Expect to see increased scrutiny on business valuations for tax purposes as a result of the Inflation Reduction Act of 2022 (IRA). The new law provides additional funding for the Internal Revenue Service to beef up its enforcement efforts. Part of the agency’s new efforts is its search for 14 new business valuation experts to join its ranks. Of course, estate and gift valuations will get caught up in the agency’s widening net, but so will other tax-related valuations, such as stock-based compensation (409A “cheap stock”), valuations for deductions of worthless stock, intangible property valuations for intercompany transactions, and more. Also, the IRA has provisions that will impact certain industries, such as the energy, pharma, and biotech sectors. McKinsey has a nice summary of the IRA and its provisions.
Extra: Chris Campbell (Kroll) will conduct a two-hour webinar on February 2, The Inflation Reduction Act—What Valuation Professionals Need to Know.
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