Washington Watch: Key Elements of the Economic Stimulus Legislation
January 30, 2009
With a new Democratic Administration and expanded Democratic majorities in Congress taking office in the midst of the worst financial crisis since the Great Depression, McDermott clients across a range of industries must pay close attention to executive and legislative actions that can dramatically affect their interests. Key decisions affecting the business community are being made every day in Congress and the highest reaches of our federal government – and that will continue for the foreseeable future.
McDermott’s Regulation and Government Affairs Department is strongly suited to provide you and your clients with important insight and intelligence not only on what the federal government is doing today, but also on what is being contemplated by policymakers down the road. This Washington Watch is our initial attempt to provide you with some of that insight.
Current Status of the Economic Stimulus
The most important issue confronting policymakers today is the economic stimulus legislation.
- H.R. 1 (American Recovery and Reconstruction Act of 2009) passed the House of Representatives on Wednesday, January 28, 2009, by a vote of 244 to 188.
- The Senate will take up similar legislation possibly on Friday, but more likely next week.
- The legislation is likely to be enacted and signed into law by President Obama prior to President’s Day
(Feb. 16).
Key Elements of Economic Stimulus Legislation
The legislation working its way through Congress has a number of key provisions that may affect our clients.
Tax Provisions
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The House and Senate business tax relief proposals are similar, but with several differences that will need to
be ironed out. -
Three provisions form the core of the business tax relief package: (i) bonus depreciation for property acquired during 2009; (ii) temporary increase in limit on small-business expensing of certain depreciable assets;and (iii) expanded net operating loss carryback period for losses incurred in 2008 and 2009.
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The legislation also 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 overall stimulus package, the business tax relief provisions are relatively modest, although the possibility remains that further business tax relief could be added to the package on the Senate floor or in a House-Senate conference.
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White House Budget Director Peter Orszag stated Tuesday that "the President is committed to paying for any of the temporary tax cuts included in the recovery plan that he would like to make permanent and will detail the manner of doing so in his budget submission.” This may suggest an approach on the part of the Administration not only to de-emphasize business tax relief in the stimulus package, but also to use President Obama's first budget submission as an opportunity to introduce a range of “loophole closing” proposals in the business tax area as part of an effort to restore some measure of fiscal discipline to the process in the wake of the stimulus package.
Health Provisions
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H.R. 1 contains significant spending in the health sector.
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Nearly $100 billion would flow to state governments to buttress the Medicaid program.
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Approximately $20 billion is included to spur the adoption of health information technology by hospitals and physicians, who could receive considerable incentive monies. For example, eligible physicians could receive $40,000 - $65,000 for being meaningful users of health information technology while eligible hospitals could receive a $2 million base payment with additional monies flowing based on discharges and other factors.
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The bill would expand the scope of, and make substantive changes to, the current HIPAA rules governing
the privacy and security of electronic medical records. -
To assist people who lose their jobs and are uninsured, the bill would expand Medicaid to temporarily cover certain jobless people and it puts aside $30 billion to assist with the cost of continued COBRA coverage.
Energy-Related Provisions
The House bill provides for the long-term extension and modification of the renewable energy production tax credit, extending the placed-in-service date for wind facilities for three years. The bill also would extend the placed-in-service date for three years (through December 31, 2013) for certain other qualifying facilities: closed-loop biomass; open-loop biomass; geothermal; small irrigation; hydropower; landfill gas; waste-to-energy; and marine renewable facilities. Additionally, the bill:
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Provides a temporary election to claim the investment tax credit in lieu of the production tax credit.
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Removes the dollar limitations on certain energy credits.
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Authorizes an additional $1.6 billion of new clean renewable energy bonds to finance facilities that generate electricity from the following resources: wind; closed-loop biomass; open-loop biomass; geothermal;
small irrigation; hydropower; landfill gas; marine renewable; and trash combustion facilities. -
Provides for an enhanced 20% R&D credit in taxable years beginning in 2009 and 2010 for research expenditures incurred in the fields of fuel cells, battery technology, renewable energy, energy conservation technology, efficient transmission and distribution of electricity, and carbon capture and sequestration.
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Increases federal matching grants for smart grid technology from 20% to 50%.
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Creates a temporary loan guarantee authority to provide loan guarantees for commercial renewable energy systems and electric power ransmission systems that begin construction by September 30, 2011. The Appropriations bill is making available $8 billion for use by this program.
Infrastructure Provisions
The House bill appropriates billions of dollars for infrastructure projects, including:
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$30 billion for highway construction.
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$31 billion to modernize federal and other public infrastructure with investments intended to lead to long-term energy cost savings.
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$19 billion for clean water, flood control, and environmental restoration investments.
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$10 billion for transit and rail to reduce traffic congestion and gas consumption.
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$32 billion to transform the nation’s energy transmission, distribution, and production systems by allowing
for a smarter and better grid and focusing investment in renewable technology. -
$16 billion to repair public housing and make key energy efficiency retrofits.
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$6 billion to expand broadband internet access so businesses in rural and other underserved areas can link
up to the global economy. -
The broadband package authorizes the National Telecommunications Information Administration (NTIA),
a part of the Commerce Department, to distribute $2.825 billion for wireless and wireline broadband through
a grant program.
