Jobs Act legislation eliminates the credit for wages paid after Sept. 30, 2021. However, with the enactment after the start of the fourth quarter of 2021, some concern has been expressed about the retroactive application of the elimination of the credit.
- Employer-sponsored retirement plans. The relaxation of minimum funding requirements for employer-sponsored retirement plans is further extended, adding to tax revenue projections as funding requirements are decreased.
- Contributions to water and sewer utilities. An exclusion for contributions to a regulated public utility for water or sewer construction is restored.
- Private activity bonds. The authorized private activity bond uses are expanded to include qualified broadband projects and qualified carbon dioxide capture facilities.
- Excise taxes. The excise taxes on fuels, retail sales of heavy trucks and trailers, and tires are expanded.
- Superfund excise taxes. These are restored.
- Disaster relief. Some disaster-related tax deadlines are extended.
- Tax deadlines. The types of tax deadlines that are extended due to service in a combat zone are expanded.
Cryptocurrency reporting is the issue given the most attention, according to Luscombe: ”Basically, a cryptocurrency reporting requirement is imposed on brokers. Under the measure, ‘brokers’ are defined pretty broadly to include persons responsible for regularly effectuating transfers of any digital asset which is recorded on a cryptographically secured distributed ledger or any similar technology.”
“The cryptocurrency industry is saying that, if read broadly, any service could be considered as ‘effectuating a transfer.’ It might require reporting on the part of people who don’t have the information to do the reporting,” he continued. “This was a concern when it passed. There was pressure to pass it without amending it. So they’re leaving it to the IRS with these problems. There may still be hope that Congress will narrow the definition in a subsequent bill, but it takes awhile for Congress to do something. However the requirement doesn’t apply until 2023 returns, so they have until 2024 to thrash things out.”
And some are reading it so that the definition of broker might mean that cryptocurrency will be treated as a security. “As a security, it would be subject to SEC administration and reporting requirements as well,” he said.
Another provision in the infrastructure act is the early termination of the Employee Retention Credit, which had been originally in place through 2020 but was extended through 2021, according to Luscombe: “The infrastructure bill terminates it after Sept. 30, 2021, eliminating the fourth quarter from what had been allowed. But the fourth quarter has already started, so some are concerned about the retroactive application of the provision. But it seems as though people are desperate to hire right now rather than get rid of employees, so it’s not apparent how big an issue it will be.”
“The Superfund excise taxes on potentially polluting chemicals, which expired after 1995, is reinstated starting in July of 2022,” noted Luscombe. “And they modified rules on disasters so they can cover disasters that go on for some period of time, such as COVID or the California wildfires, that go on for several months and keep expanding in area. The COVID disaster is the first I can think of that didn’t have an end date, just a start date.”
Originally, the progressive caucus in the House didn’t want to pass the infrastructure bill until the Senate passed Build Back Better, remarked Luscombe. “But after the Virginia elections, Biden worked the phones and said, ‘Let’s get something passed to show that we can govern.’ But now that the revenue estimates are coming out, it’s not clear what the Senate will do.”
“They don’t have to pass a reconciliation bill,” he noted. “They’re entitled to one reconciliation a year. They didn’t use it in 2020 — the American Rescue Plan used up the 2020 allotment — so if Build Back Better is not passed in 2021 it can still pass in 2022.”
