Washington Watch: President Obama Signs Stimulus Bill
February 17, 2009
Today, President Obama signed the $787 billion economic stimulus package(the American Recovery and Reinvestment Act of 2009) that passed the House of Representatives (246 to 183) and the Senate (60 to 38) on Friday. This legislation is an attempt to create or save millions of jobs through a massive federal investment in energy, transportation and infrastructure, education and health care projects. The legislation also includes significant changes to the tax code, as well as other provisions that could substantially affect the interest of your clients (e.g., new restrictions on executive compensation). This document highlights some of those important changes.
Tax Provisions
Three provisions form the core of the business tax relief package: (i) bonus depreciation for property acquired during 2009; (ii) temporary increase in the limit on small-business expensing of certain depreciable assets;
and (iii) expanded net operating loss carryback period for small businesses (gross receipts of $15 million or less). Earlier versions of the net operating loss carryback proposal would not have been limited to small businesses.
The conference agreement also provides for deferral of certain cancellation-of-indebtedness income generated by a taxpayer's repurchase of its own debt at a discount. In addition, the legislation prospectively repeals the recent IRS section 382 Notice, which had liberalized certain loss-utilization rules in the tax code in an effort to facilitate takeovers of troubled banks.
In light of the size of the overall stimulus package, the business tax relief provisions are quite modest. Indeed, the most noteworthy business tax developments relating to the package concern proposals that were not included, specifically, a renewal of the temporary repatriation benefit under Section 965 of the Internal Revenue Code, as well as a revenue-raising amendment by Sen. Dorgan to tax on a current basis income earned by foreign subsidiaries of U.S. companies from sales into the U.S. market.
Other tax provisions include:
- $20 billion in tax incentives for renewable energy and energy efficiency over the next 10 years.
- A three-year extension of the production tax credit (PTC) for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, waste-to-energy, and marine facilities (through 2013).
- Grants of up to 30 percent of the cost of building a new renewable energy facility to address current renewable energy credit market concerns.
- A tax credit for families that purchase plug-in hybrid vehicles of up to $7,500 to spur the next generation of American cars.
- A new manufacturing investment tax credit for investment in advanced energy facilities, such as facilities that manufacture components for the production of renewable energy, advanced battery technology, and other innovative next-generation green technologies.
Energy Funding
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Provides more than $30 billion for energy initiatives such as a new, smart power grid, advanced battery technology, and energy efficiency measures.
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Transforms the nation’s electricity systems through the Smart Grid Investment Program to modernize the electricity grid to make it more efficient and reliable.
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Supports U.S. development of advanced vehicle batteries and battery systems through loans and grants so that America can lead the world in transforming the way automobiles are powered.
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Provides $20 billion in tax incentives for renewable energy and energy efficiency over the next 10 years.
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Includes a three-year extension of the production tax credit (PTC) for electricity derived from wind (through 2012) and for electricity derived from biomass, geothermal, hydropower, landfill gas, waste-to-energy, and marine facilities (through 2013).
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Provides a tax credit for families that purchase plug-in hybrid vehicles of up to $7,500 to spur the next generation of American cars.
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Provides $5 billion to improve the energy efficiency of more than 1 million modest-income homes through weatherization.
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Provides more than $4 billion for increasing energy efficiency in federally-supported housing programs.
Science and Technology Funding
This legislation provides more than $16 billion for scientific research, including:
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$3 billion for the National Science Foundation, for basic research in fundamental science and engineering – which spurs discovery and innovation.
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$1.6 billion for the Department of Energy’s Office of Science, which funds research in such areas as climate science, biofuels, high-energy physics, nuclear physics and fusion energy sciences – areas crucial to our energy future.
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$400 million for the Advanced Research Project Agency-Energy (ARPA-E) to support high-risk, high-payoff research into energy sources and energy efficiency in collaboration with industry.
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$10 billion for NIH, including for expanding jobs in biomedical research to study diseases such as Alzheimer’s, Parkinson’s, cancer, and heart disease, and for improving NIH facilities.
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$7.2 billion for extending broadband services to underserved communities across the country, so that rural and inner-city businesses can compete with any company in the world.
Infrastructure – Roads, Bridges, Transit and Waterways
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Provides $27.5 billion for modernizing roads and bridges, requiring states to obligate at least half of the highway/bridge funding within 120 days.
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Provides $8.4 billion for investments in transit and $8 billion for investment in high-speed rail.
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Includes funds for new construction of commuter and light rail, modernizing existing transit systems, and purchasing buses and equipment to needed to increase public transportation and improve intermodal and transit facilities.
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Provides $19 billion for clean water, flood control, and environmental restoration investments.
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Provides billions to modernize federal and other public infrastructure with investments that lead to long-term energy cost savings, including about $4.2 billion to make improvements in DOD facilities, including housing
for troops and about $4.5 billion to make federal office buildings more energy-efficient.
Health Care Provisions
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Provides $87 billion to the states to buttress Medicaid programs.
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Includes $19 billion to encourage the use of health information technology by physicians and hospitals.
The incentive monies largely flow through Medicare and Medicaid. -
Rewrites significant portions of the HIPAA Privacy and Security Rules.
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Extends moratoria on certain Medicaid regulations and adds a new moratorium on Medicaid rules for hospital outpatient services at an approximate cost of $105 million.
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Temporarily applies Medicaid prompt pay requirements to nursing facilities and hospitals at an estimated cost of $680 million.
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Includes a temporary increase in Disproportionate Share Hospital (DSH) payments at a cost of $460 million.
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Includes $10 billion for the National Institutes of Health.
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Provides $1 billion for comparatives effectiveness research.
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Includes $1 billion for prevention and wellness programs.
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Blocks an FY09 Medicare payment reduction to teaching hospitals related to indirect medical education at a cost of $191 million.
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Averts cuts to FY09 Medicare Hospice payments at a cost of $134 million.
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Provides for health insurance assistance, including premium subsidies for COBRA continuation coverage for workers who lose their jobs, at a cost of $25 billion.
