Senate Finance Committee Tax Provisions in the Build Back Better Act

Senate Finance Committee Tax Provisions in the Build Back Better Act

Senate Finance Committee Tax Provisions in
the Build Back Better Act
December 22, 2021
Congressional Research Service
https://crsreports.congress.gov
R46998

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Senate Finance Committee Tax Provisions in the Build Back Better Act

Contents
Tables
Table 1. Subtitle E—Infrastructure Financing and Community Development ............................... 3
Table 2. Subtitle F—Green Energy ................................................................................................. 7
Table 3. Subtitle G—Social Safety Net ......................................................................................... 28
Table 4. Subtitle H—Responsibly Funding Our Priorities ............................................................ 40

Contacts
Author Information ........................................................................................................................ 59

Senate Finance Committee Tax Provisions in the Build Back Better Act

n December 11, 2021, the Senate Finance Committee released updated legislative text of
the Build Back Better Act.1 This text updates the version of the Build Back Better Act
O (BBBA; H.R. 5376) that was passed in the House on November 19, 2021. This report
summarizes the tax provisions in the Senate Finance Committee’s version of the Build Back
Better Act. For more on the provisions in the earlier versions of this legislation, see CRS Report
R46923, Tax Provisions in the “Build Back Better Act:” The House Ways and Means
Committee’s Legislative Recommendations, coordinated by Molly F. Sherlock; and CRS Report
R46960, Tax Provisions in the Build Back Better Act: Rules Committee Print 117-18, coordinated
by Molly F. Sherlock.2
A number of the tax provisions in the Senate Finance Committee’s Build Back Better Act text are
designed to raise additional federal tax revenue. Provisions expected to have the largest revenue
effects include
 modifications to individual income taxes levied on high-income individuals,
including
 applying the net investment income tax to trade or business income for
certain filers;
 making limitations on excess business losses of noncorporate taxpayers
permanent; and
 establishing a surcharge on high-income individuals, trusts, and estates;
 the addition of a 15% alternative minimum corporate tax based on financial
statement income;
 a new excise tax on corporate stock repurchases; and
 modifications to the treatment of international taxes, including changes to
 the deduction for foreign-derived intangible income;
 the base erosion and anti-abuse tax; and
 the tax on global intangible low-taxed income.
Other tax provisions in the Senate Finance Committee’s Build Back Better Act text would reduce
tax liability for individual taxpayers or businesses engaged in certain types of economic activities.
Among these provisions, those expected to have the largest revenue effects include
 for individuals, a temporary extension of enhancements made to the child tax
credit in the American Rescue Plan Act of 2021 (ARPA; P.L. 117-2) through
2022, with a permanent extension of full refundability beginning in 2023; and
 for businesses, tax credits for investment in or production of renewable
electricity.
All tax provisions in the Senate Finance Committee’s Build Back Better Act text are summarized
in a series of tables below. References to relevant CRS reports are included where applicable.

1 Senate Committee on Finance, “Finance Committee Releases Updated Build Back Better Text,” press release,
December 11, 2021, https://www.finance.senate.gov/chairmans-news/finance-committee-releases-updated-build-back-
better-text.
2 A section-by-section staff summary of the Build Back Better Act as reported by the House Committee on the Budget
and a comparative staff print showing subsequent modifications are available for both the October 28 and November 3
versions of the legislation at https://rules.house.gov/bill/117/hr-5376.
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 Table 1 includes the provisions in Subtitle E, Infrastructure Financing and
Community Development;
 Table 2 includes the provisions in Subtitle F, Green Energy;
 Table 3 includes the provisions in Subtitle G, Social Safety Net; and
 Table 4 includes the provisions in Subtitle H, Responsibly Funding Our
Priorities.
The Senate Finance Committee’s Build Back Better Act text differs from the version of the act
that was passed in the House on November 19, 2021. Most provisions that were in the House-
passed version of BBBA appear in the Senate Finance Committee text. The descriptions of the
Senate Finance Committee’s Build Back Better Act provisions below note whether these
provisions were identical or nearly identical to, or a modification of, the House-passed version of
the provision.3 Two provisions that were in the House-passed version were removed in the Senate
Finance Committee text: (1) a provision providing that rents from prison facilities could not be
treated as qualified income for the purposes of REIT income tests; and (2) a provision that would
have imposed a tax on certain nicotine products. A new provision added in the Senate Finance
Committee text would modify rules relating to expatriated entities and inverted corporations.
The effective date for most of the proposed tax provisions would be after December 31, 2021.
This is generally the case unless otherwise noted in the description of the provision. Additionally,
provisions would be permanent unless otherwise noted.

3 For the purposes of this comparison, a provision is identified as being identical or nearly identical if the change would
not have a substantial or substantive policy impact.
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Table 1. Subtitle E—Infrastructure Financing and Community Development
Section Title
Description
CRS Resources
Part 1—Low Income Housing Credit
Increases in State
This provision would increase state low-income
For background, see
Allocations
housing credit allocation authority for calendar years

CRS Report RS22389, An

2022 through 2025. In 2021, states received low-
Introduction to the Low-Income
income housing credit allocation authority equal to
Section 125101
Housing Tax Credit, by Mark
$2.8125 per person, with a small population state
P. Keightley.
allocation of $3,245,625. Under this provision, states
would receive $2.93 per person in 2022, with a small

CRS In Focus IF11335, The
population state allocation of $3,346,875; $2.98 per
Low-Income Housing Tax
person in 2023, with a small population state
Credit: Policy Issues, by Mark
allocation of $3,425,625; $3.04 per person in 2024,
P. Keightley.
with a small population state allocation of
$3,504,375; and $3.86 in 2025, with a small state
allocation of $4,481,950.
This provision is a modification of Section 135101 of
H.R. 5376, as passed in the House on November 19,
2021.
Tax Exempt Bond
This provision would reduce the 50% tax-exempt
For background, see
Financing
bond financing requirement to 25% for bond

CRS Report RS22389, An
Requirement
obligations issued in calendar years 2022 through
Introduction to the Low-Income

2026. Credits awarded to projects where the bond
Housing Tax Credit, by Mark
financing threshold is met do not reduce a state’s
Section 125102
P. Keightley.
annual housing credit.

This provision is identical or nearly identical to

CRS In Focus IF11335, The
Low-Income Housing Tax
Section 135102 of H.R. 5376, as passed in the House
Credit: Policy Issues, by Mark
on November 19, 2021.
P. Keightley.
Buildings Designated
This provision would require that at least 8% of a
For background, see
to Serve Extremely
state’s annual low-income housing credit allocation

CRS Report RS22389, An
Low-Income
authority be set-aside for projects that serve
Introduction to the Low-Income
Households
extremely low-income households. The set-aside
Housing Tax Credit, by Mark

would apply to projects where at least 20% of the
P. Keightley.
units are rent-restricted and occupied by households
Section 125103
whose income does not exceed the greater of 30%

CRS In Focus IF11335, The
of area median income or 100% of the federal
Low-Income Housing Tax
poverty line.
Credit: Policy Issues, by Mark
P. Keightley.
Projects requiring an increase in credits to be
financially feasible would receive a 50% basis boost. A
state could not award more than 13% of its credit
authority to such projects, and, if such a project
utilizes tax-exempt bond financing (and meets the
bond financing threshold), a state could not award
more than 8% of its private activity bond authority.
This provision would apply to allocations made after
December 31, 2021.
This provision is identical or nearly identical to
Section 135103 of H.R. 5376, as passed in the House
on November 19, 2021.
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Section Title
Description
CRS Resources
Repeal of Qualified
This provision would repeal the qualified contract
For background, see
Contract Option
option, and thus limit the ability of a property owner

CRS Report RS22389, An

to exit the low-income housing tax credit (LIHTC)
Introduction to the Low-Income
program after the first 15 years. The qualified
Section 125104
Housing Tax Credit, by Mark
contract option allows a property owner to sell a
P. Keightley.
LIHTC property after 15 years. To exercise this
option, a property owner must request that the state 
CRS In Focus IF11335, The
housing credit authority locate a buyer who wil
Low-Income Housing Tax
purchase the property and keep it in the program for
Credit: Policy Issues, by Mark
another 15 years. The purchase price is determined
P. Keightley.
by statute. If the housing credit authority cannot
locate a qualified buyer, the affordability restrictions
on the property are phased out over three years.
This provision would apply to buildings that received
a credit allocation before January 1, 2022, or, in the
case of properties utilizing tax-exempt bonds, that
received a determination that the building was
eligible to receive tax credits.
This provision is identical or nearly identical to
Section 135104 of H.R. 5376, as passed in the House
on November 19, 2021.
Modification and
Under current law, a property may exit the low-
For background, see
Clarification of
income housing tax credit program after 15 years if a

CRS Report RS22389, An
Rights Relating to
right of first refusal option is exercised whereby the
Introduction to the Low-Income
Building Purchase
holder of the right (typically, a nonprofit organization
Housing Tax Credit, by Mark

who helped develop the property) purchases the
P. Keightley.
property. There appears to be a lack of clarity under
Section 125105
current law over whether a third-party offer to

CRS In Focus IF11335, The
purchase the property is a necessary prerequisite to
Low-Income Housing Tax
the authority to exercise the right of first refusal.
Credit: Policy Issues, by Mark
This provision would clarify that a third party offer is
P. Keightley.
not needed by changing the right of first refusal to a
purchase option. Among other changes, the
provision would also clarify that establishing a
qualified purchase option would not disallow any of
the federal tax benefits of the low-income housing
tax credit.
This provision is identical or nearly identical to
Section 135105 of H.R. 5376, as passed in the House
on November 19, 2021.
Part 2—Neighborhood Homes Investment Act
Neighborhood
This provision would provide new federal tax credits
For background, see
Homes Credit
to offset the cost of constructing or rehabilitating

CRS In Focus IF11884,

owner-occupied homes. The credits would be
Neighborhood Homes
awarded to project sponsors (e.g., developers),
Section 125201
Investment Act: Overview and
which would either use the credits directly to offset
Policy Considerations, by Mark
development and rehabilitation costs or sell the
P. Keightley.
credits to investors to raise capital for home
construction. In 2022, 2023, and 2024, each state

would be allowed to annually award an amount of

credits equal to the greater of $3 multiplied by its
population, or $4 mil ion. In 2025, credit allocation
authority would be equal to the greater of $6
multiplied by its population, or $8 mil ion. The credit
amount would be limited to no more than 35% of
the lesser of qualified development costs or 80% of
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title
Description
CRS Resources
the national median sales price for new homes as
determined by the most recent census data. Credits
would be restricted to properties with occupants
whose income did not exceed 140% of an area’s or
state’s median income, and to properties located in a
qualified census tract.
This provision is identical or nearly identical to
Section 135201 of H.R. 5376, as passed in the House
on November 19, 2021.
Part 3—Investments in Tribal Infrastructure
Treatment of Indian
This provision would modify the treatment of Indian
For background, see
Tribes as States with
tribes so that they are generally treated as states for

CRS Report RL31457,
Respect to Bond
the purposes of issuing qualified private activity
Private Activity Bonds: An
Issuance
bonds. This provision would direct the Secretary of
Introduction, by Steven

the Treasury to establish a national bond volume cap
Maguire and Joseph S.
based on tribal population data for qualifying bonds
Section 125301
Hughes.
issued in tribal areas.
This provision is identical to Section 135301 of H.R.
5376, as passed in the House on November 19,
2021.
New Markets Tax
This provision would create a temporary New
For background, see
Credit for Tribal
Markets Tax Credit (NMTC) allocation for low-

CRS Report RL34402, New
Statistical Areas
income tribal areas and for projects that serve or
Markets Tax Credit: An

employ tribal members. The annual allocation
Introduction, by Donald J.
amount would be $175 mil ion per year for calendar
Section 125302
Marples and Sean Lowry.
years 2022-2025.
This provision is identical or nearly identical to
Section 135302 of H.R. 5376, as passed in the House
on November 19, 2021.
Inclusion of Indian
This provision would modify the definition of difficult

Areas as Difficult
development areas (DDAs) for purposes of the low-
Development Areas
income housing tax credit to include “Indian areas.”
for Purposes of
Projects in DDAs are eligible for a 30% basis boost
Certain Buildings
under current law. An Indian area would be any

Indian area as defined in Section 4(11) of the Native
American Housing Assistance and Self Determination
Section 125303
Act of 1996.
If an area were to be a DDA solely because it is an
Indian area, then a project would not be treated as
being located in a DDA unless it were assisted or
financed under the Native American Housing
Assistance and Self Determination Act of 1996, or
the project sponsor were an Indian tribe, a tribally
designated housing entity, or whol y owned or
control ed by an Indian tribe or a tribally designated
housing entity.
This provision would apply to buildings placed in
service after December 31, 2021.
This provision is identical or nearly identical to
Section 135303 of H.R. 5376, as passed in the House
on November 19, 2021.
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title
Description
CRS Resources
Part 4—Other Provisions
Possessions
This provision would create a new tax credit for

Economic Activity
certain domestic corporations actively conducting
Credit
business in American Samoa, the Commonwealth of

the Northern Mariana Islands, Puerto Rico, Guam,
and the Virgin Islands. For these corporations, the
Section 125401
credit amount would be equal to 20% of wage and
benefit expenses in the possessions. The amount of
creditable wages and benefits would be capped at
$50,000 per ful time equivalent employee per year.
The credit is increased to 50% with a cap of
$142,800 for certain small businesses.
This provision is identical or nearly identical to
Section 135401 of H.R. 5376, as passed in the House
on November 19, 2021.
Tax Treatment of
Under normal tax rules, recipients of loan repayment
Certain Assistance to programs must recognize the amounts repaid as
Farmers, Etc.
either income or a reduction in the basis of the

asset.
Section 125402
This provision would exclude from recognition
certain payments to socially disadvantaged farmers
and others enacted in the American Rescue Plan Act
of 2021 (P.L. 117-2). The provision would also
provide that no deduction would be denied by
reason of the exclusion.
This provision is identical or nearly identical to
Section 135402 of H.R. 5376, as passed in the House
on November 19, 2021
Exclusion of
Current law excludes qualified disaster relief and
For background, see
Amounts Received
qualified disaster mitigation payments from gross

CRS Report R45864, Tax
from State-Based
income (Section 139). Starting in 2021, this provision
Policy and Disaster Recovery,
Catastrophe Loss
would exclude qualified catastrophe mitigation
by Mol y F. Sherlock and
Mitigation Programs
payments made by state or local government
Jennifer Teefy.

programs from gross income. Qualified catastrophe
mitigation payments would be amounts received by

Section 125403
individuals to make improvements to the individual's
residence that would reduce the damage that would
be done to the residence by a windstorm,
earthquake, or wildfire. Taxpayers receiving these
payments would not be required to adjust their basis
in property for which payment is received.
This provision is identical or nearly identical to
Section 135403 of H.R. 5376, as passed in the House
on November 19, 2021.
Source: CRS analysis of the Senate Finance Committee’s updated text for Title XII-Committee on Finance in
the Build Back Better Act, as posted on the Senate Finance Committee’s website on December 11, 2021, at
https://www.finance.senate.gov/chairmans-news/finance-committee-releases-updated-build-back-better-text.
Notes: Provisions are effective in 2022 unless otherwise noted. The changes that would be made by the
provisions are permanent, unless otherwise noted. Within the description, “Section” citations refer to the
section within the Internal Revenue Code (IRC), 26 U.S.C., unless otherwise noted.
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Table 2. Subtitle F—Green Energy
Section Title and
Number
Description
CRS Resources
Part 1—Renewable Energy and Reducing Carbon Emissions
Extension and
Current law provides a production tax credit (PTC), at a
For background, see
Modification of
rate of 2.5 cents or 1.3 cents per kilowatt hour (kWh)

CRS Report R43453, The
Credit for
depending on the technology used, for the first 10 years of
Renewable Electricity
Electricity Produced production at qualifying renewable electricity production
Production Tax Credit: In
from Certain
facilities that begin construction before 2022. The credit
Brief, by Mol y F.
Renewable
amount is adjusted annually for inflation from a statutory
Sherlock.
Resources
rate of 1.5 cents per kWh, with some technologies qualifying  CRS Report R46865,

for a half-credit amount. This provision would extend the
PTC for wind, biomass, geothermal, solar (which previously
Energy Tax Provisions:
Section 126101
expired at the end of 2005), landfil gas, trash, qualified
Overview and Budgetary
hydropower, and marine and hydrokinetic resources
Cost, by Mol y F.
through 2026.
Sherlock.
The base credit amount for the PTC would be set in statute

CRS Report R46451,
at 0.3 cents per kWh (0.5 cents per kWh in 2021, or 0.3
Energy Tax Provisions
cents for half-credit technologies, after being adjusted for
Expiring in 2020, 2021,
inflation). Facilities that pay prevailing wages during the
2022, and 2023 (“Tax
construction phase and first 10 years of operation and meet
Extenders”), by Mol y F.
registered apprenticeship requirements are eligible for a
Sherlock, Margot L.
PTC that is five times the base amount, or 2.5 cents or 1.3
Crandall-Hol ick, and
cents per kWh after being adjusted for inflation. Facilities
Donald J. Marples.
with a maximum net output of less than one megawatt are

CRS Report R45171,
also eligible for the five times base credit amount (e.g., 2021
Registered Apprenticeship:
rates of 2.5 cents or 1.3 cents per kWh). Qualifying
Federal Role and Recent
hydropower and marine and hydrokinetic renewable energy
Federal Efforts, by
projects, which are half-credit technologies under current
Benjamin Col ins.
law, would be allowed the ful PTC.

CRS In Focus IF11927,
A “bonus credit” amount would be provided for projects
Federally Funded
that meet domestic content requirements to certify that
Construction and the
certain steel, iron, and manufactured products used in the
Payment of Locally
facility were domestically produced. The bonus credit
Prevailing Wages, by
amount would be 10% of the credit amount.
David H. Bradley and Jon
The credit amount could be increased by 10% for facilities
O. Shimabukuro.
located in an energy community. An energy community is
defined as being a brownfield site or a census tract or any
adjoining tract in which 5% of employment is in the oil and
gas sector, in which a coal mine closed after December 31,
1999, or in which a coal-fired electric power plant was
retired after December 31, 2009. Projects on forested land
cannot be treated as being located in an energy community.
Large facilities not meeting domestic content requirements
would be limited in the amount of the credit that could be
received as direct pay (see “Elective Payment for Energy
Property and Electricity Produced from Certain Renewable
Resources, Etc.”). The limit would be 90% in 2024, 85% in
2025, and zero afterward. This limit could be waived if
materials are not available domestically or if including
domestic materials would increase the facility’s construction
cost by more than 25%.
The provision provides that for facilities financed with tax-
exempt bonds, the credit amount would be reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
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Section Title and
Number
Description
CRS Resources
The proposal also extends the option to claim the energy
investment tax credit (ITC) in lieu of the PTC.
This provision is a modification of Section 136101 of H.R.
5376, as passed in the House on November 19, 2021.
Extension and
Current law provides a temporary investment tax credit
For background, see
Modification of
(ITC) for investments in certain energy property. This

CRS In Focus IF10479,
Energy Credit
provision would extend and modify the ITC, with the credit
The Energy Credit or

generally extended through the end of 2026.
Energy Investment Tax
Section 126102
The ITC would be extended through 2026 at a base rate of
Credit (ITC), by Mol y F.
6% for solar, fuel cells, waste energy recovery, and small
Sherlock.
wind property, and 2% for microturbine and combined heat

and power property. These amounts would be increased to

CRS Report R46865,
Energy Tax Provisions:
30% and 10%, respectively, if projects pay prevailing wages
Overview and Budgetary
during the construction phase and during the first five years
Cost, by Mol y F.
of operation and meet registered apprenticeship
Sherlock.
requirements. The higher credit rates are also available to
any project with a maximum net output of less than one

CRS Report R46451,
megawatt of electrical or thermal energy.
Energy Tax Provisions
Expiring in 2020, 2021,
The ITC for geothermal heat pumps would be extended
2022, and 2023 (“Tax
through 2031 with a 6% base credit rate with the 30% credit
Extenders”), by Mol y F.
rate allowed for projects meeting wage and workforce
Sherlock, Margot L.
requirements or for projects below the maximum net
Crandall-Hol ick, and
output threshold. The credit would phase down after 2031,
Donald J. Marples.
with the rates being 5.2% and 26% in 2032 and 4.4% and
22% in 2033, with no credit allowed for property beginning

CRS Report R45171,
construction after 2033.
Registered Apprenticeship:
This list of qualifying property would be expanded to include
Federal Role and Recent
energy storage technology, qualified biogas property,
Federal Efforts, by
electrochromic glass, microgrid control ers, and
Benjamin Col ins.
hydropower environmental improvement property at the

CRS In Focus IF11927,
6% or 30% rate. Linear generator assemblies would be
Federally Funded
added to the definition of qualifying fuel cells. The credit
Construction and the
would also be available for interconnection property.
Payment of Locally
A “bonus credit” amount would be provided for projects
Prevailing Wages, by
that meet domestic content requirements to certify that
David H. Bradley and Jon
certain steel, iron, and manufactured products used in the
O. Shimabukuro.
facility were domestically produced. The bonus credit
amount would be 2% of the credit amount, or 10% for
projects that meet wage and workforce requirements.
An increased credit amount would be available to projects in
an energy community, with the credit increase being 10
percentage points for projects meeting wage and workforce
requirements or 2 percentage points otherwise. An energy
community is defined as being a brownfield site or a census
tract or any adjoining tract in which 5% of employment is in
the oil and gas sector, in which a coal mine closed after
December 31, 1999, or in which a coal-fired electric power
plant was retired after December 31, 2009. Projects on
forested land cannot be treated as being located in an
energy community.
Large facilities not meeting domestic content requirements
would be limited in the amount of the credit that could be
received as direct pay (see “Elective Payment for Energy
Property and Electricity Produced from Certain Renewable
Resources, Etc.”). The limit would be 90% in 2024, 85% in
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
2025, and zero afterward. This limit could be waived if
materials are not available domestically or if including
domestic materials would increase the facility’s construction
cost by more than 25%.
The provision provides that for facilities financed with tax-
exempt bonds, the credit amount would be reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
This provision is a modification of Section 136102 of H.R.
5376, as passed in the House on November 19, 2021.
Increase in Energy
This provision would allow for the allocation of 1.8 gigawatts For background on the ITC,
Credit for Solar and for “environmental justice solar and wind capacity” credits
see
Wind Facilities
annually from 2022 through 2026. Taxpayers receiving a

CRS In Focus IF10479,
Placed in Service in
capacity allocation may be entitled to tax credits in addition
The Energy Credit or
Connection with
to otherwise allowed ITCs. Specifically, projects receiving an
Energy Investment Tax
Low-Income
allocation that are located in a low-income community or on
Credit (ITC), by Mol y F.
Communities
Indian land would be eligible for a 10% bonus investment tax
Sherlock.

credit, while projects that are part of a low-income
residential building project or qualified low-income
For background on housing
Section 126103
economic benefit project would be eligible for a 20% bonus
assistance programs, see
investment credit. No facility could receive more than a

CRS Report RL34591,
maximum 20% bonus investment credit under this provision.
Overview of Federal
Qualifying solar and wind facilities would include those with
Housing Assistance
a nameplate capacity of 5 megawatts or less, and qualifying
Programs and Policy, by
property would include energy storage property installed in
Maggie McCarty, Libby
connection with the solar property and interconnection
Perl, and Katie Jones.
property.

Facilities receiving an allocation would be required to have
the facility placed in service within four years.
This provision is a modification of Section 136103 of H.R.
5376, as passed in the House on November 19, 2021.
Elective Payment
This provision would allow taxpayers to treat certain tax
For background, see
for Energy Property credit amounts as payments of tax. Payments in excess of

CRS Report R45693, Tax
and Electricity
tax liability can be refunded to the taxpayer, allowing the
Equity Financing: An
Produced from
credits to be received as “direct pay.” This direct payment
Introduction and Policy
Certain Renewable
would be allowed for the Section 30C credit for alternative
Considerations, by Mark
Resources, Etc.
fuel refueling property, the Section 45 renewable electricity
P. Keightley, Donald J.

production credit, the Section 45Q carbon oxide
Marples, and Mol y F.
Section 126104
sequestration credit, the Section 48 energy investment tax
Sherlock.
credit, and the Section 48C qualifying advanced energy
project credit. The direct pay election would also be
available for the new Section 48D investment credit for
electric transmission property; new Section 48E advanced
manufacturing investment credit; new Section 48F clean
electricity investment credit; new Section 45W zero-
emission nuclear power production credit; new Section 45X
clean hydrogen production credit; new Section 45AA
advanced manufacturing production credit; new Section
45BB clean electricity production credit; and new Section
45CC clean fuel production credit.
Tax-exempt entities, including state and local governments
and Indian tribal governments, would be treated as
taxpayers eligible to elect a direct payment. Beginning in
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Section Title and
Number
Description
CRS Resources
FY2023, amounts provided as direct spending would be
grossed-up (increased) by 6.0445%.
This provision would not apply to territories with mirror-
code tax systems.
This provision is identical or nearly identical to Section
136104 of H.R. 5376, as passed in the House on November
19, 2021.
Investment Credit
This provision would create a new ITC for qualifying electric For background, see
for Electric
transmission property, which includes property that is

CRS Report R45171,
Transmission
capable of transmitting at least 275 kilovolts or is a
Registered Apprenticeship:
Property
superconducting line, with a capacity of not less than 500
Federal Role and Recent

megawatts. Upgrades of existing lines would be treated as
Federal Efforts, by
replacements. The new ITC would be 6% of qualifying
Section 126105
Benjamin Col ins.
investments, with a 30% ITC available for projects that pay
prevailing wages during the construction phase and during

CRS In Focus IF11927,
the first five years of operation and that meet registered
Federally Funded
apprenticeship requirements.
Construction and the
Payment of Locally
“Bonus credit” amounts for domestic content and limits on
Prevailing Wages, by
direct pay related to domestic content would apply, similar
David H. Bradley and Jon
to those applying to the ITC (see “Extension and
O. Shimabukuro.
Modification of Energy Credit”). Projects financed with tax-
exempt bonds would have the credit amount reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
The credit would be available for property that begins
construction by December 31, 2031, unless the property
began construction prior to January 1, 2022, or was selected
for cost allocation in a regional transmission plan.
This provision is a modification of Section 136105 of H.R.
5376, as passed in the House on November 19, 2021.
Extension and
Under current law, industrial carbon capture or direct air
For background, see
Modification of
capture facilities that begin construction by December 31,

CRS In Focus IF11455,
Credit for Carbon
2025, can qualify for the Section 45Q tax credit for carbon
The Tax Credit for Carbon
Oxide
oxide sequestration. This tax credit can be claimed for
Sequestration (Section
Sequestration
carbon oxide captured during the 12-year period fol owing a
45Q), by Angela C. Jones

qualifying facility’s being placed in service. Currently, the per
and Mol y F. Sherlock.
metric ton tax credit for geologically sequestered carbon
Section 126106
oxide is set to increase to $50 per ton by 2026 ($35 per ton 
CRS Insight IN11710,
for carbon oxide that is reused, such as for enhanced oil
Carbon Capture and
recovery) and adjusted for inflation thereafter. This
Sequestration Tax Credit
provision would extend the start of construction deadline to
(“Section 45Q”) Legislation
December 31, 2031.
in the 117th Congress, by
Mol y F. Sherlock and
The amount of carbon oxide that must be captured at a
Angela C. Jones.
qualifying facility would be reduced to 1,000 metric tons
annually for a direct air capture (DAC) facility, 18,750

CRS Report R46451,
metric tons annually (not less than 75% of which would
Energy Tax Provisions
otherwise have been released into the atmosphere) for an
Expiring in 2020, 2021,
electricity generating facility, and 12,500 metric tons for any
2022, and 2023 (“Tax
other facility.
Extenders”), by Mol y F.
Sherlock, Margot L.
Base credit amounts would be $17 per metric ton for
Crandall-Hol ick, and
carbon oxide that is captured and geologically sequestered
Donald J. Marples.
and $12 per metric ton for carbon oxide that is reused.
Increased credit amounts of $85 per ton and $60 per ton,

CRS Report R45171,
respectively, would be available for facilities that pay
Registered Apprenticeship:
Congressional Research Service

10

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
prevailing wages during the construction phase and during
Federal Role and Recent
the first 12 years of operation and meet registered
Federal Efforts, by
apprenticeship requirements.
Benjamin Col ins.
The credit amount for DAC would be increased to a base

CRS In Focus IF11927,
rate of $36 per metric ton, with a credit of $180 per metric
Federally Funded
ton for projects that meet wage and workforce
Construction and the
requirements. These amounts would be $26 and $130 per
Payment of Locally
metric ton for carbon oxide captured using DAC that is
Prevailing Wages, by
beneficially reused.
David H. Bradley and Jon
Projects financed with tax-exempt bonds would have the
O. Shimabukuro.
credit amount reduced by the lesser of (1) 15%; or (2) the
fraction of the proceeds of a tax-exempt obligation used to
finance the project over the aggregate amount of the
project’s financing costs. The provision would also provide
flexibility with respect to the period in which credits can be
claimed for projects affected by federally declared disasters.
This provision is identical or nearly identical to Section
136106 of H.R. 5376, as passed in the House on November
19, 2021.
Green Energy
If 90% of a business’s gross income is qualifying income, the
For background, see
Publicly Traded
business can elect to be treated as a master limited

CRS Report R41893,
Partnerships
partnership (MLP), allowing the business to be taxed as a
Master Limited

partnership while ownership interests are tradable in
Partnerships: A Policy
financial markets. Qualifying income currently includes
Section 126107
Option for the Renewable
mining and natural resource income. This provision would
Energy Industry, by Mol y
expand the definition of qualifying income to include income
F. Sherlock and Mark P.
derived from green and renewable energy. These additions
Keightley.
include income from certain activities related to energy
production eligible for the PTC, energy property eligible for
the ITC, renewable fuels, and carbon sequestration projects
eligible for credits under Section 45Q.
This provision is identical or nearly identical to Section
136107 of H.R. 5376, as passed in the House on November
19, 2021.
Zero-Emission
This provision would create a new tax credit for qualifying
For background, see
Nuclear Power
zero-emission nuclear power produced and sold after

CRS Report R42853,
Production Credit
December 31, 2021. Qualified nuclear power facilities are
Nuclear Energy: Overview

taxpayer-owned facilities that use nuclear power to generate
of Congressional Issues, by
electricity that did not receive an advanced nuclear
Section 126108
Mark Holt.
production tax credit allocation under Section 45J, and are
placed in service before the date of enactment (i.e., are

CRS Insight IN10725,
existing nuclear power plants).
The Advanced Nuclear
Production Tax Credit, by
The PTC amount would be 0.3 cents per kWh. Taxpayers
Mol y F. Sherlock and
that satisfy prevailing wage and registered apprenticeship
Mark Holt.
requirements would be eligible for a tax credit of 1.5 cents
per kWh.

CRS Report R45171,
Registered Apprenticeship:
The credit would be reduced when the price of electricity
Federal Role and Recent
increases. Credits would be reduced by a “reduction
Federal Efforts, by
amount,” which is 16% of the excess of gross receipts
Benjamin Col ins.
(excluding certain state and local zero-emissions grants)
from electricity produced by the facility and sold over the

CRS In Focus IF11927,
product of 2.5 cents times the amount of electricity sold
Federally Funded
during the taxable year.
Construction and the
Payment of Locally
Prevailing Wages, by
Congressional Research Service

11

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Credit amounts and amounts in the phaseout formula would
David H. Bradley and Jon
be adjusted for inflation. Taxpayers could elect to receive
O. Shimabukuro.
the credit as direct pay (discussed above).
The credit would terminate on December 31, 2027.
This provision is identical or nearly identical to Section
136108 of H.R. 5376, as passed in the House on November
19, 2021.
Part 2—Renewable Fuels

Extension of
Current law provides a 50-cents-per-gallon tax credit for
For background, see
Incentives for
alternative fuels and alternative fuel mixtures through 2021

CRS Report R46865,
Biodiesel,
and a $1.00-per-gallon tax credit for biodiesel and
Energy Tax Provisions:
Renewable Diesel,
renewable diesel (with an additional $0.10-per-gallon tax
Overview and Budgetary
and Alternative
credit for agri-biodiesel) through 2022. The biodiesel and
Cost, by Mol y F.
Fuels
renewable diesel mixtures tax credit may be claimed as an
Sherlock.

immediate excise tax credit against the blender’s motor and
aviation fuels excise taxes. Credits in excess of excise tax

CRS Report R46451,
Section 126201
liability may be refunded. The biodiesel and small agri-
Energy Tax Provisions
biodiesel credits may be claimed as income tax credits. The
Expiring in 2020, 2021,
alternative fuels credit can be claimed as an excise tax credit
2022, and 2023 (“Tax
or received as an outlay. The alternative fuels mixture credit
Extenders”), by Mol y F.
is an excise tax credit.
Sherlock, Margot L.
Crandall-Hol ick, and
This provision would extend the existing tax credits for
Donald J. Marples.
alternative fuels and alternative fuel mixtures and biodiesel
and renewable diesel through December 31, 2026.
This provision is identical or nearly identical to Section
136201 of H.R. 5376, as passed in the House on November
19, 2021.
Extension of
Current law provides a $1.01-per-gallon income tax credit
For background, see
Second Generation
for second-generation biofuel production through 2021. This  CRS Report R46865,
Biofuel Incentives
provision would extend the second-generation biofuel
Energy Tax Provisions:

producer tax credit through December 31, 2026.
Overview and Budgetary
Section 126202
This provision is identical or nearly identical to Section
Cost, by Mol y F.
136202 of H.R. 5376, as passed in the House on November
Sherlock.
19, 2021.

CRS Report R46451,
Energy Tax Provisions
Expiring in 2020, 2021,
2022, and 2023 (“Tax
Extenders”), by Mol y F.
Sherlock, Margot L.
Crandall-Hol ick, and
Donald J. Marples.
Sustainable Aviation This provision would create a new tax credit for the sale or
For background, see
Fuel Credit
mixture of sustainable aviation fuel starting in 2023. The tax

CRS In Focus IF11696,

credit would have a base amount of $1.25 per gallon, with a
Aviation and Climate
supplemental credit amount of $0.01 per gallon for each
Section 126203
Change, by Richard K.
percentage point by which the lifecycle greenhouse gas
Lattanzio.
emissions reduction percentage for the fuel exceeds 50%
(with a maximum supplemental credit of $0.50 per gallon).
Sustainable aviation fuel is defined as liquid fuel that (1)
meets the requirements of either ASTM International
Standard D7566 or the Fischer Tropsch provisions of ASTM
International Standard D1655, Annex; (2) is not derived
from palm fatty acid distil ates or petroleum; and (3) has
been certified to achieve at least a 50% lifecycle greenhouse
Congressional Research Service

12

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
gas reduction percentage as defined according to the most
recent Carbon Offsetting and Reduction Scheme for
International Aviation adopted by the International Civil
Aviation Organization and agreed to by the United States
(or a similar methodology which satisfies criteria in the
Clean Air Act), as compared with petroleum-based jet fuel.
The sustainable aviation fuel credit would require claimants
to be registered with the Secretary of the Treasury, and
could be used to offset fuel excise tax liability or, in the case
of insufficient fuel excise tax liability, be received as a
payment. Like the tax credit for biodiesel and renewable
diesel, there would be a coordinated income tax credit.
Credit amounts would be included in a taxpayer’s gross
income for income tax purposes.
The credit would expire after December 31, 2026.
This provision is identical or nearly identical to Section
136203 of H.R. 5376, as passed in the House on November
19, 2021.
Clean Hydrogen
This provision would create a new credit for the qualified
For background, see

production of clean hydrogen. The credit would be available

CRS Report R45171,
for qualified clean hydrogen produced at a qualifying facility
Section 126204
Registered Apprenticeship:
during the facility’s first 10 years of operation. The base
Federal Role and Recent
credit amount would be $0.60 per kilogram (kg) times the
Federal Efforts, by
applicable percentage. The credit would be $3.00 per kg
Benjamin Col ins.
times the applicable percentage if the clean hydrogen is
produced at a facility that meets prevailing wage and

CRS In Focus IF11927,
registered apprenticeship requirements. Credit amounts
Federally Funded
would be indexed for inflation.
Construction and the
Payment of Locally
The applicable percentage would be determined by the
Prevailing Wages, by
lifecycle greenhouse gas emissions rate achieved in
David H. Bradley and Jon
producing clean hydrogen. The applicable percentage would
O. Shimabukuro.
be 100% for hydrogen achieving a lifecycle greenhouse gas
emissions rate of less than 0.45 kilograms of carbon dioxide
equivalent (CO2e) per kg. The applicable percentage would
be 33.4% for hydrogen achieving a lifecycle greenhouse gas
emission rate of less than 1.5 kilograms of CO2e per kg (but
not less than 0.45 kilograms). For hydrogen with a lifecycle
greenhouse gas emission rate of less than 2.5 kgs of CO2e
per kg (but not less than 1.5), the applicable percentage
would be 25%, and for hydrogen with a lifecycle greenhouse
gas emissions rate of less than 4 kgs of CO2e per kg (but
not less than 2.5), the applicable percentage would be 20%.
For facilities placed into service before 2027 producing
hydrogen with a greenhouse gas emissions rate of no more
than 6 kg of CO2e per kg (but not less than 4), the
applicable percentage would be 15%.
Taxpayers could elect to receive the credit as direct pay
(see “Elective Payment for Energy Property and Electricity
Produced from Certain Renewable Resources, Etc.”).
Taxpayers could not claim credits for clean hydrogen
produced at facilities that claimed credits under Section
45Q. Taxpayers could elect to claim the energy investment
tax credit (ITC) in lieu of the clean hydrogen production
credit. Taxpayers may claim the Section 45 PTC for
electricity produced from renewable resources by the
Congressional Research Service

13

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
taxpayer if the electricity is used at a qualified clean
hydrogen facility to produce qualified clean hydrogen.
The provision would terminate the alternative fuel excise
tax credit for hydrogen after December 31, 2021.
The provision provides that for facilities financed with tax-
exempt bonds, the credit amount would be reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
To qualify for the credit, new facilities must begin
construction before January 1, 2029. Facilities existing
before January 1, 2022, would be able to qualify based on
the date that modifications to their facility required to
produce clean hydrogen are placed into service.
This provision is a modification of Section 136204 of H.R.
5376, as passed in the House on November 19, 2021.
Part 3—Green Energy and Efficiency Incentives for Individuals

Extension, Increase,
Current law provides a 10% tax credit for qualified energy-
For background, see
and Modifications of efficiency improvements and expenditures for residential

CRS Report R42089,
Nonbusiness Energy energy property on a taxpayer’s primary residence through
Residential Energy Tax
Property Credit
2021. The credit is subject to a $500 per taxpayer lifetime
Credits: Overview and

limit. This provision would extend the tax credit through
Analysis, by Margot L.
December 31, 2031, and make additional modifications.
Section 126301
Crandall-Hol ick and
The proposed modifications would increase the credit rate
Mol y F. Sherlock.
to 30% with an annual per-taxpayer limit of $1,200 and a

CRS Report R46451,
$600 per item limit (geothermal and air source heat pumps
Energy Tax Provisions
and biomass stoves would be excluded from this cap). The
Expiring in 2020, 2021,
credit would be allowed for expenditures made on any
2022, and 2023 (“Tax
dwelling unit used by the taxpayer (not limited to primary
Extenders”), by Mol y F.
residences). Limits for expenditures on windows and doors
Sherlock, Margot L.
would also be increased. Required energy efficiency
Crandall-Hol ick, and
standards would be modified, and changed to update over
Donald J. Marples.
time without additional legislative action. Qualifying building
envelope components would no longer include roofs, but

would include air sealing insulation. Electric load or service
center upgrade property installed to enable the use of
electric appliances would also be qualifying property.
Biomass stoves would be made eligible for tax credits. A
30% credit, up to $150, would be allowed for home energy
audits. Treasury would be given the authority to treat
errors related to this section as mathematical or clerical
errors. Starting in 2024, taxpayers would be required to
submit a product identification number to claim the tax
credit.
The credit would be renamed the energy efficient home
improvement credit.
This provision is a modification of Section 136301 of H.R.
5376, as passed in the House on November 19, 2021.
Residential Clean
Current law provides a tax credit for the purchase of solar
For background, see
Energy Credit
electric property, solar water heating property, fuel cells,

CRS Report R42089,

geothermal heat pump property, small wind energy
Residential Energy Tax
property, and qualified biomass fuel property. The credit
Section 126302
Credits: Overview and
rate is 26% through 2022 (it was 30% through 2019), and is
Analysis, by Margot L.
scheduled to be reduced to 22% in 2023 before expiring.
Congressional Research Service

14

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision would extend the credit through December
Crandall-Hol ick and
31, 2033, restoring the 30% credit rate after 2021 and
Mol y F. Sherlock.
through 2031, and then reducing the credit rate to 26% in

CRS Report R46451,
2032 and 22% in 2033. Qualified battery storage technology
Energy Tax Provisions
would be added to the list of eligible property.
Expiring in 2020, 2021,
The credit would be made refundable after 2022. Starting in
2022, and 2023 (“Tax
2023, only property installed by qualified installers would be
Extenders”), by Mol y F.
eligible for the credit and taxpayers would be required to
Sherlock, Margot L.
report the qualified installation identification number to
Crandall-Hol ick, and
claim the credit.
Donald J. Marples.
Payments would be made to territories for the revenue loss

associated with providing the residential energy efficient
property credit.
The credit would be renamed the residential clean energy
credit.
This provision is a modification of Section 136302 of H.R.
5376, as passed in the House on November 19, 2021.
Energy Efficient
Under current law, a permanent deduction of up to $1.80
For background, see
Commercial
per square foot is allowed for certain energy-saving

CRS Committee Print
Building Deduction
commercial building property installed as part of (1) the
CP10004, Tax

interior lighting system; (2) the heating, cooling, ventilation,
Expenditures:
or hot water system; or (3) the building envelope. This
Section 126303
Compendium of
provision would temporarily modify the energy-efficient
Background Material on
commercial building deduction, with the modifications
Individual Provisions — A
effective through 2031.
Committee Print Prepared
The temporary modifications would reduce the amount by
for the Senate Committee
which a building must increase its efficiency relative to a
on the Budget, 2020, by
reference building, from 50% to 25%. They would further
Jane G. Gravelle et al.
provide that the per-square-foot deduction of $0.50 be
(pp. 99-104).
increased by $0.02 for each percentage point by which the

CRS Report R45171,
certified efficiency improvements reduce energy and power
Registered Apprenticeship:
costs, with a maximum amount of $1.00 per square foot.
Federal Role and Recent
For projects that meet prevailing wage requirements and
Federal Efforts, by
registered apprenticeship requirements, the base credit is
Benjamin Col ins.
$2.50, which would be increased by $0.10 for each
percentage point increase in energy efficiency, with a

CRS In Focus IF11927,
maximum credit amount of $5.00 per square foot. The
Federally Funded
maximum credit amount would be the total deduction a
Construction and the
building can claim over a four-year period (the current tax
Payment of Locally
year plus the three preceding tax years). Taxpayers making
Prevailing Wages, by
energy-efficiency retrofits that are part of a qualified retrofit
David H. Bradley and Jon
plan on a building that is at least five years old would be able
O. Shimabukuro.
to deduct their adjusted basis in the retrofit property (so

long as that amount does not exceed a per-square foot value
determined on the basis of energy usage intensity). Any tax-
exempt organization would be allowed to allocate the
deduction to the designer or the building or retrofit plan.
This provision is identical or nearly identical to Section
136303 of H.R. 5376, as passed in the House on November
19, 2021.
Congressional Research Service

15

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Extension, Increase,
Under current law, through 2021, a tax credit is available for For background, see
and Modifications of eligible contractors for building and selling qualifying energy-

CRS Report R46451,
New Energy
efficient new homes. The credit is equal to $2,000, with
Energy Tax Provisions
Efficient Home
certain manufactured homes qualifying for a $1,000 credit.
Expiring in 2020, 2021,
Credit
This provision would extend the energy-efficient new home
2022, and 2023 (“Tax

credit through December 31, 2031, and increase and modify
Extenders”), by Mol y F.
Section 126304
the credit amount. For homes acquired after 2021, a $2,500
Sherlock, Margot L.
credit would be available for new homes that meet certain
Crandall-Hol ick, and
Energy Star efficiency standards, and a $5,000 credit would
Donald J. Marples.
be available for new homes that are certified as zero-energy

ready homes. Multifamily dwellings that meet certain Energy

CRS In Focus IF11927,
Federally Funded
Star efficiency standards could be eligible for a $500 credit
Construction and the
per unit, with a $1,000 per unit credit available for eligible
Payment of Locally
zero-energy ready multifamily dwellings. The credits for
Prevailing Wages, by
multifamily dwelling units would be increased to $2,500 and
David H. Bradley and Jon
$5,000, respectively, if the taxpayer ensures that the
O. Shimabukuro.
laborers and mechanics employed by contractors and
subcontractors in the construction of the residence are paid
prevailing wages.
This provision is identical or nearly identical to Section
136304 of H.R. 5376, as passed in the House on November
19, 2021.
Modifications to
Under current law, subsidies provided by public utilities to
For background, see
Income Exclusion
customers for the purchase or installation of energy

CRS Committee Print
for Conservation
conservation measures are excluded from taxable income.
CP10004, Tax
Subsidies
This provision would provide that amounts provided for
Expenditures:

water conservation or efficiency, storm water management,
Compendium of
Section 126305
or wastewater management could also be excluded. For
Background Material on
wastewater management, the property purchased or
Individual Provisions — A
installed would need to be on the taxpayer’s principal
Committee Print Prepared
residence. The provision would be effective for amounts
for the Senate Committee
received after December 31, 2018.
on the Budget, 2020, by
This provision is identical or nearly identical to Section
Jane G. Gravelle et al.
136305 of H.R. 5376, as passed in the House on November
(pp. 121-124).
19, 2021.
Credit for Qualified
This provision would create a tax credit for 30% of qualified
For background, see
Wildfire Mitigation
wildfire mitigation expenditures made after the date of

CRS In Focus IF10244,
Expenditures
enactment. Qualified expenditures would be specified
Wildfire Statistics, by

wildfire mitigation expenditures made under a state wildfire
Katie Hoover and Laura
mitigation program that requires wildfire mitigation
Section 126306
A. Hanson.
expenditures be paid by the taxpayer and the state, for
property owned or leased by the taxpayer. The credit rate

CRS In Focus IF10732,
would be reduced below 30% if the taxpayer’s percentage of
Federal Assistance for
the wildfire mitigation expenditure (as opposed to the
Wildfire Response and
state’s share) were to fall below 30%. For business
Recovery, by Katie
expenditures, the credit would be part of the general
Hoover.
business credit. For nonbusiness expenditures, the credit
would be a nonrefundable individual income tax credit. If
basis of property includes qualified wildfire mitigation
expenditures, the property’s basis would be reduced by the
amount of any tax credits claimed.
This provision is identical or nearly identical to Section
136306 of H.R. 5376, as passed in the House on November
19, 2021.
Congressional Research Service

16

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Part 4—Greening the Fleet and Alternative Vehicles

Refundable New
Buyers of qualifying plug-in electric vehicles (EVs) may be
For background, see
Qualified Plug-In
able to claim a nonrefundable federal income tax credit of

CRS In Focus IF11017,
Electric Drive
up to $7,500 under current law. The tax credit phases out
The Plug-In Electric Vehicle
Motor Vehicle
once a vehicle manufacturer has sold 200,000 qualifying
Tax Credit, by Mol y F.
Credit for
vehicles. This provision would modify and extend the tax
Sherlock.
Individuals
credit for plug-in EVs.


The modified credit would be $4,000 for vehicles with a

CRS Report R46864,
Alternative Fuels and
Section 126401
battery capacity of 10 kilowatt hours that can be charged by
Vehicles: Legislative
an external source of electricity, plus $3,500 for vehicles
Proposals, by Melissa N.
with a battery capacity of at least 40 kilowatt hours (50
Diaz.
kilowatt hours after 2026) that have a gas tank capacity of
no more than 2.5 gallons. An additional amount of $4,500

CRS Report R46231,
would be available for domestically assembled vehicles
Electric Vehicles: A Primer
assembled at a facility that operates under a union-
on Technology and
negotiated col ective bargaining agreement, and an additional
Selected Policy Issues, by
amount of $500 would be available for vehicles powered by
Melissa N. Diaz.
battery cells meeting domestic content requirements. The

maximum per-vehicle credit would be up to $12,500, not to
exceed 50% of the vehicle purchase price. The credit would
be made refundable. Vehicles subject to depreciation would
be ineligible.
The credit would not apply to vehicles acquired after
December 31, 2031. The 200,000 qualifying vehicles per
manufacturer limitation would be removed.
Certain limitations would apply starting in 2023. First, the
credit would phase out for married taxpayers filing a joint
return with modified AGI above $500,000 ($375,000 in the
case of head of household filers; $250,000 in the case of
other filers). The credit would be reduced by $200 for each
$1,000 (or fraction thereof) by which the taxpayer’s
modified AGI exceeds the threshold amount. The taxpayer’s
modified AGI would be the lesser of modified AGI in the
taxable year or prior year. Second, credits would only be
allowed for vehicles that have a manufacturer’s suggested
retail price of less than $80,000 for vans, SUVs, or pickup
trucks, and $55,000 for other vehicles. Third, taxpayers
would be allowed to claim the credit for one vehicle per
year.
Starting in 2027, the $4,000 plus $3,500 base credit would
be available only for EVs with final assembly occurring in the
United States.
Two- and three-wheeled electric vehicles would be allowed
a 30% tax credit, up to $7,500.
Starting in 2023, taxpayers purchasing eligible vehicles could
elect to transfer the tax credit to the dealer, so long as the
dealer meets registration, disclosure, and other
requirements. Amounts provided as direct spending would
be grossed-up (increased) by 6.0445%.
Taxpayers would be required to include the vehicle
identification number (VIN) on their tax return to claim a
tax credit.
Payments would be made to territories for the revenue loss
associated with providing the EV credit.
Congressional Research Service

17

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision is a modification of Section 136401 of H.R.
5376, as passed in the House on November 19, 2021.
Credit for
This provision would create a new refundable tax credit for
For background, see
Previously Owned
previously owned qualified plug-in electric and fuel cell

CRS In Focus IF11017,
Qualified Plug-In
vehicles. The credit would be up to $4,000 (a base credit of
The Plug-In Electric Vehicle
Electric Drive
$2,000 plus $2,000 for vehicles propelled by a battery with a
Tax Credit, by Mol y F.
Motor Vehicles
capacity of 40 kilowatt hours [50 kilowatt hours after 2026]
Sherlock.

having a gas tank with a capacity of less than 2.5 gallons).
The credit would be limited to 50% of the vehicle purchase

CRS Report R46864,
Section 126402
price.
Alternative Fuels and
Vehicles: Legislative
The credit would phase out for married taxpayers filing a
Proposals, by Melissa N.
joint return with modified AGI above $150,000 ($112,500 in
Diaz.
the case of head of household filers; $75,000 in the case of
other filers). The credit would be reduced by $200 for each

CRS Report R46231,
$1,000 (or fraction thereof) by which the taxpayer’s
Electric Vehicles: A Primer
modified AGI exceeds the threshold amount. The taxpayer’s
on Technology and
modified AGI would be the lesser of modified AGI in the
Selected Policy Issues, by
taxable year or prior year.
Melissa N. Diaz.
Credits would only be allowed for vehicles with a sale price

of $25,000 or less with a model year that is at least two
years earlier than the calendar year in which the vehicle is
sold. This credit could only be claimed for the first transfer
of a qualifying vehicle. Taxpayers would be required to
include the VIN on their tax return to claim a tax credit.
Starting in 2023, taxpayers purchasing eligible vehicles could
elect to transfer the tax credit to the dealer, so long as the
dealer meets registration, disclosure, and other
requirements. Amounts provided as direct spending would
be grossed-up (increased) by 6.0445%.
Payments would be made to territories for the revenue loss
associated with providing the EV credit.
The credit would not apply to vehicles acquired after
December 31, 2031.
This provision is a modification of Section 136402 of H.R.
5376, as passed in the House on November 19, 2021.
Qualified
This provision would create a new tax credit for qualified

Commercial
commercial electric vehicles. The credit would be the lesser
Electric Vehicles
of (1) 15% of the vehicle’s cost (30% for vehicles not

powered by a gasoline or diesel internal combustion engine);
or (2) the incremental cost of the vehicle relative to a
Section 126403
comparable vehicle. Eligible vehicles would have a battery
capacity of not less than 15 kilowatt hours and be charged
by an external source of electricity. Mobile machinery and
qualified commercial fuel cell vehicles would also be eligible
for this credit. Leasing companies could elect to determine
the credit using the rules under Section 36C for individuals if
the vehicle is leased to an individual. Qualifying vehicles
would be depreciable property.
Tax-exempt entities would have the option of electing to
receive direct payments.
Taxpayers would be required to include the VIN on their
tax return to claim a tax credit.
The credit would not apply to vehicles acquired after
December 31, 2031.
Congressional Research Service

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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision is identical or nearly identical to Section
136403 of H.R. 5376, as passed in the House on November
19, 2021.
Qualified Fuel Cell
Current law allows, through 2021, a tax credit of up to
For background, see
Motor Vehicles
$8,000 for fuel cell vehicles (the base credit amount is

CRS Report R46451,

$4,000, with up to an additional $4,000 available based on
Energy Tax Provisions
fuel economy). Heavier vehicles qualify for up to a $40,000
Section 126404
Expiring in 2020, 2021,
credit. This provision would modify the definition of
2022, and 2023 (“Tax
qualified fuel cell motor vehicles to exclude vehicles subject
Extenders”), by Mol y F.
to depreciation (commercial vehicles), and extend the credit
Sherlock, Margot L.
through December 31, 2031. Commercial fuel cell vehicles
Crandall-Hol ick, and
would be eligible for the new credit for qualified commercial
Donald J. Marples.
electric vehicles.

CRS Report R46864,
This provision is identical or nearly identical to Section
Alternative Fuels and
136404 of H.R. 5376, as passed in the House on November
Vehicles: Legislative
19, 2021.
Proposals, by Melissa N.
Diaz.
Alternative Fuel
Current law allows, through 2021, a tax credit for the cost
For background, see
Refueling Property
of any qualified alternative fuel vehicle refueling property

CRS Report R46451,
Credit
installed by a business or at a taxpayer’s principal residence.
Energy Tax Provisions

The credit is equal to 30% of these costs, limited to $30,000
Expiring in 2020, 2021,
for businesses at each separate location with qualifying
Section 126405
2022, and 2023 (“Tax
property, and $1,000 for residences. This provision would
Extenders”), by Mol y F.
extend the credit through December 31, 2031, and make
Sherlock, Margot L.
additional modifications. For residential property, the credit
Crandall-Hol ick, and
would be extended at the 30% rate, with the credit limit
Donald J. Marples.
increased to $3,333.33. For business property (property
subject to depreciation), the credit would be extended at a

CRS Report R46864,
rate of 6% (30% if prevailing wage and registered
Alternative Fuels and
apprenticeship requirements were met), with the credit limit
Vehicles: Legislative
increased to $100,000.
Proposals, by Melissa N.
Diaz.
A supplemental 4% credit (20% if prevailing wage and
registered apprenticeship requirements are met) would be

CRS Report R46231,
available for costs above the $100,000 limit for business
Electric Vehicles: A Primer
property that refuels using only electricity or fuel consisting
on Technology and
of at least 85% hydrogen by volume. To qualify for the
Selected Policy Issues, by
supplemental credit, the property would need to be
Melissa N. Diaz.
intended for general public use (i.e., no fee or payment

CRS Report R45171,
arrangement required) and accept payments via a credit card
Registered Apprenticeship:
reader (including contactless technology) or be exclusively
Federal Role and Recent
used by commercial or government vehicles.
Federal Efforts, by
The definition of qualifying property would be modified to
Benjamin Col ins.
include bidirectional charging equipment.

CRS In Focus IF11927,
The credit would not apply to property placed in service
Federally Funded
after December 31, 2031.
Construction and the
This provision is identical or nearly identical to Section
Payment of Locally
136405 of H.R. 5376, as passed in the House on November
Prevailing Wages, by
19, 2021.
David H. Bradley and Jon
O. Shimabukuro.
Congressional Research Service

19

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Reinstatement and
Before 2018, up to $20 per month in employer

Expansion of
reimbursements for qualifying bicycle commuting expenses
Employer-Provided
were excludable from an employee’s income and wages and
Fringe Benefit for
hence not subject to income or employment taxes. P.L. 115-
Bicycle Commuting
97, commonly called the Tax Cuts and Jobs Act (TCJA),

temporarily suspended, through 2025, the exclusion for
employer-provided bicycle commuter fringe benefits. This
Section 126406
provision would repeal the suspension and expand the
exclusion for bicycle commuting benefits to include
employer provision or reimbursement for purchase, lease or
rental (including bikeshare), improvement, repair, or storage
of bikes or scooters for commuting purposes. The amount
excluded could be up to 30% of the monthly dol ar limit on
qualified transportation fringe benefits ($270 in 2021). This
provision would allow employees to elect a salary
contribution for bicycle commuting benefits (similar to other
qualified transportation fringe benefits).
This provision is identical or nearly identical to Section
136406 of H.R. 5376, as passed in the House on November
19, 2021.
Credit for Certain
This provision would create a new refundable 30% tax credit
New Electric
for qualified electric bicycles. The maximum credit amount
Bicycles
would be $900. The credit could be claimed for one bike

per three-year period per taxpayer (two bikes in the case of
a joint return).
Section 126407
Qualified electric bicycles include those made by a qualified
manufacturer and that include a VIN, cost no more than
$4,000, have an electric motor of less than 750 watts, and
where the motor does not provide assistance at higher
speeds. Qualified manufacturers are those that assign a VIN
to electric bicycles produced and provide that information
to the Secretary of the Treasury.
The credit would phase out for married taxpayers filing a
joint return with modified AGI above $150,000 ($112,500 in
the case of head of household filers; $75,000 in the case of
other filers). The credit would be reduced by $200 for each
$1,000 (or fraction thereof) by which the taxpayer’s
modified AGI exceeds the threshold amount. Prior-year
modified AGI could be used for the purposes of determining
the phaseout if it was less than current-year modified AGI.
Taxpayers would be required to include the VIN on their
tax return to claim a tax credit.
Payments would be made to territories for the revenue loss
associated with this credit.
Beginning after December 31, 2022, taxpayers purchasing
qualified electric bicycles could elect to transfer the credit
to the retailer selling the bicycle if the retailer is registered
with the Secretary of the Treasury, reports certain
information to the taxpayer, and makes a payment to the
taxpayer equal to the amount of the credit. Such payments
would be excluded from the taxpayer’s gross income.
Amounts provided as direct spending would be grossed-up
(increased) by 6.0445%.
The credit would not apply to bicycles acquired after
December 31, 2025.
Congressional Research Service

20

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision is a modification of Section 136407 of H.R.
5376, as passed in the House on November 19, 2021.
Part 5—Investment in the Green Workforce and Manufacturing

Extension of the
This provision would provide additional allocations of the
For background, see
Advanced Energy
qualified advanced energy manufacturing tax credit, which is

CRS Committee Print
Project Credit
a 30% tax credit for investments in projects that reequip,
CP10004, Tax

expand, or establish certain energy manufacturing facilities.
Expenditures:
The American Recovery and Reinvestment Act (P.L. 111-5)
Section 126501
Compendium of
provided $2.3 bil ion in allocations, which have been ful y
Background Material on
allocated.
Individual Provisions — A
An additional $5 bil ion in allocations would be provided in
Committee Print Prepared
2022 and 2023 and an additional $1.875 bil ion would be
for the Senate Committee
allocated in each year from 2024 through 2031. In 2022 and
on the Budget, 2020, by
2023, $800 mil ion in annual allocations would be for
Jane G. Gravelle et al.
projects in automotive communities, with $300 mil ion set
(pp. 221-224).
aside in each of the subsequent years. The same amounts

CRS Report R45171,
would be set aside for projects in energy communities (as
Registered Apprenticeship:
defined for the purposes of the increased credit amount
Federal Role and Recent
under the PTC and ITC).
Federal Efforts, by
The definition of qualifying advanced energy projects would
Benjamin Col ins.
be amended such that it would include projects that reequip, 
expand, or establish a manufacturing or industrial facility for

CRS In Focus IF11927,
Federally Funded
the production or recycling of renewable energy property;
Construction and the
energy storage systems and components; grid modernization
Payment of Locally
equipment and components; property designed to remove,
Prevailing Wages, by
use, or sequester carbon oxide emissions; equipment
David H. Bradley and Jon
designed to refine, electrolyze, or blend any fuel, chemical,
O. Shimabukuro.
or product which is renewable or low-carbon and low-
emission; property designed to produce energy conservation
technologies; electric or fuel-cell vehicles, including
technologies, components, or materials for such vehicles and
the associated charging infrastructure; hybrid vehicles
weighing less than 14,000 pounds, including technologies,
components, or materials for such vehicles; or which
reequips an industrial manufacturing facility with equipment
designed to reduce greenhouse gas emissions by at least
20%.
The base rate for the credit would be 6%, with the 30%
credit rate allowed for projects meeting prevailing wage and
registered apprenticeship requirements.
The Secretary would be directed to establish a program to
award credits to qualifying advanced energy project
sponsors. Applicants accepting certifications for credits
would have two years to provide evidence that the
requirements of the certification have been met and to place
property in service.
This provision is a modification of Section 136501 of H.R.
5376, as passed in the House on November 19, 2021.
Labor Costs of
This provision would create a new tax credit for 2% of the

Installing Mechanical labor cost of installing mechanical insulation (10% if
Insulation Property
prevailing wage and registered apprenticeship requirements

are met).
Section 126502
The credit would not apply to costs incurred after
December 31, 2025.
Congressional Research Service

21

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision is identical or nearly identical to Section
136502 of H.R. 5376, as passed in the House on November
19, 2021.
Advanced
This provision would create a new advanced manufacturing
For background, see
Manufacturing
investment tax credit for taxpayers investing in advanced

CRS Report R46581,
Investment Credit
manufacturing facilities to manufacture semiconductors or
Semiconductors: U.S.

semiconductor tooling equipment. The tax credit would
Industry, Global
have a base amount of 5%, with the credit rate increasing to
Section 126503
Competition, and Federal
25% for facilities that pay prevailing wages and meet
Policy, by Michaela D.
registered apprenticeship requirements.
Platzer, John F. Sargent
Taxpayers would be able to elect to receive the credit as
Jr., and Karen M. Sutter.
direct pay.
For property for which construction began before January 1,
2022, only the basis attributable to construction taking place
after December 31, 2021, would be eligible for the credit.
To qualify for this credit, construction on a facility must
begin by December 31, 2025.
This provision is identical or nearly identical to Section
136503 of H.R. 5376, as passed in the House on November
19, 2021.
Advanced
This provision would create a new production tax credit

Manufacturing
that could be claimed for the domestic production and sale
Production Credit
of qualifying solar and wind components.

Credits for solar components would include (1) for a thin
Section 126504
film photovoltaic cell or crystalline photovoltaic cell, 4 cents
per direct current watt of capacity; (2) for photovoltaic
wafers, $12 per square meter; (3) for solar grade polysilicon,
$3 per kilogram; and (4) for solar modules, 7 cents per
direct current watt of capacity.
For wind energy components, if the component is an
offshore wind vessel, the credit amount would be 10% of
the sales price. Otherwise, credits for wind components
would be computed as an applicable amount times the total
rated capacity of the completed wind turbine for which the
component was designed. The applicable amount would be 2
cents for blades, 5 cents for nacelles, 3 cents for towers, 2
cents for fixed platform offshore wind foundations, and 4
cents for floating platform offshore wind foundations. The
credit for torque tubes and longitudinal purlin would be
$0.87 per kg, and the credit for structural fasteners would
be $2.28 per kg. The credit for inverters would be based on
the inverter’s capacity, with different types of inverters
eligible for specified credit amounts ranging from 1.5 cents
to 11 cents per watt.
The total credit amount would be increased by 10% for
components manufactured in facilities operating under a
col ective bargaining agreement.
Taxpayers would be able to elect to receive the credit as
direct pay.
The credit would phase out for components sold after
December 31, 2028. Components sold in 2029 would be
eligible for 75% of the ful credit amount. Components sold
in 2030 and 2031 would be eligible for 50% and 25% of the
Congressional Research Service

22

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
ful credit amount, respectively. No credit would be available
for components sold after December 31, 2031.
This provision is a modification of Section 136504 of H.R.
5376, as passed in the House on November 19, 2021.
Part 6—Environmental Justice

Qualified
This provision would create a new refundable tax credit for

Environmental
eligible educational institutions that received an allocation
Justice Program
from the Treasury and incur costs associated with a qualified
Credit
environmental justice program. The credit would be 30% for

a program involving material participation of faculty and
students of an institution described in Section 371(a) of the
Section 126601
Higher Education Act of 1965, and 20% otherwise. The
Secretary would be directed to allocate credits to eligible
educational institutions for qualified environmental justice
programs that submit applications at such time and in such
manner as the Secretary may provide.
Up to $1 bil ion per year could be allocated from 2022
through 2031. The program would be effective upon the
date of enactment.
Amounts provided as direct spending would be grossed-up
(increased) by 6.0445%.
This provision is a modification of Section 136601 in H.R.
5376, as reported on September 27, 2021.
Part 7—Superfund

Reinstatement of
This provision would permanently reinstate the Hazardous
For background, see
Superfund
Substance Superfund financing rate for certain excise taxes,

CRS In Focus IF11982,

but would not reauthorize the Superfund special
Superfund Tax Legislation
environmental tax on corporate income that also once
Section 126701
in the 117th Congress, by
financed this trust fund.
Anthony A. Cil uffo and
This provision would permanently reinstate Superfund
David M. Bearden.
excise taxes on domestic crude oil and imported petroleum

CRS Report R41039,
products at the rate of 16.4 cents per barrel in 2022, with
Comprehensive
adjustments for inflation annually thereafter. The previous
Environmental Response,
tax rate was 9.7 cents per barrel when this tax last expired
Compensation, and
at the end of 1995.
Liability Act: A Summary of
Generally, the tax is paid by refineries that receive crude oil
Superfund Cleanup
or by the person using or importing a petroleum product.
Authorities and Related
The Infrastructure Investment and Jobs Act (P.L. 117-58)
Provisions of the Act, by
separately renews other excise taxes that contribute to the
David M. Bearden.
Superfund. P.L. 117-58 increases the tax rate on
domestically produced chemical feedstocks and imported
chemical derivatives and renews those taxes from July 1,
2022, through December 31, 2031. P.L. 117-58 also
removes the statutory link between the dates of applicability
of the crude oil and chemical products taxes.
Revenues from the excise tax finance the Hazardous
Substance Superfund Trust Fund. Borrowing would be
authorized through repayable advances from the General
Fund of the U.S. Treasury until the end of 2031.
This provision is identical or nearly identical to Section
136701 of H.R. 5376, as passed in the House on November
19, 2021.
Congressional Research Service

23

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Part 8—Incentives for Clean Electricity and Clean Transportation

Clean Electricity
This provision would create a new clean electricity

Production Credit
production tax credit (PTC). This new PTC would be for

the sale of domestically produced electricity with a
greenhouse gas emissions rate not greater than zero. To
Section 126801
qualify for a tax credit, electricity would need to be
produced at a qualifying facility placed in service after
December 31, 2026.
The base PTC amount would be 0.3 cents per kWh, with
the tax credit amount increased to 1.5 cents per kWh for
facilities that pay prevailing wages and meet registered
apprenticeship requirements (0.5 cents and 2.5 cents,
respectively, in 2021, applying the inflation adjustment
factor; the amounts would be adjusted for inflation annually).
Facilities with a maximum net output of less than 1
megawatt would also qualify for the ful 1.5 cents per kWh
amount. The PTC would be available for electricity
produced during the facility’s first 10 years of operation.
The credit amount would be increased by 10% for electricity
produced in energy communities (as defined for the
purposes of the increased credit amount under the PTC and
ITC).
A 10% domestic content bonus would be available for
electricity produced at facilities that certify that certain steel,
iron, and manufactured products used in the facility were
domestically produced.
The provision would provide that for facilities financed with
tax-exempt bonds, the credit amount is reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
Taxpayers would be able to elect to receive the credit as
direct pay, effectively making the tax credit refundable. The
ability to claim the credit as direct pay would be subject to
meeting domestic content requirements. Taxpayers would
not be able to claim the clean electricity production credit if
the facility or electricity produced from the facility claimed
certain other energy-related investment or production tax
credits. Taxpayers would choose between the clean
electricity PTC and ITC, and could not claim both.
The tax credit would phase out when emissions reduction
target levels are achieved or after 2031 (the later of the
two). The emissions target phaseout would begin after the
calendar year in which greenhouse gas emissions from the
electric power sector are equal to or less than 25% of 2021
electric power sector emissions. Once phaseout begins, the
ful credit amount would remain available for facilities that
begin construction the fol owing year. The credit amount for
facilities beginning construction in the second year would be
75% of the ful credit amount. This would be reduced to
50% for facilities beginning construction in the third year,
and zero afterward.
This provision is a modification of Section 136801 in H.R.
5376, as passed in the House on November 19, 2021.
Congressional Research Service

24

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Clean Electricity
This provision would create a new clean electricity
For background, see
Investment Credit
investment tax credit (ITC). This new ITC would be for

CRS Report R45171,

investment in qualifying zero-emissions electricity generation
Registered Apprenticeship:
facilities or energy storage technology. Costs of
Section 126802
Federal Role and Recent
interconnection property are eligible for clean electricity
Federal Efforts, by
projects smaller than 5 megawatts. This credit would be
Benjamin Col ins.
available for facilities and property placed in service after
December 31, 2026.

CRS In Focus IF11927,
Federally Funded
The base ITC amount would be 6%, with the tax credit rate
Construction and the
increased to 30% for facilities that pay prevailing wages and
Payment of Locally
meet registered apprenticeship requirements. Facilities with
Prevailing Wages, by
a maximum net output of less than 1 megawatt would also
David H. Bradley and Jon
qualify for the 30% credit.
O. Shimabukuro.
The clean electricity ITC is increased by one-third (2
percentage points or 10 percentage points) for property
placed in service in an energy community (as defined above
for the purposes of the clean electricity PTC). Similarly, a
10% domestic content bonus also applies for the clean
electricity ITC.
The provision would provide that for facilities financed with
tax-exempt bonds, the credit amount is reduced by the
lesser of (1) 15%; or (2) the fraction of the proceeds of a
tax-exempt obligation used to finance the project over the
aggregate amount of the project’s financing costs.
Taxpayers would be able to elect to receive the credit as
direct pay, effectively making the credit refundable. The
ability to claim the credit as direct pay would be subject to
meeting domestic content requirements. Taxpayers would
not be able to claim the clean electricity production credit if
the facility or electricity produced from the facility claimed
certain other energy-related investment or production tax
credits. Taxpayers would choose between the clean
electricity PTC and ITC, and could not claim both.
The clean electricity ITC would phase out according to the
same schedule as would apply to the clean electricity PTC.
This provision is a modification of Section 136802 in H.R.
5376, as passed in the House on November 19, 2021.
Increase in Clean
This provision would allow for the allocation of 1.8 gigawatts For background, see
Electricity
for “environmental justice solar and wind capacity” credits

CRS Report R45171,
Investment Credit
annually from 2027 through 2031. Taxpayers receiving a
Registered Apprenticeship:
for Facilities Placed
capacity allocation may be entitled to tax credits in addition
Federal Role and Recent
in Service in
to otherwise allowed clean electricity ITCs. Specifically,
Federal Efforts, by
Connection with
projects receiving an allocation that are located in a low-
Benjamin Col ins.
Low-Income
income community or on Indian land would be eligible for a
Communities
10% bonus investment tax credit, while projects that are

CRS In Focus IF11927,
Federally Funded

part of a low-income residential building project or qualified
low-income economic benefit project would be eligible for a
Construction and the
Section 126803
20% bonus investment credit. No facility could receive more
Payment of Locally
than a maximum 20% bonus investment credit under this
Prevailing Wages, by
provision.
David H. Bradley and Jon
O. Shimabukuro.
Qualifying clean electricity projects would include those with
a nameplate capacity of 5 megawatts or less (other than
facilities producing electricity through combustion or
gasification).
Congressional Research Service

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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Facilities receiving an allocation would be required to have
the facility placed in service within four years.
This provision would take effect on January 1, 2027.
This provision is a modification of Section 136803 of H.R.
5376, as passed in the House on November 19, 2021.
Cost Recovery for
This provision would provide that any facility qualifying for

Qualified Facilities,
the clean electricity PTC or any facility or property
Qualified Property,
qualifying for the clean electricity ITC would be treated as 5-
and Energy Storage
year property under the modified accelerated cost recovery
Technology
system (MACRS), making it so that cost recovery for

renewable energy investments is generally similar to current
law.
Section 126804
This provision would apply to facilities and property placed
in service after December 31, 2026.
This provision is identical or nearly identical to Section
136804 of H.R. 5376, as passed in the House on November
19, 2021.
Clean Fuel
This provision would create a tax credit for domestic clean
For background, see
Production Credit
fuel production starting in 2027. The tax credit per gallon of

CRS Report R45171,

transportation fuel would be calculated as the applicable
Registered Apprenticeship:
amount multiplied by the emissions factor of the fuel. To
Section 126805
Federal Role and Recent
qualify, the fuel must be produced by the taxpayer at a
Federal Efforts, by
qualified facility (excluding facilities that receive credits for
Benjamin Col ins.
producing clean hydrogen or carbon oxide sequestration, or
the investment credit for energy produced in clean

CRS In Focus IF11927,
hydrogen facilities) and sold by the taxpayer. Qualified
Federally Funded
producers must be registered with the IRS.
Construction and the
Payment of Locally
The “applicable amount” would be determined by the type
Prevailing Wages, by
of fuel and the producer’s labor practices. The base credit
David H. Bradley and Jon
amount for zero-emissions fuels would be $0.20 for
O. Shimabukuro.
nonaviation fuel and $0.35 for aviation fuel. If the producer
meets prevailing wage and registered apprenticeship
requirements, then the applicable amount would be $1.00
for nonaviation fuel and $1.75 for aviation fuel. These
amounts would be adjusted annually for inflation.
The “emissions factor” would be calculated according to the
formula: [(50 kilograms of CO2-equivalent (CO2e) global
warming potential per metric mil ion British Thermal Units
(mmBTU) – emissions rate of fuel produced) / 50 kilograms
of CO2e per mmBTU]. For example, suppose a producer
met the labor practices and other requirements and
produced a nonaviation fuel with an emissions factor of 25
kg of CO2e emissions per mmBTU. That producer’s credit
per gallon would be $1.00 * [(75-25)/75] = $0.67 per gallon.
The Treasury Secretary would publish tables of emissions
rates for various fuel types that would be used in the
calculation.
Qualifying transportation fuel would be fuel with an
emissions rate not greater than 50 kilograms of CO2e per
mmBTU for fuel sold in 2027 through 2030. For sustainable
aviation fuel the emission rate could not be greater than 35
kilograms of CO2e per mmBTU. For fuel sold after 2030,
qualifying fuel could not have an emissions rate greater than
25 kilograms of CO2e per mmBTU.
Congressional Research Service

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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
The tax credit would phase out when emissions reduction
target levels are achieved or after 2031 (the later of the
two). The emissions target phaseout would begin after the
calendar year in which greenhouse gas emissions from the
transportation sector are equal to or less than 25% of 2021
transportation sector emissions. Once phaseout begins, the
ful credit amount would remain available for facilities that
begin construction the fol owing year. The credit amount for
facilities beginning construction in the second year would be
75% of the ful credit amount. This would be reduced to
50% for facilities beginning construction in the third year,
and zero afterward.
Taxpayers would be able to elect to receive the credit as a
direct payment.
This provision is a modification of Section 136805 of H.R.
5376, as passed in the House on November 19, 2021.
Source: CRS analysis of the Senate Finance Committee’s updated text for Title XII-Committee on Finance in
the Build Back Better Act, as posted on the Senate Finance Committee’s website on December 11, 2021, at
https://www.finance.senate.gov/chairmans-news/finance-committee-releases-updated-build-back-better-text.
Notes: Part 9 of Subtitle F would appropriate $4,073,433,000 to the IRS, to remain available until September 30,
2031, to administer the provisions in this subtitle.
Provisions are effective in 2022 unless otherwise noted. The changes that would be made by the provisions are
permanent, unless otherwise noted. Within the description, “Section” citations refer to the section within the
Internal Revenue Code (IRC), 26 U.S.C., unless otherwise noted.

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Table 3. Subtitle G—Social Safety Net
Section Title and
Number
Description
CRS Resources
Part 1—Child Tax Credit
Modifications
The bil would make several changes to current law
For more information, see
Applicable
applicable to the 2021 child credit (and the 2022 credit as

CRS Insight IN11827,
Beginning in 2021
described in Section 127102 below), including:
The Child Tax Credit in the

Safe Harbor
Senate Finance Committee
Section 127101
Under current law, low- and moderate-income taxpayers
Text of the Build Back
who receive excess advance child credit payments may, in
Better Act: Summary
certain situations, be protected from repayment as a
Table, by Margot L.
result of a safe harbor provision. Excess advance
Crandall-Hol ick.
payments are equal to the value of the credit a taxpayer is For background, see
eligible to claim on their tax return minus amounts

CRS Report R46900, The
received as advance payments. The safe harbor applies in
Expanded Child Tax Credit
cases where there is a change in the number of qualifying
for 2021: Frequently
children used to estimate the advance payment in
Asked Questions (FAQs),
comparison to the number of children taken into account
by Margot L. Crandall-
when claiming and calculating the credit on the applicable
Hol ick.
income tax return (assuming this information is not
updated with the IRS during the year).a

CRS Insight IN11752,
The Impact of a “Fully
This provision would amend the existing safe harbor such
Refundable” Child Tax
that the safe harbor would not apply in cases where the
Credit, by Margot L.
qualifying child taken into account in determining the
Crandall-Hol ick.
advance payment amount was done so either fraudulently
or due to intentional disregard of the rules and

CRS Insight IN11656,
regulations. This would include cases where two
The Child Tax Credit: How
taxpayers set up an arrangement whereby one taxpayer
Would the Biden
receives advance payments (equaling up to 50% of the
Administration’s Proposed
2021 credit), while the other claims the ful amount of the
American Families Plan
credit on their 2021 return.
Change the Child Tax
Joint Returns
Credit?, by Margot L.
Crandall-Hol ick.
Under current law, to determine the amount of the credit
a taxpayer wil receive when they file their 2021 tax
return, the taxpayer first calculates the total amount of
the 2021 child credit they are eligible for. The taxpayer
then subtracts from this amount the sum of all the
advance payments of the 2021 credit they received. The
difference is the amount they wil receive with their 2021
return (generally filed in 2022).
For the purposes of calculating the amount of the credit a
taxpayer wil receive with their 2021 return, the provision
would provide that each spouse would be assumed to
have received half of the advance amount. This may be
relevant, for example, in cases where the taxpayer’s
marital status differs between the year used to calculate
the advance payments (2020 or 2019) and 2021. The
provision would also apply to advance payments issued by
territorial governments.
Information Used to Determine Advance
Payment Amounts
The provision would clarify that the data available to the
IRS to calculate advance payments of the 2021 credit
include “any information known to the [Treasury]
Secretary.”
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Section Title and
Number
Description
CRS Resources
Disclosure of Information Relating to Joint
Returns and Advanced Payments
In the case of an individual who receives an advance
payment, and who was a married joint filer during the
reference year (e.g., generally 2020 for the 2021
expanded child credit, or 2019 if data for 2020 are not
available), the Treasury may disclose to their spouse (or
ex-spouse) information used to determine eligibility for
and the amount of the advanced payment (including
whether the individual’s principal place of abode is the
United States or whether the individual is a resident of
Puerto Rico).
These provisions are generally applicable beginning in
2021 (including to advance payments made in 2021). The
provision related to disclosure of information relating to
joint returns and advance payments shall take effect after
the date of enactment.
This provision is identical or nearly identical to Section
137101 of H.R. 5376, as passed in the House on
November 19, 2021.
Extensions and
The American Rescue Plan Act of 2021 (ARPA; P.L. 117-
For more information, see
Modifications
2) temporarily increased (for 2021) the child credit for

CRS Insight IN11827,
Applicable
many taxpayers with children. Specifically, the law
The Child Tax Credit in the
Beginning in 2022
increased the maximum child credit from $2,000 per child
Senate Finance Committee

to $3,000 per child ($3,600 for children under 6 years
Text of the Build Back
old); expanded the eligibility age for children to include
Section 127102
Better Act: Summary
17-year-olds; and made the credit “ful y refundable.”
Table, by Margot L.
The bil would extend the 2021 ARPA-expanded child
Crandall-Hol ick.
credit to 2022 (as modified by Section 127101 above),
For background, see
with additional changes to the 2021 credit in effect for
2022 summarized below.b The parameters of the credit in

CRS Report R46900, The
2022 would not be adjusted for inflation.
Expanded Child Tax Credit
for 2021: Frequently
Modifications of Advance Payment Program
Asked Questions (FAQs),
Under current law, the advance payment program for the
by Margot L. Crandall-
2021 child credit advances up to 50% of the estimated
Hol ick.
2021 credit amount in equal periodic payments between

July 1, 2021, and December 31, 2021. (The IRS issued

CRS Insight IN11752,
The Impact of a “Fully
advance payments in six monthly payments between July
Refundable” Child Tax
15, 2021, and December 15, 2021.)
Credit, by Margot L.
This provision would advance all (100%) of the estimated
Crandall-Hol ick.
2022 child credit through the end of December 31, 2022,
in 12 monthly payments.

CRS Insight IN11656,
The Child Tax Credit: How
Under current law, otherwise-eligible taxpayers are
Would the Biden
automatically issued an advance payment, irrespective of
Administration’s Proposed
their income level, though they may opt out of advance
American Families Plan
payments with the IRS.
Change the Child Tax
This provision would generally limit eligibility for the
Credit?, by Margot L.
advance payment program to taxpayers whose income in
Crandall-Hol ick.
the reference year is below the initial phaseout. (The

CRS Report R43840,
reference taxable year is generally the prior taxable year,
Federal Income Taxes and
or if such data are not available, the year preceding the
Noncitizens: Frequently
prior year. For the 2022 child tax credit, the reference
Asked Questions, by Erika
taxable year would be 2021, or if data from that year are
K. Lunder and Margot L.
not available, 2020.) Those initial phaseout thresholds are
Crandall-Hol ick.
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Section Title and
Number
Description
CRS Resources
$150,000 for married joint filers, $112,500 for head of

household filers, and $75,000 for single filers.
Under current law, residents of Puerto Rico are generally
ineligible to receive advance payments. Instead, they must
file a 2021 tax return with the IRS to receive their 2021
child credit.
The provision would allow the Treasury Secretary to
make advanced payments of the 2022 child credit to
residents of Puerto Rico between July and December of
2022. If in effect, this would effectively allow Puerto Rican
residents to receive up to half of their total 2022 credit in
advance payments, and claim the remainder on their 2022
tax return, filed in early 2023.
Repeal of Temporary SSN Requirement for
Qualifying Children
Under current law (enacted as part of P.L. 115-97 and in
effect from 2018 to 2025), a taxpayer can only receive the
child credit for an otherwise-eligible child if they provide
the child’s Social Security number (SSN). This SSN must
be associated with work authorization, meaning an SSN
issued solely to receive a public benefit does not qualify.
These types of work-authorized SSNs are generally
provided to all U.S. citizen children and certain noncitizen
children, including legal permanent residents (i.e., “green
card holders”), refugees, and asylees. As a result of this
provision, for example, taxpayers cannot claim the child
credit for otherwise-eligible children with individual
taxpayer identification numbers (ITINs).
The provision would repeal the temporary “work-
authorized” SSN requirement for qualifying children.
Hence, eligible taxpayers with children with ITINs could
claim the credit for those children (assuming those
children meet all the other eligibility requirements). This
would apply for 2022-2025. Since this temporary
requirement is scheduled to expire at the end of 2025,
this provision would effectively permanently repeal the
temporary SSN requirement for children.
Income Lookback
Under current law, when a taxpayer calculates their child
credit for a given year on their income tax return, they
use the income for that year to determine whether and to
what extent the credit is subject to phaseout.c For
example, a taxpayer would generally use their annual 2022
income to calculate their 2022 child credit amount, if
subject to the phaseout.
The provision would allow taxpayers to elect to use the
preceding year’s income to determine their current year’s
credit amount, if subject to the phaseout. Specifically,
under this provision a taxpayer could elect to use their
2021 income to calculate their 2022 credit for purposes
of the phaseout. This provision would limit the amount
taxpayers would need to pay back in advance payments of
the credit due to annual fluctuations in their income.
Modification of Safe Harbor
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Section Title and
Number
Description
CRS Resources
Under current law, low- and moderate-income taxpayers
who receive excess advance payments may, in certain
situations, be protected from repayment as a result of a
safe harbor provision in Section127101 of the bil , as
described above. The maximum amount of the safe
harbor for 2021 is $2,000 multiplied by the difference in
the number of qualifying children between 2021 and 2020
(2019, if 2020 data are unavailable). This amount then
gradually phases out as income rises. The prior-year
data—in this case 2020 data, or if they are unavailable
2019 data—used to administer the advance payments is
generally referred to as the “reference year” data.
For 2022, the maximum safe harbor would be larger.
Specifically, the maximum safe harbor would be calculated
as $3,600 times the number of young children taken into
consideration during the reference year to determine the
advance payment amounts who are not claimed on 2022
returns plus $3,000 times the number of older children
taken into consideration during the reference year (to
determine the advance payment amounts) who are not
claimed on 2022 returns. (In this case, the reference year
would be 2021, or if those data are unavailable, 2020.)d
The phaseout of the safe harbor would be unchanged
under the law in effect for 2021.
This provision is identical or nearly identical to Section
137102 of H.R. 5376, as passed in the House on
November 19, 2021.
Refundable Child
Under current law, the child credit is scheduled to revert
For more information, see
Tax Credit After
to levels in effect under prior law, including as amended

CRS Insight IN11827,
2022
by P.L. 115-97. The changes made by P.L. 115-97 were in
The Child Tax Credit in the

effect from 2018 to 2025, and most of them would be in
Senate Finance Committee
effect for 2023-2025 under this bil . Specifically, under
Section 127103
Text of the Build Back
current law from 2023 to 2025, the credit is scheduled to
Better Act: Summary
equal a maximum of $2,000 per qualifying child. Lower-
Table, by Margot L.
income taxpayers wil receive their credit, whether all or
Crandall-Hol ick.
part of the credit, as the refundable portion of the credit.
From 2023 to 2025, the refundable portion wil generally
For background, see
be calculated under the earned income formula as 15% of

CRS Report R46900, The
earned income above $2,500, not to exceed $1,400 per
Expanded Child Tax Credit
qualifying child.e From 2023 to 2025, the credit wil begin
for 2021: Frequently
to phase out when a taxpayer’s income exceeds $400,000
Asked Questions (FAQs),
for married joint filers and $200,000 for unmarried
by Margot L. Crandall-
taxpayers (e.g., head of household). From 2023 to 2025,
Hol ick.
taxpayers can only receive the credit for children for

CRS Insight IN11752,
whom they have furnished a work-authorized SSN.
The Impact of a “Fully
Beginning in 2026, the child credit is scheduled to revert
Refundable” Child Tax
to levels in effect before P.L. 115-97 under current law. In
Credit, by Margot L.
other words, beginning in 2026 the credit is scheduled to
Crandall-Hol ick.
equal a maximum of $1,000 per qualifying child. Beginning

CRS Report R45124, The
in 2026, the refundable portion of the credit would
Child Tax Credit:
generally be calculated as 15% of earned income over
Legislative History, by
$3,000, not to exceed $1,000 per qualifying child.e
Margot L. Crandall-
Beginning in 2026, the credit starts to phase out when
Hol ick.
income exceeds $110,000 for married joint filers and
$75,000 for unmarried taxpayers (e.g., head of
household). Beginning in 2026, taxpayers can only receive
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
the credit for children for whom they have furnished a
taxpayer ID, which includes an SSN, an ITIN, or an
adoption taxpayer ID number (ATIN).
Finally, under current law, beginning in 2023, a qualifying
child wil revert permanently to being a dependent child
0-16 years old, meaning 17-year-olds would not be
eligible. (This age limit of a qualifying child is a permanent
provision that was not temporarily changed by P.L. 115-
97.)
This provision would modify current law beginning in
2023 by making the credit “ful y refundable.” Specifically,
for taxpayers with a principal place of abode in the United
States for more than half the year, the provision would
eliminate the formula(s) for calculating the refundable
portion of the child credit. Hence, the child credit would
be the same amount per child for low- and moderate-
income taxpayers, irrespective of their income. The
maximum credit would be $2,000 per child from 2023 to
2025 and $1,000 per child beginning in 2026. (Higher-
income taxpayers would stil be subject to a phaseout of
the credit, as scheduled to be in effect for a given year.)
Ful refundability would also be available to taxpayers who
are residents of Puerto Rico.
The temporary SSN requirement for qualifying children
would be repealed for 2023-2025 by Section 127102 of
this bil .
Under this provision, the credit’s advance payment
program would no longer be in effect beginning in 2023.
This provision is identical or nearly identical to Section
137103 of H.R. 5376, as passed in the House on
November 19, 2021.
Appropriations
The provision would provide for an additional

appropriation of $3.9633 bil ion for the IRS for

administrative expenses of the child tax credit and
Section 127104
advance payments of the child tax credit, and $1 bil ion
for the Treasury Department for outreach efforts to
increase enrol ment of eligible families in the child tax
credit and the advance payments of the child tax credit.
These amounts would be available upon enactment and
through September 30, 2026.
This provision is identical or nearly identical to Section
137104 of H.R. 5376, as passed in the House on
November 19, 2021.
Part 2—Earned Income Tax Credit
Certain
ARPA (P.L. 117-2) temporarily increased for 2021 the
For more information, see
Improvements to
earned income tax credit (EITC) for workers without

CRS Insight IN11825,
the Earned Income
qualifying children (often referred to as the “childless
The Earned Income Tax
Tax Credit
EITC”). Specifically, the law modified several parameters
Credit (EITC) in the Senate
Extended Through
of the credit that in combination tripled the maximum
Finance Committee Text of
2022
amount of the childless EITC from about $500 to about
the Build Back Better Act:

$1,500 per taxpayer. The law also temporarily reduced
Summary Table, by
the eligibility age of the childless EITC for young workers
Section 127201
Margot L. Crandall-
and eliminated the age limit for older workers. The
Hol ick.
provision would temporarily extend the changes to the
For background, see
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Section Title and
Number
Description
CRS Resources
childless EITC enacted by the ARPA for one year—2022,

CRS Insight IN11610,
as described below
The “Childless” EITC:
Regarding the credit amount, for 2022 this provision
Temporary Expansion for
would increase the childless EITC amount by making
2021 Under the American
several modifications to the credit formula: (1)
Rescue Plan Act of 2021
increasing—to $9,820—the minimum earned income
(ARPA; P.L. 117-2), by
necessary to receive the maximum credit amount (i.e.,
Margot L. Crandall-
“the earned income amount”); (2) increasing—to
Hol ick.
$11,610—the highest income level at which taxpayers

CRS Report R43805, The
receive the maximum credit amount before it begins to
Earned Income Tax Credit
phase out; and (3) doubling the phase-in and phaseout
(EITC): How It Works and
rates from 7.65% to 15.3%.f Combined, these changes
Who Receives It, by
would effectively triple the maximum EITC for childless
Margot L. Crandall-
workers. (Like other aspects of the EITC under current
Hol ick, Gene Falk, and
law, the $9,820 and $11,610 amounts would be indexed
Conor F. Boyle.
for inflation in 2022.)
Regarding eligibility age, for 2022, this provision would
temporarily expand eligibility for the childless EITC—by
reducing the minimum eligibility age from 25 to 19 for
most workers. In other words, this change would allow
most eligible workers ages 19 to 24 to claim the childless
EITC for 2022. For students who are attending school at
least part-time, the age limit would be reduced from 25 to
24 for 2022.g For former foster children and youth who
are homeless, the minimum age would be reduced from
25 to 18. The provision would also temporarily eliminate
the upper age limit for 2022, so workers aged 65 and
older would be eligible.
The provision also includes a temporary earned income
lookback for 2022 (a similar provision was temporarily
enacted for 2021 under ARPA whereby taxpayers could
use their 2019 income). Under this provision, if a
taxpayer’s earned income in 2022 was less than their
earned income in 2021, the taxpayer could elect to use
their 2021 earned income in calculating their EITC. This
income lookback would be applicable to all EITC
recipients—those with and without children.
This provision is identical or nearly identical to Section
137201 of H.R. 5376, as passed in the House on
November 19, 2021.
Funds for
Under current law, residents of the territories may be

Administration of
eligible to receive an EITC under their own territorial tax
Earned Income Tax
law. These territories are Puerto Rico, American Samoa,
Credits in the
the Commonwealth of the Northern Mariana Islands
Territories
(CNMI), the United States Virgin Islands (USVI), and

Guam. These territorial EITCs are paid by the local
territorial government, with the Treasury making
Section 127202
aggregate payments to territorial governments for the
total cost of these benefits. (Territorial residents are
generally ineligible for the federal EITC.) From 2021 to
2025 under current law, the Treasury is also required to
pay to territorial governments amounts that these
governments spend on education efforts regarding the
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
EITC—up to $1 mil ion per year for Puerto Rico, and up
to $50,000 per year for the other territories.
This provision would permanently provide additional
funding for territorial governments to cover
administrative expenses of their territorial EITCs—up to
$4 mil ion per year for Puerto Rico and up to $200,000
per year for the other territories.
This provision would apply beginning in 2022.
This provision is identical or nearly identical to Section
137202 of H.R. 5376, as passed in the House on
November 19, 2021.
Part 3—Expanding Access to Health Coverage and Lowering Costs
Improve
Under current law, certain individuals without access to
For background, see
Affordability and
subsidized health insurance coverage may be eligible for

CRS Report R44425,
Reduce Premium
the premium tax credit (PTC). In order to be eligible to
Health Insurance Premium
Costs of Health
receive the premium tax credit in 2021, individuals must
Tax Credit and Cost-
Insurance for
have annual household income at or above 100% of the
Sharing Reductions, by
Consumers
federal poverty level; not be eligible for certain types of
Bernadette Fernandez.

health insurance coverage, with exceptions; file federal
income tax returns; and enrol in a plan through an

Section 127301
individual exchange.
This provision would temporarily extend expanded
eligibility for and the amount of the PTC originally
enacted under ARPA by modifying the income eligibility
criteria and credit formula for 2021 through 2025.
Regarding income eligibility, the provision would
temporarily eliminate the phaseout for households with
annual incomes above 400% of the federal poverty level
(FPL).
Regarding the formula, the provision would temporarily
establish the percentage of annual income that eligible
households may be required to contribute toward the
premium. The percentages would range from 0.0% to
8.5% of household income, with higher-income groups
subject to larger percentages, as specified. The provision
would strike the existing indexing provision that annually
updates the percentages used in the PTC formula.
This provision is identical or nearly identical to Section
137301 of H.R. 5376, as passed in the House on
November 19, 2021.
Modification of
Under current law, individuals who are eligible for
For background, see
Employer-
minimum eligible coverage from their employer are

CRS Report R44425,
Sponsored
generally ineligible for the PTC. An exception is provided
Health Insurance Premium
Coverage
to an individual whose employer-provided health benefits
Tax Credit and Cost-
Affordability Test in
are unaffordable or inadequate. In 2021, coverage is
Sharing Reductions, by
Health Insurance
considered unaffordable if an employee’s share of the
Bernadette Fernandez.
Premium Tax
premium for self-only coverage under the plan exceeds
Credit
9.83% of the employee’s household income. This

affordability test is annually adjusted.
Section 127302
For 2022 through 2025, this provision would reduce the
percentage of household income used to determine
affordability of eligible employer-sponsored plans and
qualified small employer health reimbursement
arrangements from 9.83% to 8.5%. Hence, more
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
households with unaffordable employer health benefits
could be eligible for the PTC compared to current law.
The provision would permanently strike the annual
adjustment process.
This provision is identical or nearly identical to Section
137302 of H.R. 5376, as passed in the House on
November 19, 2021.
Treatment of
Beginning in 2022, this provision would exclude from
For background, see
Lump-Sum Social
household income—for purposes of determining PTC

CRS Report R44425,
Security Benefits in
eligibility and amount for a given year—any lump-sum
Health Insurance Premium
Determining
Social Security benefit payment attributable to a prior
Tax Credit and Cost-
Household Income
year. This provision would allow taxpayers to elect to
Sharing Reductions, by

include as part of their income the excludable amount, as
Bernadette Fernandez.
specified, beginning in 2026.
Section 127303

This provision is identical or nearly identical to Section
137303 of H.R. 5376, as passed in the House on
November 19, 2021.
Temporary
For 2022 through 2025, this provision would expand PTC
For background, see
Expansion of Health eligibility for lower-income households and make other

CRS Report R44425,
Insurance Premium
temporary changes.
Health Insurance Premium
Tax Credits for
The provision would temporarily disallow income criteria
Tax Credit and Cost-
Certain Low-
to be used to determine PTC eligibility. For households
Sharing Reductions, by
Income Populations
with incomes not exceeding 138% of FPL, the provision
Bernadette Fernandez.

would temporarily disregard the affordability test

CRS Report R45455, The
Section 127304
applicable to eligible employer-sponsored plans and
Affordable Care Act’s
qualified small employer health reimbursement
(ACA’s) Employer Shared
arrangements for PTC eligibility purposes.
Responsibility Provisions
For households with incomes less than 200% of FPL, the
(ESRP), by Ryan J. Rosso.
provision would temporarily cap the dol ar amount such

households would pay back in advanced PTC (APTC)
payments that were provided in excess.
For a household that would not be required to file a tax
return except to reconcile APTC payments, the provision
would temporarily repeal the requirements to file a
return and pay back excess APTC if an exchange
projected such household’s income would not exceed
138% of FPL.
For applicable large employers of employees with
household incomes projected to not (or that do not)
exceed 138% of FPL, the provision would temporarily
repeal the requirement that such employers pay a penalty
if at least one ful -time employee enrol s in an exchange
plan and is eligible for a PTC or cost-sharing reduction
(CSR).
This provision is identical or nearly identical to Section
137304 of H.R. 5376, as passed in the House on
November 19, 2021.
Special Rule for
For 2021 and 2022, this provision would deem individuals
For background, see
Individuals
who receive unemployment compensation for any week

CRS Report R44425,
Receiving
during a given year to have met the PTC income eligibility
Health Insurance Premium
Unemployment
criteria. The provision would temporarily disregard any
Tax Credit and Cost-
Compensation
household income above 150% of FPL in 2022 (133% of
Sharing Reductions, by

FPL in 2021).
Bernadette Fernandez.
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Section Title and
Number
Description
CRS Resources
Section 127305
This provision is identical or nearly identical to Section

137305 of H.R. 5376, as passed in the House on
November 19, 2021.
Permanent Credit
For the health coverage tax credit (HCTC), this provision
For background, see
for Health
would strike the sunset date of January 1, 2022, to

CRS Report R44392, The
Insurance Costs
authorize it on a permanent basis. The provision would
Health Coverage Tax

increase the HCTC’s subsidy rate from 72.5% to 80% of
Credit (HCTC): In Brief, by
the premium for qualifying health plans, for coverage
Section 127306
Bernadette Fernandez.
months beginning after December 31, 2021.

This provision is identical or nearly identical to Section
137306 of H.R. 5376, as passed in the House on
November 19, 2021.
Exclusion of
For 2023 through 2026, this provision would exclude
For background, see
Certain Dependent
income of a dependent under 24 years old from the

CRS Report R44425,
Income for
calculation of the PTC and determination of eligibility for
Health Insurance
Purposes of
cost-sharing reductions. An exception to this exclusion
Premium Tax Credit and
Premium Tax
would apply to aggregate income from all dependents
Cost-Sharing
Credit
younger than 24 in a given household that exceeds
Reductions, by

$3,500; the dol ar level would be annually adjusted
Bernadette Fernandez.
beginning in 2024.
Section 127307h

This provision is identical or nearly identical to Section
137307 of H.R. 5376, as passed in the House on
November 19, 2021.
Part 5—Higher Education
Credit for Public
This provision would create a new tax credit for
For background, see
University Research donations to public educational institutions for research

CRS Report R45922, Tax
Infrastructure
infrastructure, in lieu of claiming the charitable
Issues Relating to

contribution deduction for these amounts.
Charitable Contributions
Section 127501
Specifically, taxpayers would be able to claim a credit
and Organizations, by
equal to 40% of cash contributions for a qualifying project
Jane G. Gravelle, Donald
of a certified educational institution, subject to credit
J. Marples, and Mol y F.
allocation limits. This tax credit would be part of the
Sherlock.
general business credit.
The Secretary of the Treasury would establish a program
to designate a group of certified educational institutions
and allocate credit amounts for their qualifying projects.
These designations would be based on the institution’s
expected expansion in science, technology, engineering
and math (STEM) research, ensuring consideration for
smaller institutions (those with fewer than 12,000 ful
time students). A qualifying project would be defined as a
project to purchase, construct, or improve research
infrastructure property. Eligible institutions would
generally be limited to state col eges and universities.
Certified educational institutions would be awarded a
credit allocation, with qualified cash contributions not to
exceed 250% of this allocation. A certified educational
institution’s annual allocation could not exceed $50
mil ion per year. Total allocations would be limited to
$500 mil ion per year for 2022 through 2026.
For example, a certified educational institution could be
allocated $20 mil ion in credits for a qualifying project.
The institution could then designate up to $50 mil ion
(250% of $20 mil ion) in qualifying cash contributions for
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link to page 41 Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
that project. These qualifying cash contributions would
then generate up to $20 mil ion (40% of $50 mil ion) in
credits for taxpayers.
This provision is identical or nearly identical to Section
137501 of H.R. 5376, as passed in the House on
November 19, 2021.
Treatment of
Under current law, the portion of a scholarship (including
For background, see
Federal Pell Grants
a Pell Grant) that covers qualified tuition and fees is

CRS Report R45418,
for Income Tax
generally excludable from income and hence not taxable.i
Federal Pell Grant Program
Purposes
In contrast, the portion of a scholarship that covers room
of the Higher Education

and board and other living expenses is taxable. Pell Grants
Act: Primer, by Cassandria
may be used to pay for tuition and fees, room and board,
Section 127502
Dortch.
and other educational expenses. In addition, under
current law, when calculating an education tax credit,

CRS Report R41967,
taxpayers must reduce their credit-eligible education
Higher Education Tax
expenses by any amounts received as tax-free
Benefits: Brief Overview
scholarships. Since the amount of an education tax credit
and Budgetary Effects, by
depends on expenses incurred for tuition and fees, then
Margot L. Crandall-
all else being equal, receipt of a tax-free scholarship
Hol ick.
reduces the amount of credit-eligible expenses, and may

CRS Report R42561, The
reduce the amount of their education credit.
American Opportunity Tax
This provision would temporarily modify the current
Credit: Overview, Analysis,
exclusion for scholarship income such that any amount of
and Policy Options, by
a Pell Grant—not just the portion that pays for qualified
Margot L. Crandall-
tuition and fees—would be excluded from income, and
Hol ick.
hence not be taxable. In addition, under this provision,

expenses eligible for education tax credits would
temporarily not be reduced by any amount of a Pell Grant.
Both of these changes would apply to Pell Grants received
in 2022 through 2025.
This provision is identical or nearly identical to Section
137502 of H.R. 5376, as passed in the House on
November 19, 2021.
Repeal of Denial of
Under current law, the American Opportunity Tax Credit For background, see
American
(AOTC) cannot be claimed for a student convicted of a

CRS Report R42561, The
Opportunity Tax
federal or state felony drug possession or distribution
American Opportunity Tax
Credit on Basis of
offense. This lifetime prohibition generally applies
Credit: Overview, Analysis,
Felony Drug
beginning with the year in which the conviction occurs.
and Policy Options, by
Conviction
The provision would repeal this ban, allowing the AOTC
Margot L. Crandall-

to be claimed for an otherwise eligible student convicted
Hol ick.
Section 127503
of a felony drug offense.

This provision is identical or nearly identical to Section
137503 of H.R. 5376, as passed in the House on
November 19, 2021.
Placeholder for
Under current law, taxpayers who itemize their
For background, see
Compromise on
deductions may claim a deduction for certain state and

CRS Report R46246, The
Deduction for State local taxes paid (the SALT deduction). P.L. 115-97 limited
SALT Cap: Overview and
and Local taxes, etc. nonbusiness SALT deduction claims for tax years 2018
Analysis, by Grant A.

through 2025, set to $10,000 for single taxpayers and
Driessen and Joseph S.
married couples filing jointly and $5,000 for married
Section 127601
Hughes.
taxpayers filing separately. That law also excluded foreign
real property taxes paid from SALT deduction claims over 
CRS Report RL32781,
the same time frame.
Federal Deductibility of
State and Local Taxes, by
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
The language released by the Senate Finance Committee
Grant A. Driessen and
does not provide detail on changes to the limitation, and
Steven Maguire.
instead reserves the section as a “Placeholder for

Compromise on Deduction for State and Local Taxes.”
This provision is a modification of Section 137601 of H.R.
5376, as passed in the House on November 19, 2021.
Source: CRS analysis of the Senate Finance Committee’s updated text for Title XII-Committee on Finance in
the Build Back Better Act, as posted on the Senate Finance Committee’s website on December 11, 2021, at
https://www.finance.senate.gov/chairmans-news/finance-committee-releases-updated-build-back-better-text.
Notes: Provisions are effective in 2022 unless otherwise noted. The changes that would be made by the
provisions are permanent, unless otherwise noted. Within the description, “Section” citations refer to the
section within the Internal Revenue Code (IRC), 26 U.S.C., unless otherwise noted. Part 4 of Subtitle G would
establish new Pathway to Practice Training Programs, which are beyond the scope of this report and not
included in the table above. Part 4, Section 127403 includes a new refundable tax credit (under Section 36G of
the Internal Revenue Code) for qualifying educational institutions to offset amounts paid or incurred by the
institution for each eligible student who receives a Pathway to Practice medical scholarship voucher. This
provision is identical or nearly identical to Section 137403 of H.R. 5376, as passed in the House on November 19,
2021.
a. For example, the advance payments of the 2021 credit wil be based on an estimate of the 2021 credit
amount generally using 2020 tax data (the year of the data used to estimate the credit amount is referred to
as the “reference year”). Differences in the number of qualifying children between 2021 and 2020 may
occur when children move between taxpayers from year to year or if a child is born in 2021.
b. Territorial residents would be eligible to receive this larger child credit for 2022 from their territorial
revenue authority, with the IRS making aggregate payments to the territory for the larger 2022 credit
amount under existing law, IRC Section 24(k).
c. Income for purposes of phasing out the child credit is equal to Adjusted Gross Income (AGI) increased by
foreign earned income of U.S. citizens abroad, including income earned in Guam, American Samoa, the
Northern Mariana Islands, and Puerto Rico.
d. The age of the children would be based on their age at the end of 2022. When issuing advance payments in
2022, the IRS could project a child’s age under IRC Section 7527A(b)(1)(D). In other words, a qualifying
child who is 5 years old in 2021 and 6 years old in 2022 would result in the taxpayer being eligible for a
maximum credit of $3,000, or $250 per month advanced in 2022. Hence, for the purposes of the safe
harbor, the child would be considered an older child.
e. Under IRC Section 24(d)(1)(B)(i ), taxpayers with three or more qualifying children can calculate the
refundable portion of the child credit—the additional child tax credit or ACTC—using an alternative
formula. Under this formula, the ACTC equals the difference in the employee’s share of Social Security
taxes and Medicare taxes (i.e., 7.65% of earned income) and their EITC, up to the maximum ACTC. The
maximum ACTC in 2021 before ARPA was $1,400 per qualifying child and is scheduled under current law
to revert to that level from 2022 to 2025. Beginning in 2026, the maximum ACTC is scheduled to be
$1,000 per qualifying child. In most cases, the ACTC calculated under the earned income formula is greater
than the ACTC calculated under the alternative formula.
f.
Under current law, beginning in 2022 the statutory earned income amount and the phaseout threshold
amount for childless EITC recipients wil revert to their levels prior to ARPA, $4,220 and $5,280
respectively, and be annually adjusted for inflation. For reference, in 2021, prior to ARPA these amounts
after inflation adjustment would have been $7,100 and $8,880, respectively. The phaseout threshold amount
for married joint filers with a given number of qualifying children is $5,000 more than for unmarried filers. In
2021, once adjusted for inflation, this amount equals $5,940 for childless EITC recipients ($5,950 for those
with children). See IRS Revenue Procedure 2020-45.
g. The definition of a student would be someone carrying half or more of the normal ful -time workload for
their program of study, as defined under IRC Section 25A(b)(3).
h. The Senate Finance Committee text also includes Section 127308, which would require the Health and
Human Services (HHS) Secretary to award grants to states for purposes of developing a new Patient
Protection and Affordable Care Act Section 1332 waiver application, preparing an application for a waiver
extension or amendment, or implementing a state plan. In addition to any other amounts made available,
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section 127308 would appropriate $50 mil ion to the HHS Secretary for FY2022 (to remain available until
expended) for purposes of implementing the grant program and awarding grants. Grants to states would
not be allowed to exceed $5 mil ion and would remain available to the state until expended. For more
information, see CRS Report R44760, State Innovation Waivers: Frequently Asked Questions, by Ryan J. Rosso.
i.
Under current law, taxpayers may elect to have a tax-free scholarship (including a Pell Grant) included in
income and hence subject to tax. This may increase a taxpayer’s education credit and lower their total tax
(or increase their refund).
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Table 4. Subtitle H—Responsibly Funding Our Priorities
Section Title and
Number
Description
CRS Resources
Part 1—Corporate and International Tax Reforms

Subpart A—Corporate Provisions

Corporate
This provision would impose an alternative minimum tax
For background, see
Alternative
of 15% on corporations based on financial income. It

CRS Report R46887,
Minimum Tax
would apply to corporations with $1 bil ion or more in
Minimum Taxes on

earnings in the previous three years. In the case of U.S.
Business Income:
corporations that have foreign parents, it would apply
Section 128101
Background and Policy
only to income earned in the United States of $100
Options, by Mol y F.
mil ion or more (and apply when the international
Sherlock and Jane G.
financial reporting group has income of $1 bil ion or
Gravelle.
more). It would apply to a new corporation in existence
for less than three years based on the earnings in the

CRS Insight IN11646, A
years of existence.
Look at Book-Tax
Differences for Large
The provision would exclude Subchapter S corporations,
Corporations Using
regulated investment companies (RICs), and real estate
Aggregate Internal
investment trusts (REITs).
Revenue Service (IRS)
Firms that file consolidated returns would include income
Data, by Mol y F.
allocable to the firm from related firms including
Sherlock and Jane G.
control ed foreign corporations (and any disregarded
Gravelle.
entities); for other related firms, dividends would be
included. The provision would allow special deductions
for cooperatives and Alaska Native Corporations. It
would make adjustments to conform financial accounting
to tax accounting for certain defined benefit pension
plans. It would apply with respect to items under the
unrelated business income tax for tax-exempt entities.
The additional tax would equal the amount of the
minimum tax in excess of the regular income tax plus the
additional tax from the Base Erosion and Anti-Abuse tax.
Income would be increased by federal and foreign income
taxes to place income on a pretax basis.
Losses would be allowed in the same manner as with the
regular tax, with loss carryovers limited to 80% of taxable
income.
Domestic credits under the general business tax (such as
the R&D credit) would be allowed to offset up to 75% of
the combined regular and minimum tax. Foreign tax
credits would be allowed based on the allowance for
foreign taxes paid in a corporation’s financial statement.
A credit for additional minimum tax could be carried over
to future years to offset regular tax when that tax is
higher.
This tax would apply to taxable years beginning after
December 31, 2022.
This provision is a modification of Section 138101 of H.R.
5376, as passed in the House on November 19, 2021.
Excise Tax on
This provision would impose a 1% excise tax on the
For background, see
Repurchase of
repurchase of stock by a publicly traded corporation. The

CRS In Focus IF11960,
Corporate Stock
amount subject to tax would be reduced by any new
An Excise Tax on Stock

issues to the public or stock issued to employees. The tax
Repurchases and Tax
would not apply if repurchases are less than $1 mil ion or
Section 128102
Advantages of Buybacks
are contributed to an employee pension or similar plan.
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
The tax would not apply if the repurchases are treated as
over Dividends, by Jane G.
a dividend. It also would not apply to repurchases by
Gravelle.
regulated investment companies (RICs) or real estate

CRS Legal Sidebar
investment trusts (REITs). Further, it would not apply to
LSB10266, Stock
repurchases that are treated as dividends or to purchases
Buybacks: Background and
by a dealer in securities in the ordinary course of
Reform Proposals, by Jay
business.
B. Sykes.
The excise tax would apply to purchases of corporation

stock by a subsidiary of the corporation (a corporation or

CRS In Focus IF11393,
Stock Buybacks: Concerns
partnership that is more than 50% owned). The tax would
over Debt-Financing and
also apply to purchases by a U.S. subsidiary of a foreign-
Long-Term Investing, by
parented firm. It would apply to newly inverted (after
Gary Shorter.
September 20, 2021) or surrogate firms (firms that
merged to create a foreign parent with the former U.S.

CRS In Focus IF11506,
shareholders owning more than 60% of shares).
Stock Buybacks and
Company Executives’
The tax would not be deductible.
Profits, by Gary Shorter.
This provision is identical or nearly identical to Section
138102 of H.R. 5376, as passed in the House on
November 19, 2021.
Subpart B—Limitations on Deduction for Interest Expense

Limitations on
Section 163(j) of the IRC limits interest deductions to
For background see
Deduction for
30% of earnings before interest and taxes (EBIT). Before

CRS Report R45186,
Interest Expense
2022, the income base is earnings before interest, taxes,
Issues in International

depreciation, and amortization (EBITDA). Excess interest
Corporate Taxation: The
is carried forward. The limit applies at the partnership or
Section 128111
2017 Revision (P.L. 115-
corporate level for partnerships and Subchapter S
97), by Jane G. Gravelle
corporations.
and Donald J. Marples.
This provision would add an additional interest limitation

CRS In Focus IF11809,
under Section 163(n). The share of interest deducted by
Trends and Proposals for
firms with operations in other countries would be limited
Corporate Tax Revenue,
to 110% of the allocated share of worldwide interest; the
by Donald J. Marples and
allocated share is the same as the U.S. firm’s share of
Jane G. Gravelle.
worldwide EBITDA. This provision would apply to firms
with an average excess interest of $12 mil ion over three

years. This limit would not apply to small businesses with
average earnings over three years of less than $25 mil ion,
partnerships, Subchapter S corporations, real estate
investment trusts (REITs), or regulated investment
companies (RICs).
The firm could elect to provide an allocation reflecting
the adjusted basis of assets using the alternative
depreciation system. Research and experimental
expenditures for this purpose would be treated as if
amortized over five years.
The Section 163(j) limit applies at the partner or
shareholder level for partnerships and Subchapter S
corporations.
The provision would be effective for taxable years
beginning after December 31, 2022.
This provision is a modification of Section 138111 of H.R.
5376, as passed in the House on November 19, 2021.
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Subpart C—Outbound International Provisions

Modifications to
Current law imposes a minimum tax on global intangible
For background see
Deduction for
low-taxed income (GILTI) of control ed foreign

CRS Report R45186,
Foreign-Derived
corporations (CFCs), after allowing a deduction for 10%
Issues in International
Intangible Income
of tangible assets and 50% of the remainder. A deduction
Corporate Taxation: The
and Global
is also allowed for foreign-derived intangible income
2017 Revision (P.L. 115-
Intangible Low-
(FDII) for 10% of tangible assets and 37.5% of the
97), by Jane G. Gravelle
Taxed Income
remainder. These deduction amounts for the remainder
and Donald J. Marples.

are scheduled to fall to 37.5% for GILTI and 21.875% for
FDII after 2025. With the current 21% tax rate, these

CRS In Focus IF11809,
Section 128121
deductions result in a rate of 10.5% (13.125% after 2025)
Trends and Proposals for
for GILTI and 13.125% (16.4% after 2025) for FDII.
Corporate Tax Revenue,
by Donald J. Marples and
The combined GILTI and FDII deductions are limited to
Jane G. Gravelle.
taxable income and any unused deduction cannot be
carried back or forward.

This provision would reduce the deduction for GILTI to
28.5% and the deduction for FDII to 24.8%. With the
current 21% rate, these deductions would result in a tax
rate of 15.015% for GILTI and 15.792% for FDII. The
proposal would allow amounts in excess of taxable
income to be deducted and increase net operating losses,
effectively allowing them to be carried forward.
This provision would be effective for taxable years
beginning after December 31, 2022.
This provision is identical or nearly identical to Section
138121 of H.R. 5376, as passed in the House on
November 19, 2021.
Repeal of Election
Under current law, control ed foreign corporations are

for 1-Month
generally required to have the same tax year as the U.S.
Deferral in
parent, but there is an election to begin the tax year one
Determination of
month earlier. This provision would repeal that election.
Taxable Year of
It would apply to tax years beginning after November 30,
Specified Foreign
2022.
Corporations
This provision is identical or nearly identical to Section

138122 of H.R. 5376, as passed in the House on
Section 128122
November 19, 2021.
Modifications of
Under current law, a credit for foreign taxes paid offsets

Foreign Tax Credit
U.S. tax on foreign-source income dol ar for dol ar,
Rules Applicable to
whereas a deduction is less valuable. Dual-capacity
Certain Taxpayers
taxpayers are taxpayers who receive a benefit from a
Receiving Specific
foreign government (such as a right to extract oil). These
Economic Benefits
taxpayers also sometimes pay higher taxes that may not

be distinguishable from payments for benefits (such as
royalties) that would be deductible. Under this provision,
Section 128123
taxes would only be creditable up to the amount that
would be paid under rules general y applicable to
corporations in that country, and the excess could be
deducted.
This provision is identical or nearly identical to Section
138123 of H.R. 5376, as passed in the House on
November 19, 2021.
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Section Title and
Number
Description
CRS Resources
Modifications to
Current law allows a credit for foreign taxes paid (80% of
For background see:
Foreign Tax Credit
foreign taxes can be credited for GILTI). The credit is

CRS Report R45186,
Limitations
limited to U.S. tax on foreign-source income. The IRC
Issues in International

allocates a share of interest and head office expenses of
Corporate Taxation: The
the U.S. parent company to foreign-source income, which
Section 128124
2017 Revision (P.L. 115-
reduces the limit. Any excess credits are carried back one
97), by Jane G. Gravelle
year and carried forward 10 years. This limit applies on an
and Donald J. Marples.
overall basis for all countries (within separate overall
limits, or baskets, for GILTI, branch, passive, and general

CRS In Focus IF11809,
income). This overall limit allows taxes in excess of the
Trends and Proposals for
U.S. tax in high-tax countries to offset U.S. tax due in low-
Corporate Tax Revenue,
or no-tax countries.
by Donald J. Marples and
Jane G. Gravelle.
This provision would impose the limit separately in each
county (referred to as a per-country limit). The provision
would also eliminate the branch basket, eliminate
allocation of interest and head office expenses to foreign-
source income, eliminate the foreign tax credit carryback,
and allow excess credits for GILTI to be carried forward
five years for tax years beginning after December 31,
2022, and before January 1, 2031. It would also modify the
treatment of certain foreign asset dispositions.
This provision would be effective for tax years beginning
after December 31, 2022.
This provision is identical or nearly identical to Section
138124 of H.R. 5376, as passed in the House on
November 19, 2021.
Foreign Oil and Gas Under current law, foreign oil and gas extraction income
For background, see
Extraction Income
is not taxed (although another section would include this

CRS Report R43128, Oil
and Foreign Oil
income in GILTI), and foreign oil-related income (such as
Sands and the Oil Spill
Related Income to
a distribution) is included in GILTI. This provision would
Liability Trust Fund: The
Include Oil Shale
amend the definition of these incomes to include oil shale
Definition of “Oil” and
and Tar Sands
and tar sands.
Related Issues for

This provision is identical or nearly identical to Section
Congress, by Jonathan L.
Section 128125
138125 of H.R. 5376, as passed in the House on
Ramseur.
November 19, 2021.
Modifications to
Current law imposes a minimum tax on global intangible
For background, see
Inclusion of Global
low-taxed income (GILTI) of CFCs, after allowing a

CRS Report R45186,
Intangible Low-
deduction for 10% of tangible assets and 50% of the
Issues in International
Taxed Income
remainder (this percentage would be reduced by the
Corporate Taxation: The

section described above). GILTI (including profits and
2017 Revision (P.L. 115-
losses) is measured on an overall basis, so that losses in
Section 128126
97), by Jane G. Gravelle
one jurisdiction can offset income in another. Any overall
and Donald J. Marples.
losses cannot be carried forward. Foreign oil and gas
extraction income is not included in GILTI and not taxed.

CRS In Focus IF11809,
Trends and Proposals for
This provision would provide for a per-country measure
Corporate Tax Revenue,
of GILTI income and loss, reduce the deduction for
by Donald J. Marples and
tangible assets to 5%, allow losses to be carried forward
Jane G. Gravelle.
for one year, and include foreign oil and gas extraction
income in GILTI. The reduction in the 10% deduction for

tangible assets would not apply to the territories.
This provision would be effective for taxable years
beginning after December 31, 2022.
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision is identical or nearly identical to Section
138126 of H.R. 5376, as passed in the House on
November 19, 2021.
Modifications to
Under current law, credits for foreign taxes paid on GILTI For background, see
Determination of
are limited to 80% of these taxes. This provision would

CRS Report R45186,
Deemed Paid
increase the amount to 95%. It would also provide that
Issues in International
Credit for Taxes
CFCs must have direct U.S. shareholders and would apply
Corporate Taxation: The
Properly
special rules to foreign-owned U.S. shareholders.
2017 Revision (P.L. 115-
Attributable to
This provision would be effective for tax years beginning
97), by Jane G. Gravelle
Tested Income
after December 31, 2022.
and Donald J. Marples.

This provision is identical or nearly identical to Section

CRS In Focus IF11809,
Section 128127
138127 of H.R. 5376, as passed in the House on
Trends and Proposals for
November 19, 2021.
Corporate Tax Revenue,
by Donald J. Marples and
Jane G. Gravelle.
Modifications
On adoption of the GILTI regime in 2017, dividends from
For background, see
Related to
foreign corporations became deductible by shareholders

CRS Report R45186,
Deduction for
with a 10% interest beginning in 2018. The GILTI regime
Issues in International
Foreign Source
and Subpart F, which taxes certain easily shifted income at
Corporate Taxation: The
Portion of
ful rates, apply only to CFCs. CFCs are 50% owned by
2017 Revision (P.L. 115-
Dividends and
U.S. shareholders, each with at least 10% ownership. This
97), by Jane G. Gravelle
Control ed Foreign
provision would limit the 100% dividend deductions by
and Donald J. Marples.
Corporations
10% shareholders to dividends of CFCs. Other 10%
Status
shareholders could deduct 65% of dividends. Foreign

corporations that are not CFCs could elect CFC status
with the agreement of all U.S. shareholders. The provision
Section 128128
would also largely reverse the elimination of downward
attribution where CFC status could result from tracing
ownership by a U.S. corporation up through a foreign
parent. Currently, these downward attribution rules apply
to a U.S. person at least 10% control ed by a foreign
person; the revision would raise that share to 50%. These
provisions would apply to distributions made after the
date of enactment and to taxable years beginning after the
date of enactment.
This provision is a modification of Section 138128 of H.R.
5376, as passed in the House on November 19, 2021.
Limitation on
Under current law, subpart F imposes current taxes on
For background, see
Foreign Base
certain income that is easily shifted, including foreign base

CRS Report R45186,
Company Sales and
company sales and service income. This income is earned
Issues in International
Services Income
in a jurisdiction where the product or service is neither
Corporate Taxation: The

produced nor consumed (i.e., in an intermediary). It
2017 Revision (P.L. 115-
applies to transactions with related parties. This provision
Section 128129
97), by Jane G. Gravelle
would limit the definition of related parties to taxable
and Donald J. Marples.
units resident in the United States. It also would close
certain tax planning techniques that allow U.S.
shareholders to avoid tax.
This provision is identical or nearly identical to Section
138129 of H.R. 5376, as passed in the House on
November 19, 2021.
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Subpart D—Inbound International Provisions

Modifications to
Under current law, the base erosion and anti-abuse tax
For background, see
Base Erosion and
(BEAT) provides for an alternative calculation of tax by

CRS Report R45186,
Anti-Abuse Tax
adding certain payments to related foreign parties (such as
Issues in International

interest and royalties) and taxing this income at 10%.
Corporate Taxation: The
Payments for the cost of goods sold are not included.
Section 128131
2017 Revision (P.L. 115-
BEAT does not allow tax credits, including the foreign tax
97), by Jane G. Gravelle
credit, except for a temporary allowance of the research
and Donald J. Marples.
credit along with 80% of the low-income housing credit
and two energy credits. After 2025, the rate wil rise to
12.5% and no credits wil be allowed.
This provision would raise the tax rate to 10% in 2022,
12.5% in 2023, 15% in 2024, and 18% for 2025 and after.
Tax credits would be allowed. The base would also
include payments to foreign related parties for inventory
that is required to be capitalized (such as inventory to
produce tangible property) and payments for inventory in
excess of cost.
This provision is identical or nearly identical to Section
138131 of H.R. 5376, as passed in the House on
November 19, 2021.
Subpart E—Other Business Tax Provisions

Credit for Clinical
Under current law, businesses investing in the
For background, see
Testing of Orphan
development of drugs to diagnose, treat, or prevent rare

CRS Committee Print
Drugs Limited to
diseases and conditions—sometimes referred to as
CP10004, Tax
First Use or
“orphan drugs”—have been able to claim a nonrefundable
Expenditures:
Indication
tax credit for a portion of the qualified clinical testing
Compendium of

expenses they incur or pay.
Background Material on
Section 128141
This provision would modify the credit to limit the
Individual Provisions — A
eligibility of drugs to their first use or indication. In
Committee Print Prepared
addition, expenses eligible for the credit must be incurred
for the Senate Committee
prior to the receipt of any other use or indication.
on the Budget, 2020, by
This provision is identical or nearly identical to Section
Jane G. Gravelle et al.
1338141 of H.R. 5376, as passed in the House on
(pp. 911-918).
November 19, 2021.

Modifications to
Under this provision, a worthless security would be

Treatment of
considered a loss from the sale or exchange at the time it
Certain Losses
became worthless, as opposed to on the last day of the

taxable year. The rules relating to worthless securities
would be expanded to include partnership indebtedness
Section 128142
so that partnership indebtedness would be treated the
same as corporate indebtedness. A worthless partnership
interest would be considered a loss from the sale or
exchange of a capital asset and recognized at the time it
became worthless. The tax treatment of corporate
subsidiary liquidations would be modified.
This provision is identical or nearly identical to Section
138142 of H.R. 5376, as passed in the House on
November 19, 2021.
Congressional Research Service

45

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Adjusted Basis
Corporations that reorganize have rules about whether

Limitation for
the corporation wil realize gain in the transaction. If these
Divisive
reorganizations only involve the exchange of stock, the
Reorganization
reorganization is tax free. However, if money or property

is transferred, the corporation receiving the property can
be subject to tax on gain in the value of assets as long as
Section 128143
they are not distributed to shareholders. If the property is
transferred to creditors, it is treated as a distribution.
This provision would apply to reorganizations that involve
a corporation (the distributing corporation) separating
from its control ed corporation. In this case, where the
control ed corporation receives property from the
distributing corporation and transfers debt securities to
the creditors of the distributing corporation, any gain on
the property is subject to tax.
This provision would apply to reorganizations after the
date of enactment with a transition rule for transactions
already subject to binding agreements or announced.
This provision is identical or nearly identical to Section
138143 of H.R. 5376, as passed in the House on
November 19, 2021.
Modifications to
Under current law, an exemption for portfolio interest

Exemption for
allows foreign corporations (and nonresidents) to invest
Portfolio Interest
in certain U.S. debt without being subject to U.S. income

tax (or withholding). This exemption is not allowed for
10% shareholders—individuals who own 10% of the
Section 128144
voting stock of the corporation.
This provision would expand the definition of 10%
shareholder to also include any individual who owns 10%
of the value of the corporation.
This provision would apply to obligations issued after the
date of enactment.
This provision is identical or nearly identical to Section
138145 of H.R. 5376, as passed in the House on
November 19, 2021.
Certain Partnership
Under current law, income arising from notional principal

Interest Derivatives
contracts is generally sourced to the residence of the

recipient of the payment—unless the income is effectively
connected with U.S. trade or business activity. Publicly
Section 128145
traded partnerships, however, are not subject to the rules
on effectively connected income.
The provision would treat notional principal contract
income of publicly traded partnerships as “dividend
equivalent amounts” that would be sourced based on the
residence of the payor.
This provision would apply to payments made after
December 31, 2022.
This provision is identical or nearly identical to Section
138146 of H.R. 5376, as passed in the House on
November 19, 2021.
Congressional Research Service

46

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Adjustments to
Under current law, earnings and profits determine

Earnings and Profits
whether a distribution is a dividend (which may be taxed),
of Control ed
return of capital (not taxed), or capital gain (taxed).
Foreign
Earnings and profits are adjusted by various items, but
Corporations
control ed foreign corporations are not subject to certain

inventory adjustments, installment sales, or the completed
contract method of accounting.
Section 128146
This provision would relocate the current-law provision
in the tax code and would not include the former
language that these rules do not apply if they increase
earnings and profits above distributions, expanding its
applicability to all control ed foreign corporations
regardless of the level of distributions.
This provision is identical or nearly identical to Section
138147 of H.R. 5376, as passed in the House on
November 19, 2021.
Certain Dividends
Under current law, dividends are often exempt or

of Control ed
partially exempt from tax through domestic intercompany
Foreign
dividend deductions, and foreign dividends from CFCs are
Corporations
exempt for 10% shareholders. When stock has been held
Treated as
for less than two years, and an extraordinary dividend is
Extraordinary
paid, that dividend reduces the basis (the basis is the price
Dividends
paid for the stock) of the stock, and if it exceeds the basis

it is treated as a capital gain. An extraordinary dividend is
one that exceeds 10% of the value of the stock (5% for
Section 128147
preferred stock).
This provision would make disqualified dividends from
CFCs subject to the rules for treatment as a reduction of
basis or capital gain regardless of holding period.
Disqualified dividends are those that arise from earnings
and profits or gains during a disqualified period. A
disqualified period is one before the corporation became
a CFC or when it was owned by a non-U.S. shareholder.
This provision would apply to distributions made after the
date of enactment.
This provision is a modification of Section 138143 in H.R.
5376, as reported on September 27, 2021.
This provision is identical or nearly identical to Section
138148 of H.R. 5376, as passed in the House on
November 19, 2021.
Limitation on
Under current law, noncorporate taxpayers may exclude

Certain Special
a portion of the gain from the sale of qualified small
Rules for Section
business stock held for at least five years. The exclusion
1202 Gains
rate is determined by the date of acquisition—50% for

stock acquired on or before February 17, 2009; 75% for
stock acquired after February 17, 2009, and before
Section 128148
September 28, 2010; and 100% for stock acquired after
September 27, 2010.
The provision would limit the 75% and 100% exclusions
to taxpayers with AGI less than $400,000. Taxpayers with
AGI greater than or equal to $400,000, estates, and trusts
would be eligible for the 50% exclusion.
Congressional Research Service

47

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision would apply to sales and exchanges after
September 13, 2021, subject to a binding contract
exception.
This provision is identical or nearly identical to Section
138149 of H.R. 5376, as passed in the House on
November 19, 2021.
Constructive Sales
Under the constructive sale rule, certain offsetting

financial assets transactions are treated as if the
transaction occurred with an unrelated party. This rule
Section 128149
results in the realization of any gains in the financial assets
for tax purposes as a “constructive sale.”
The provision would extend current-law constructive
sales rules to digital assets.
This provision would apply to constructive sales and
contracts entered into after the date of enactment.
This provision is identical or nearly identical to Section
138150 of H.R. 5376, as passed in the House on
November 19, 2021.
Rules Relating to
Common control rules are applied in the tax code to

Common Control
treat multiple taxpayers as a single taxpayer to apply

specific tax rules. These rules apply to both corporate and
noncorporate entities that are conducting a trade or
Section 128150
business.
This provision would include under the common control
rules certain component members that may have been
previously treated as an excluded member, and these
rules would apply for any for-profit or research and
development activity.
This provision is identical or nearly identical to Section
138151 of H.R. 5376, as passed in the House on
November 19, 2021.
Modification of
Wash sale rules generally disallow claims of a loss related

Wash Sale Rules
to stocks or securities if the taxpayer acquires or

contracts to acquire similar assets within 30 days of the
sale of the original asset.
Section 128151
This provision would extend current-law wash sale rules
to the taxpayer and related parties and to specified assets
(including digital assets, currencies, commodities, and
short sales of these assets).
This provision is identical or nearly identical to Section
138152 of H.R. 5376, as passed in the House on
November 19, 2021.
Research and
The TCJA (P.L. 115-97) repealed the option to expense
For background, see
Experimental
qualified research expenditures, beginning in 2022. Under

CRS In Focus IF10757,
Expenditures
current law, starting in 2022, companies wil be required
The 2017 Tax Law (P.L.

to capitalize those costs and amortize them over five
115-97) and Investment in
years for domestic research and 15 years for foreign
Section 128152
Innovation, by Gary
research.
Guenther.
This provision would delay the requirement that qualified
research expenditures be capitalized and amortized until
2026.
Congressional Research Service

48

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision is identical or nearly identical to Section
138153 of H.R. 5376, as passed in the House on
November 19, 2021.
Modifications to
Under current law, a domestic corporation acquired by a
For background, see
Rules Relating to
foreign corporation may be deemed an inverted company

CRS Report R43568,
Expatriated Entities
depending on the share of the inverted company owned
Corporate Expatriation,
and Inverted
by the domestic corporation’s shareholders. If the former
Inversions, and Mergers:
Corporations
domestic corporation’s shareholders own at least 80% of
Tax Issues, by Donald J.

the new inverted company, then the inverted company
Marples and Jane G.
continues to be taxed as if it is a domestic company. If the
Section 128153
Gravelle.
ownership shares are greater than 60% and less than 80%,
then the new company is treated as an expatriated entity.
An expatriated entity is not taxed as a domestic
corporation, but is required to pay U.S. tol taxes (taxes
on gains) on assets transferred to the new entity.
This provision would expand the definition of inverted
and expatriated entities to include partnerships and lower
the applicable ownership thresholds to 65% (from 80%)
and 50% (from 60%). This provision would apply to
taxable years ending after December 31, 2021.
This provision was not included in H.R. 5376, as passed in
the House on November 19, 2021.
Part 2—Tax Increases for High-Income Individuals

Application of Net
This provision would subject the active income of high-
For background, see
Investment Income
income partners and S corporation owners that is not

CRS In Focus IF11820,
Tax to Trade or
already subject to Federal Insurance Contributions Act
The 3.8% Net Investment
Business Income of
(FICA) or Self-Employed Contributions Act (SECA) tax to
Income Tax: Overview,
Certain High
the 3.8% net investment income tax. The high-income
Data, and Policy Options,
Income Individuals
thresholds would be $250,000 (married filing separately),
by Mark P. Keightley.

$400,000 (single or head of household), and $500,000
(married filing jointly).
Section 128201
This provision is identical or nearly identical to Section
138201 of H.R. 5376, as passed in the House on
November 19, 2021.
Limitations on
The TCJA (P.L. 115-97) introduced excess business loss
For background, see
Excess Business
limitations, which limit the amount of business losses that

CRS Report R46377, The
Losses of
noncorporate taxpayers can use to offset their
Tax Treatment and
Noncorporate
nonbusiness income to $500,000 for a joint return and
Economics of Net
Taxpayers
$250,000 for a single return. These limits were set to
Operating Losses, by Mark

expire after 2025. In response to the economic effects of
P. Keightley.
the COVID-19 pandemic, the Coronavirus Aid, Relief, and
Section 128202
Economic Security (CARES) Act (P.L. 116-136)
temporarily suspended the limits on excess business
losses through 2025. The American Rescue Plan Act of
2021 (P.L. 117-2) extended the original TCJA limits
through 2026.
This provision would make permanent the excess
business loss limitation for noncorporate taxpayers.
This provision is identical or nearly identical to Section
138202 of H.R. 5376, as passed in the House on
November 19, 2021.
Congressional Research Service

49

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Surcharge on High
The provision would create an additional income tax on

Income Individuals,
individuals, estates, and trusts on modified adjusted gross
Estates, and Trusts
income (MAGI) in excess of specified thresholds. The tax

would be applied at a flat rate of 5% and would apply to
MAGI in excess of $5 mil ion and below $12.5 mil ion for
Section 128203
married individuals filing separate returns, $200,000 and
$500,000 for estates and trusts, and $10 mil ion and $25
mil ion for all other noncorporate taxpayers. MAGI in
excess of these thresholds would be taxed at a flat rate of
8%. Taxes paid under this provision would not be treated
as income taxes paid for purposes of the alternative
minimum tax.
This provision is identical or nearly identical to Section
138203 of H.R. 5376, as passed in the House on
November 19, 2021.
Part 3—Modifications of Rules Relating to Retirement Plans
Subpart A—Limitations on High-income Taxpayers With Large Retirement Account Balances
Contribution Limit
Under current law, taxpayers can contribute to their
For background, see
for Individual
individual retirement accounts (IRAs) regardless of the

CRS Report RL34397,
Retirement Plans of
balance in the accounts. This provision would disal ow
Traditional and Roth
High-Income
contributions to accounts if the contributions would
Individual Retirement
Taxpayers with
cause the total value of the individual’s IRAs and defined
Accounts (IRAs): A Primer,
Large Account
contribution plans to exceed $10 mil ion. It would apply
by Elizabeth A. Myers.
Balances
to married couples with taxable income over $450,000

CRS Report R46635,

(singles over $400,000 and heads of household over
$425,000). There is also a provision for reporting by
Individual Retirement
Section 128301
employer defined contribution plans of accounts with at
Account (IRA) Ownership:
least $2.5 mil ion. These dol ar amounts wil be adjusted
Data and Policy Issues, by
for inflation after 2028.
Elizabeth A. Myers.
These provisions would be effective for tax years

CRS Report R43439,
beginning after December 31, 2028.
Worker Participation in
Employer-Sponsored
This provision is identical or nearly identical to Section
Pensions: Data in Brief, by
138301 of H.R. 5376, as passed in the House on
John J. Topoleski and
November 19, 2021.
Elizabeth A. Myers.


CRS Insight IN11722,
Data on Contributions to
Individual Retirement
Accounts (IRAs), by
Elizabeth A. Myers and
John J. Topoleski.

CRS Insight IN11721,
Data on Retirement
Contributions to Defined
Contribution (DC) Plans,
by John J. Topoleski and
Elizabeth A. Myers.
Congressional Research Service

50

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Increase in
Under current law, taxpayers are generally required to
For background, see
Minimum Required
begin making withdrawals (“required minimum

CRS Report RL34397,
Distributions for
distributions”) from traditional IRAs when they are 72
Traditional and Roth
High-Income
years old (this does not apply to Roth IRAs). This
Individual Retirement
Taxpayers with
provision would require individuals with a combined
Accounts (IRAs): A Primer,
Large Retirement
traditional IRA, Roth IRA, and employer defined
by Elizabeth A. Myers.
Account Balances
contribution (DC) plan balance of over $10 mil ion to


make withdrawals of 50% of the excess over $10 mil ion.

CRS Report R46635,
This rule would apply to taxpayers with taxable income in
Individual Retirement
Section 128302
excess of the amounts listed above.
Account (IRA) Ownership:
Data and Policy Issues, by
A traditional IRA generally allows a deduction of
Elizabeth A. Myers.
contributions and taxation of withdrawals, while a Roth
IRA does not allow the deduction or impose the tax on

CRS Report R43439,
withdrawals, but exempts the earnings from tax.
Worker Participation in
Employer defined contribution plans can be in the
Employer-Sponsored
traditional or Roth form. The provision would also
Pensions: Data in Brief, by
require that when the amounts in all IRA and DC
John J. Topoleski and
accounts exceed $20 mil ion, withdrawals must be made
Elizabeth A. Myers.
from Roth IRAs and employer plans to reduce the

CRS Insight IN11722,
amount to the lesser of the amount needed to bring all
Data on Contributions to
accounts to $20 mil ion or the amounts in Roth IRA plans.
Individual Retirement
These provisions would be effective for tax years
Accounts (IRAs), by
beginning after December 31, 2028.
Elizabeth A. Myers and
This provision is identical or nearly identical to Section
John J. Topoleski.
138302 of H.R. 5376, as passed in the House on

CRS Insight IN11721,
November 19, 2021.
Data on Retirement

Contributions to Defined
Contribution (DC) Plans,
by John J. Topoleski and
Elizabeth A. Myers.
Subpart B—Other Provisions Relating to Individual Retirement Plans
Tax Treatment of
Contributions to Roth IRAs and the deductibility of
For background, see
Rol overs to Roth
contributions to traditional IRAs are limited by income,

CRS In Focus IF11963,
IRAs and Accounts
although individuals can make nondeductible contributions to
Rollovers and Conversions

traditional IRAs regardless of income. For a nondeductible
to Roth IRAs and
IRA, the withdrawals are partially exempt to recover the
Section 128311
Designated Roth Accounts:
taxpayer’s contribution proportional to the withdrawal.
Proposed Changes in
Current law allows conversions (i.e., rol overs) from
Budget Reconciliation, by
traditional to Roth IRAs regardless of income, so that
Elizabeth A. Myers
taxpayers can invest in a nondeductible traditional IRA
and then convert it to a Roth IRA (so-called back-door

CRS Report RL34397,
Roths).
Traditional and Roth
Individual Retirement
Employer plans may allow various types of contributions,
Accounts (IRAs): A Primer,
such as pretax, Roth, and after-tax (non-Roth) contributions.
by Elizabeth A. Myers.
After-tax contributions are generally made after an
individual has contributed the maximum amount of pretax

CRS Report R46635,
or Roth contributions. Under current law, individuals may
Individual Retirement
convert after-tax savings in an employer plan to a
Account (IRA) Ownership:
designated Roth account in an employer plan or to a Roth
Data and Policy Issues, by
IRA (so-called mega back-door Roths).
Elizabeth A. Myers.
This provision would prohibit (1) all taxpayers from

CRS Report R43439,
converting after-tax savings in qualified plans and
Worker Participation in
nondeductible IRA funds to Roth IRAs and designated
Employer-Sponsored
Roth accounts after December 31, 2021; and (2) high-
Pensions: Data in Brief, by
income taxpayers from converting pretax savings in
Congressional Research Service

51

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
qualified plans or IRA savings attributable to deductible
John J. Topoleski and
contributions to Roth IRAs or designated Roth accounts
Elizabeth A. Myers.
after December 31, 2021.

CRS Insight IN11722,
For high-income taxpayers, as described above, rol overs
Data on Contributions to
could only be made from Roth plans (IRAs and employer
Individual Retirement
plans) after December 31, 2031.
Accounts (IRAs), by
This provision is identical or nearly identical to Section
Elizabeth A. Myers and
138311 of H.R. 5376, as passed in the House on
John J. Topoleski.
November 19, 2021.

CRS Insight IN11721,

Data on Retirement
Contributions to Defined
Contribution (DC) Plans,
by John J. Topoleski and
Elizabeth A. Myers.
Statute of
This provision would extend the statute of limitations

Limitations with
from three to six years for IRA noncompliance related to
Respect to IRA
valuation and prohibited transactions.
Noncompliance
This provision is identical or nearly identical to Section

138312 of H.R. 5376, as passed in the House on
Section 128312
November 19, 2021.
IRA Owners
Under the prohibited transaction rule, IRA owners cannot
Treated as
do business with disqualified persons (such as relatives
Disqualified Persons who own more than 50% of a business). This provision
for Purposes of
would clarify that disqualified persons include the owner
Prohibited
of the account, individuals who inherit the IRA, or
Transaction Rules
beneficiaries.

This provision is identical or nearly identical to Section
Section 128313
138313 of H.R. 5376, as passed in the House on
November 19, 2021.
Part 4—Funding the Internal Revenue Service and Improving Taxpayer Compliance
Enhancement of
This provision would provide the Internal Revenue
For background, see
Internal Revenue
Service (IRS) with additional appropriations directed

CRS In Focus IF11607,
Service Resources
toward taxpayer services ($3,181,500,000), enforcement
Internal Revenue Service

($45,637,400,000), operational support
Appropriations, FY2021,
($25,236,400,000), business systems modernization
Section 128401
by Gary Guenther.
($4,750,700,000), Treasury Inspector General for Tax
Administration ($403,000,000), Tax Court
($153,000,000), Treasury’s Office of Tax Policy
($104,533,803), and Treasury Departmental Offices
($50,000,000) to be available through the end of FY2031.
The IRS would be required to design a multiyear
operations plan on the use of these funds and provide
Congress with quarterly updates on the use of the
additional funding. The IRS would also be appropriated
$15,000,000 to study the feasibility of a free IRS-run
direct file system.
This provision is a modification of Section 138401 of H.R.
5376, as passed in the House on November 19, 2021.
Congressional Research Service

52

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Application of
This provision would make payments from third-party
For background, see
Backup Withholding networks (such as some electronic payment processors,

CRS In Focus IF11910,
with Respect to
some "gig economy" platforms, and some cryptocurrency
Cryptocurrency Transfers
Third-Party
payment processors) subject to backup withholding. Not
and Data Collection, by
Network
all taxpayers would be subject to backup withholding on
Mark P. Keightley and
Transactions
these transactions. Only taxpayers who meet a
Andrew P. Scott.

requirement in Section 3406(a)(1) would have backup
withholding from their payments. Generally, this happens

CRS In Focus IF11896,
Section 128402
when the taxpayer does not provide a tax identification
Tax Treatment of Gig
number (such as a Social Security number) to the
Economy Workers, by
network or if the taxpayer is subject to backup
Anthony A. Cil uffo.
withholding due to a previous underreporting penalty.
Payments typically may be subject to backup withholding if
the aggregate payments from the third-party network to
the taxpayer are equal to or greater than $600 in a year.
This provision is identical or nearly identical to Section
138402 of H.R. 5376, as passed in the House on
November 19, 2021.
Modification of
Under current law, generally no penalty or addition to tax
Procedural
under the IRC can be assessed unless the initial
Requirements
determination of such assessment is personally approved
Relating to
(in writing) by the immediate supervisor of the IRS
Assessment of
employee making such determination. Exceptions to
Penalties
supervisory preapproval apply, including for

penalties/additions to tax automatically calculated through
electronic means and associated with failure to file or pay
Section 128403
taxes.
This provision would repeal this requirement for
supervisory preapproval effective for penalties/additions
to tax assessed after December 31, 2000.
The provision would enact a new requirement that each
supervisor certify on a quarterly basis whether employees
have fol owed procedural requirements with respect to
issuing notices of penalties to taxpayers. This provision
would apply to notices of penalties issued after the date of
enactment.
This provision is identical or nearly identical to Section
138403 of H.R. 5376, as passed in the House on
November 19, 2021.
Part 5—Other Provisions

Modifications to
The American Rescue Plan Act of 2021 (ARPA; P.L. 117-

Limitation on
2) included expansion of the Section 162(m) limit on
Deduction of
excessive employee compensation, effective after
Excessive Employee
December 31, 2026, denying deduction of compensation
Remuneration
in excess of $1 mil ion to certain highly paid employees,

plus the CEO or CFO, at publicly traded companies.
Under the ARPA expansion, up to 10 individuals may be
Section 128501
covered under Section 162(m). This provision would
modify the definition of employee remuneration to
include performance-based compensation, commissions,
post-termination compensation, and beneficiary payments,
whether or not the compensation is paid by the
corporation.
Congressional Research Service

53

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
This provision is identical or nearly identical to Section
138501 of H.R. 5376, as passed in the House on
November 19, 2021.
Extension of Tax to
The black lung excise tax (BLET) is imposed on sales or
For background, see
Fund Black Lung
use of domestically mined coal. The tax is designed to

CRS Report R45261, The
Disability Trust
support the Black Lung Disability Trust Fund for domestic
Black Lung Program, the
Fund
miners. Currently, through 2021, coal from underground
Black Lung Disability Trust

mines is taxed at a rate of $1.10 per ton and coal from
Fund, and the Excise Tax
surface mines is taxed at 55 cents per ton, with the tax
Section 128502
on Coal: Background and
for both types of coal being no more than 4.4% of the sale
Policy Options, by Scott
price. Effective January 1, 2022, the tax on underground-
D. Szymendera and
mined coal wil be the lesser of (1) 50 cents per ton, or
Mol y F. Sherlock.
(2) 2% of the sale price. The tax on surface-mined coal
wil be the lesser of (1) 25 cents per ton, or (2) 2% of the
sales price. This provision would extend the higher excise
tax rates through December 31, 2025.
This provision is identical or nearly identical to Section
138502 of H.R. 5376, as passed in the House on
November 19, 2021.
Prohibited
DISCs (Domestic International Sales Corporations) and

Transactions
FSCs (Foreign Sales Corporations) were firms with
Relating to Holding
export benefits, and these benefits were repealed going
DISC or FSC in
forward. This provision would disallow an interest in a
Individual
DISC or FSC at the direction of the individual that
Retirement
receives a payment or commission from an entity owned
Account
by the individual from being held in that individual’s IRA.

Constructive ownership rules require a 50% ownership,
which is reduced to 10% for this purpose.
Section 128503
This provision is identical or nearly identical to Section
138503 of H.R. 5376, as passed in the House on
November 19, 2021.
Clarification of
DISCS and FSCs were firms with export benefits, and

Treatment of DISC
these benefits were repealed going forward. This
Gains and
provision clarifies that the sale or exchange of, or
Distributions of
distributions to a foreign person, would be treated as
Certain Foreign
effectively connected income from a trade or business in
Shareholders
the United States, subjecting them to U.S. tax.

This provision is identical or nearly identical to Section
Section 128504
138504 of H.R. 5376, as passed in the House on
November 19, 2021.
Treatment of
Under current law, sound recording production costs are
For background, see
Certain Qualified
not deducted immediately, but are deducted over time

CRS Report RL31852,
Sound Recording
under the income forecast method. Television and theater
The Section 179 and
Productions
productions have tax benefits that allow them to expense
Section 168(k) Expensing

(deduct immediately) up to $15 mil ion. This provision is
Allowances: Current Law
set to expire after 2025. Production costs of qualified film,
Section 128505
and Economic Effects, by
television, and live theatrical productions are also eligible
Gary Guenther.
for bonus depreciation. Bonus depreciation allows costs
to be deducted immediately. Bonus depreciation is

CRS Report R46800,
currently 100%, but it is scheduled to be phased out over
Temporary Business-
five years starting in 2023, and wil no longer be available
Related Tax Provisions
in 2027 and after.
Expiring 2021-2027 and
Business “Tax Extenders”,
This provision would allow for the expensing of sound
coordinated by Jane G.
recording production costs, up to $150,000. Sound
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
recording would also be made eligible for bonus
Gravelle and Mol y F.
depreciation.
Sherlock.
This provision would expire after 2025.

This provision is identical or nearly identical to Section
138505 of H.R. 5376, as passed in the House on
November 19, 2021.
Payment to Certain
This provision would modify the existing mechanism for

Individuals Who
refunding taxes paid by consumers of diesel fuel and
Dye Fuel
kerosene, which had already been taxed, who use the fuel

for nontaxable purposes. This provision would specifically
exempt off-highway business uses (such as certain farming
Section 128506
equipment), all trains, school buses, and qualified local
buses.
This provision is identical or nearly identical to Section
138506 of H.R. 5376, as passed in the House on
November 19, 2021.
Treatment of
Passive foreign investment companies (PFICS) are foreign-

Financial Guaranty
incorporated firms that have at least 75% of earnings in
Insurance
passive investments or at least 50% of assets that earn
Companies as
dividends, interest, or capital gains (for example, a mutual
Qualifying Insurance fund or hedge fund). These firms are often located in tax
Corporations under havens with little or no corporate tax. Distributions from
Passive Foreign
a PFIC are taxed at the highest tax rate plus an interest
Investment
charge. Passive income does not include income of life
Company Rules
insurance companies if insurance liabilities constitute 25%

of their assets. This provision would allow financial
guaranty insurance companies to include unearned
Section 128507
premium (advanced premiums col ected on policies that
may be subject to return) reserves in their insurance
liabilities.
This provision would apply to tax years beginning after
December 31, 2017.
This provision is identical or nearly identical to Section
138507 of H.R. 5376, as passed in the House on
November 19, 2021.
Extension of Period
Under current law, taxpayers file their tax return using
For background, see
of Limitation for
the applicable tax filing status. Married individuals

CRS Report R43157, The
Certain Legally
generally must file using one of the married tax filing
Federal Tax Treatment of
Married Couples
statuses: either jointly (married filing jointly) or separately
Married Same-Sex

(married filing separately). Unmarried individuals generally
Couples, by Margot L.
must use one of the unmarried tax filing statues: either
Section 128508
Crandall-Hol ick, Mol y
single if they have no dependents or as a head of
F. Sherlock, and Erika K.
household if they have at least one dependent. Tax filing
Lunder.
status affects a variety of tax provisions including tax
rates, as well as eligibility for and the amount of a variety
of tax benefits. For many (although not all) married
couples, filing their taxes jointly reduces their tax liability,
in comparison to their combined liabilities from
unmarried tax filing statuses (i.e., marriage bonuses).
Prior to the Supreme Court’s decision in United States v.
Windsor, Section 3 of the Defense of Marriage Act
(DOMA) prohibited the IRS from recognizing same-sex
marriages. Hence, same-sex couples could not file as
married filing jointly (or separately). In Windsor, the
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55

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Supreme Court held that Section 3 of DOMA was
unconstitutional. Section 3 had required that, for
purposes of federal enactments, marriage be defined as
the union of one man and one woman and the word
spouse be defined as someone of the opposite sex who is
a husband or wife. As a result of the Windsor decision, on
August 29, 2013, the IRS ruled that all legal same-sex
marriages would be recognized for federal tax purposes
under IRS Revenue Ruling 2013-17.
Before the 2013 IRS ruling, all same-sex married couples
were required to file their federal income tax returns as
unmarried individuals. However, the IRS made clear that
taxpayers who were in same-sex marriages for one or
more open prior tax years could file amended returns to
change their filing status to that of a married couple. At
the time of the 2013 IRS ruling, this meant that amended
returns could be filed for 2010, 2011, and 2012. Same-sex
taxpayers lawful y married under state law before 2010
could not claim the benefits of federal recognition of
same-sex marriage for pre-2010 tax years.
This provision would provide lawful y married same-sex
couples with the option to file amended returns for
credits and refunds related to a change in marital status
back to their year of marriage (which could be as early as
2004).
This provision is identical or nearly identical to Section
138508 of H.R. 5376, as passed in the House on
November 19, 2021.
Allowance of
This provision would allow an above-the-line deduction
For background, see
Deduction for
for up to $250 in dues paid to a labor organization

CRS Report RL30110,
Certain Expenses of described in Section 501(c)(5). Above-the-line deductions
Federal Individual Income
the Trade or
are available to eligible taxpayers irrespective of whether
Tax Terms: An
Business of Being an they claim the standard deduction or itemize their
Explanation, by Mark P.
Employee
deductions. This provision would apply in taxable years
Keightley.

2022 through 2025.
Section 128509
This provision is identical or nearly identical to Section
138514 of H.R. 5376, as passed in the House on
November 19, 2021.
Temporary Increase Under current law, employers are allowed to claim a tax
For background, see
in Employer-
credit equal to 25% of qualified child care expenditures

CRS Committee Print
Provided Child
plus 10% of qualified child care resource and referral
CP10004, Tax
Care Credit
expenditures. The maximum total credit that may be
Expenditures:

claimed by a taxpayer cannot exceed $150,000 per year.
Compendium of
The credit is reduced by the amount of any tax deduction
Section 128510
Background Material on
claimed for the same expenditures. Any credit claimed for
Individual Provisions — A
acquiring, constructing, rehabilitating, or expanding
Committee Print Prepared
property is subject to recapture if the facility ceases to
for the Senate Committee
operate as a qualified child care facility, or for certain
on the Budget, 2020, by
ownership transfers within the first 10 years. Qualified
Jane G. Gravelle et al.
child care expenditures include the cost of acquiring,
(pp. 781-783).
constructing, rehabilitating, or expanding property used
for a qualified child care facility; costs for the operation of

the facility (including training costs and certain
compensation for employees, and scholarship programs);
and costs for contracting with a qualified child care facility
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Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
to provide child care. A qualified child care facility must
have child care as its principal purpose and must meet all
applicable state and local laws and regulations. A facility
operated by a taxpayer is not a qualified child care facility
unless, in addition to these requirements, the facility is
open to all employees and, if qualified child care is the
principal trade or business of the taxpayer, at least 30% of
the enrol ees at the facility are dependents of employees
of the taxpayer. Qualified child care resource and referral
expenditures include amounts paid or incurred under a
contract to provide child care resource and referral
services to an employee of the taxpayer. Use of a qualified
child care facility and use of child care resource and
referral services cannot discriminate in favor of highly paid
employees.
This provision would temporarily modify several
parameters of this credit. First, the credit rate for
qualified child care expenditures would increase from 25%
to 50%. Second, the overall credit limitation would
increase from $150,000 to $500,000. Third, the amount
of expenses that could be taken into account as qualified
child care resource and referral expenditures would be
limited to $1.5 mil ion per year. These three temporary
changes would apply beginning in 2022 through 2025.
This provision is identical or nearly identical to Section
138515 of H.R. 5376, as passed in the House on
November 19, 2021.
Payrol Credit for
This provision would create a refundable credit against

Compensation of
the Medicare Hospital Insurance tax for local news
Local News
journalist employers for a portion of the wages paid to
Journalists
local news journalists.

Employers would be able to claim a credit against the
Section 128511
Medicare Hospital Insurance tax paid on the wages of
local news journalists who spend an average of 30 hours a
week on local news services during a calendar quarter and
reside within 50 miles of the local community served by
the employer.
The wages for each journalist considered for the credit
may not exceed $12,500 per quarter. The credit is equal
to 50% of wages paid to each journalist in the first year of
the credit. The credit is then 30% for years two through
five. The credit expires after the fifth year.
To qualify, employers must either be an eligible local news
organization or a qualifying broadcast station. Both types
must disclose their ownership to the public in ways
determined by the Treasury Secretary. Neither type of
employer can be a 501(c)(4) tax-exempt organization or a
527 political organization, nor may they receive more
than 50% of their gross receipts from 501(c)(4) or 527
organizations.
Local news organizations must publish at least one
qualifying publication per quarter. To qualify, a publication
must be primarily to provide the local community with
local news, be covered by media liability insurance, have
been published each of the four quarters before the
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57

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
current quarter, and not have received services from
more than 1,500 people during the quarter. The
publication must be primarily distributed within the
metropolitan or micropolitan area that the local news
organization serves.
Broadcast stations must own or operate a broadcast
station that serves the local community, which it is
licensed to serve by the Federal Communications
Commission (FCC). The station’s services cannot exceed
those boundaries.
Employers would only be able to consider up to 1,500
workers for the credit. The U.S. government, state or
local governments, or any agencies of those governments
do not qualify, with the exception of public broadcasting
entities. The provision would also prevent employers
from getting “double benefits” from this and other payrol
tax credits.
This provision is identical or nearly identical to Section
138516 of H.R. 5376, as passed in the House on
November 19, 2021.
Above-the-Line
This provision would create a new temporary above-the-

Deduction for
line deduction for employee uniforms. The amount that
Employee Uniforms
could be deducted would equal the cost of the uniform,
up to $250 per taxpayer. Uniform costs eligible for the

deduction would be those for uniforms required as a
Section 128512
condition of employment and not suitable for everyday
wear. This provision would apply beginning in 2022
through 2024.
This provision is identical or nearly identical to Section
138517 of H.R. 5376, as passed in the House on
November 19, 2021.
Expenses in
This provision allows plaintiffs’ attorneys to deduct out-

Contingency Fee
of-pocket costs when they are incurred rather than
Cases
waiting for the conclusion of the litigation. Any contingent

payment wil be included in income when received.
Section 128513
This provision is identical or nearly identical to Section
138518 of H.R. 5376, as passed in the House on
November 19, 2021.
Increase in
Small businesses that have gross receipts of less than $5
For background, see
Research Credit
mil ion and no gross receipts in the previous five years

CRS Report RL31181,
Against Payrol Tax
may take up to $250,000 of research and experimentation
Research Tax Credit:
for Small Business
credits against payrol taxes. This provision would double
Current Law and Policy

that amount.
Issues for the 114th
Section 128514
This provision is identical or nearly identical to Section
Congress, by Gary
138519 of H.R. 5376, as passed in the House on
Guenther.
November 19, 2021.
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58

Senate Finance Committee Tax Provisions in the Build Back Better Act

Section Title and
Number
Description
CRS Resources
Termination of
Through 2025, employers can claim a tax credit of up to
For background, see
Employer Credit
25% of wages paid by employers providing paid leave to

CRS Report R46800,
for Paid Family and
employees under the Family and Medical Leave Act of
Temporary Business-
Medical Leave
1993 (FMLA; P.L. 103-3). The credit can only be claimed
Related Tax Provisions

for paid family and medical leave provided to certain
Expiring 2021-2027 and
employees with incomes below a fixed threshold (for
Section 128515
Business “Tax Extenders”,
credits claimed in 2021, employee compensation in 2020
coordinated by Jane G.
cannot have exceeded $78,000). This provision would
Gravelle and Mol y F.
accelerate the termination of this tax credit by two years,
Sherlock.
to December 31, 2023.

This provision is identical or nearly identical to Section

CRS In Focus IF11141,
Employer Tax Credit for
138521 of H.R. 5376, as passed in the House on
Paid Family and Medical
November 19, 2021.
Leave, by Mol y F.
Sherlock.

CRS Report R46390,
Paid Family and Medical
Leave: Current Policy and
Legislative Proposals in the
116th Congress, by Mol y
F. Sherlock, Barry F.
Huston, and Sarah A.
Donovan.
Source: CRS analysis of the Senate Finance Committee’s updated text for Title XII-Committee on Finance in
the Build Back Better Act, as posted on the Senate Finance Committee’s website on December 11, 2021, at
https://www.finance.senate.gov/chairmans-news/finance-committee-releases-updated-build-back-better-text.
Notes: Provisions are effective in 2022 unless otherwise noted. The changes that would be made by the
provisions are permanent, unless otherwise noted. Within the description, “Section” citations refer to the
section within the Internal Revenue Code (IRC), 26 U.S.C., unless otherwise noted.

Author Information

Molly F. Sherlock, Coordinator
Jane G. Gravelle
Specialist in Public Finance
Senior Specialist in Economic Policy

Anthony A. Cilluffo
Mark P. Keightley
Analyst in Public Finance
Specialist in Economics

Margot L. Crandall-Hollick
Donald J. Marples
Specialist in Public Finance
Specialist in Public Finance

Grant A. Driessen

Specialist in Public Finance

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Senate Finance Committee Tax Provisions in the Build Back Better Act

Acknowledgments
Bernadette Fernandez, Specialist in Health Care Financing, contributed to content related to provisions in
Subtitle G, Part 3, “Expanding Access to Health Coverage and Lowering Costs.”

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
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under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
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