Stimulus Bill Summary

The Rural Housing Insurance Fund will provide these loans to low-income individuals and households purchasing, building, repairing or renovating homes in rural communities.

Corporate Tax

Paul Jones - paul.jones@icemiller.com

Net Operating Losses

Extends carryback period for net operating losses from 2 years to up to 5 years for certain businesses

Carryback period extended to 5 years for businesses with receipts under $15 million over the 3 years prior to the loss.

Expense vs. Depreciate Equipment

Extends financial limits for code section 179 (small business) expensing

2008 limits of $250,000 and $800,000 extended into 2009. Previously these limits were scheduled to revert back to $125,000 and $500,000 in 2009.

Depreciation Provision

Bonus depreciation to property placed in service in 2009 will be allowed. Some long-lived property will qualify

Certain property placed in service in 2008 and 2009 will qualify for 50% of the depreciation to be recovered immediately, with the remaining being depreciated under the standard rules.

AMT and R&D Credits

Extends the AMT and R&D credit carryovers

Taxpayers can elect to "cash out" (in the form of refundable credit) in 2008 and/or 2009. Limitations will be separately applied.

Cancellation of Indebtedness Income

Recognition of income spread over 5 years

Under certain circumstances, taxpayers can elect to defer debt re-acquisitions in 2009 and 2010 until 2014, and then recognize income ratably over a 5 year period.

C Corp. to S Corp. Gains

Shortens the built-in gains tax holding period

Holding period for assets subject to built-in gains tax will be 7 years, instead of 10 years. Applies to S Corporations that recognize built-in gains in 2009 and 2010.

Tax Credit for Manufacturing Facilities (Advanced Energy Property/Cleantech)

Adds new 30% investment tax credit

Companies that manufacture advanced energy property, which includes technology for the production of renewable energy, energy storage, energy conservation, efficient transmission and distribution of electricity, and carbon capture or sequestration are eligible for the credit. Generally applies to qualified investments in tangible personal property (and not buildings). Application and allocation process is required with the Treasury Department for the $2.3 billion in credits that have been authorized.

Read a brief article discussing the impact of this specific change.

Renewable Electricity Production Tax Credit

Extends placed in service date

Extends placed in service date to December 31, 2012 for wind facilities, and to December 31, 2013 for facilities producing electricity from solar energy, biomass, geothermal energy, municipal solid waste, small irrigation power, and qualified hydropower.

Investment Tax Credit

Allows 30% investment tax credit in lieu of production tax credit

Allows temporary election to claim 30% investment credit in lieu of the production tax credit. Wind facilities formerly qualified for only the production tax credit which is claimed over 10 years. Investors in wind facilities that are placed in service during 2009 through 2012 can now elect to realize tax benefits sooner as the investment tax credit is claimed over a shorter period of time.

New Market Tax Credits

Increases the level of funding available

New market tax credits are available to investors in corporations with the primary mission of serving low income communities. Investors who submitted allocation applications in 2008 and did not receive an allocation, may receive the allocation requested in 2009.

Education

Jane Herndon - jane.herndon@icemiller.com

Achievement Gaps

Funding of $13 billion

Earmarked for state programs designed to close achievement gaps.

Special Education Programs

Funding of $12.2 billion

Allocated to state programs for special education.

Financial Aid

Over $16 billion of additional funding

Federal funds to be used for financial aid packages for college students and federal grants.

Tax Credit Bonds

Up to $9.9 billion in bonds

Funding to be used for land acquisition for, or construction, rehabilitation or repair of, public school facilities.

Qualified Zone Academy Bonds

$1 billion of additional funding

Will be available to state and local authorities for public schools located in empowerment zones designed to cooperate with businesses to increase graduation and employment rates.

Employee Benefits

Mary Beth Braitman - marybeth.braitman@icemiller.com and Melissa Proffitt Reese - melissa.reese@icemiller.com

COBRA Premium

Provides a nine-month premium subsidy

The ARRA provides a 9-month COBRA premium subsidy for individuals and their dependents who are entitled to COBRA as a result of an employee being involuntarily terminated from a job between September 1, 2008, and December 31, 2009. The subsidy phases out at income levels between $125,000 and $145,000 for taxpayers, or between $250,000 and $290,000 for joint filers. The subsidy is equal to 65% of the normal COBRA premium charged to COBRA recipients, and is funded by the federal government. However, employers have to "front" the subsidy. In return, employers may claim a dollar-for-dollar credit against their payroll taxes to be reimbursed for the subsidy. Employers must identify eligible individuals and have new notice obligations related to this subsidy.

Read an alert regarding the COBRA provision.

Employment

Michael Tooley - michael.tooley@icemiller.com

Whistleblower Protection

Non-federal employees

Protects non-federal employees of employers receiving funding under the stimulus bill.

Prevailing Wage Rate Guidelines

Davis-Bacon Act's prevailing wage rate guidelines

This provision requires that certain recipients of funds under the stimulus bill observe these guidelines.

Restrictions on Executive Pay

Companies receiving TARP funds

Requires that compensation of top executives of public companies be restricted if they received TARP funds.

H-1B Workers

Companies receiving TARP funds

Places additional obligations on TARP recipients hiring H-1B workers.

Immigration Violations

Small business loans

Prohibits the Small Business Administration from making certain guaranteed loans available to small businesses with a record of immigration violations.

Pre-Tax Transit Exclusion

Increases allowable amounts

Employees can exclude from their income up to $230 per month for parking and up to $120 per month for transit.

Work Opportunity Tax Credit

Tax credit for hiring certain classes of workers

Expands the credit available to employers for hiring unemployed veterans discharged within 5 years of their hire and unemployed youths between 16 and 24 years of age not in school and lacking a sufficient number of basic skills. The credit can be applied in 2009 and 2010.

COBRA Premium Subsidies

65% premium subsidy

Employees who are involuntarily terminated from employment between September 1, 2008 and December 31, 2009, will be eligible. Employers and insurers would initially pay the subsidy and receive a credit against their federal payroll taxes.

Health and Life Sciences

Kevin Woodhouse - kevin.woodhouse@icemiller.com

Medicaid Coverage and COBRA

$112 billion in additional funding

Will provide temporary increases in Federal Medicaid contributions for states, including additional DSH allocations. Also provides a subsidy for COBRA benefits for recently unemployed individuals.

National Institute of Health (NIH) and Department of Health and Human Services

$15 billion in additional funding

This funding is for construction projects, acquiring scientific equipment, encouraging education and workforce growth, and conducting medical research.

Health Information Technology

$19 billion of incentive payments

This funding is intended to support the Health Information Technology for Economic and Clinical Health Act for the development of health information technology and to provide monetary incentives to spur the adoption of electronic health records. It also revises existing health information privacy protections in significant ways.

National Science Foundation

$3 billion in additional funding

Earmarked to support research and construction projects.

Agency for Healthcare Research and Quality

$700 million in additional funding

To be used for comparative effectiveness research.

Defense Health Program

$400 million in additional funding

To be used to improve and repair military medical centers.

Homeland Security

Scott Snively - scott.snively@icmiller.com

Airport Security

$1 billion in funding

This funding is to be used to improve airport baggage and checkpoint explosive detection systems and equipment.

Border Security

$100 million in funding

To be used for the construction of border security fencing and technology.

Port, Rail and Transit Security

$300 million in funding

For local and state programs including Amtrak.

Firefighter Assistance Grants

$210 million in funding

To provide upgrades to state and local fire stations. The cost-share provisions in the Federal Fire Prevention and Control Act are also waived for 2009 and 2010.

Municipal Finance

Read a brief article discussing the impact on municipal finance.

James Snyder - james.snyder@icemiller.com and Philip Genetos - philip.genetos@icemiller.com

Bank Qualified Bonds-Interest Expense Deduction

Bonds issued in 2009 and 2010

Issuers may issue up to $30 million in bank qualified bonds (prior limit was $10 million.) The stimulus bill deems the 501(c)(3) borrower as the issuer for purposes of determining the $30 million threshold. Private activity bonds and governmental bonds are eligible to be counted as bank qualified under new de minimus rule. Refunding opportunities exist with respect to many governmental or Section 501(c)(3) obligations not originally issued bank qualified.

Alternative Minimum Tax

Tax-exempt interest.

Interest earned on tax-exempt private activity bonds is no longer an item of tax preference. The interest on any tax-exempt bond is not included in adjusted gross earnings in determining minimum taxable income of corporations. Refunding opportunities exist with respect to tax-exempt private activity bonds issued between 2004 and 2008.

Manufacturing Bonds

Financing manufacturing facilities

For new bonds issued, the requirements regarding the percentage of proceeds (currently 25%) that can be used for facilities have been relaxed so that the restrictions no longer apply to manufacturing facilities that are functionally related and subordinate to the manufacturing facility or located at the same site. The definition of manufacturing facilities is also expanded to include facilities used in the production of intangible property, such as patents, copyrights, formulas or similar items.

Build America Bonds

A new type of bond for state and local governments

State and local governments may elect to issue these bonds in lieu of tax-exempt government bonds. Under the program, bondholders would receive a credit tax equal to 35% of the taxable interest, or issuers may elect to receive such credit. The bonds must be issued prior to January 1, 2011.

Recovery Zone Economic Development Bonds

A new type of bond for recovery zones

These bonds may be issued for the purposes of capital expenditures for public infrastructure, constructing of public facilities and expenditures for job training and educational programs in areas defined by state and local governments as having significant poverty, unemployment, home-foreclosure rates or general distress. Under the Recovery Zone Economic Development Bonds program, the federal government will provide issuers with an advance tax credit equal to 45% of the taxable interest on the bonds. The bonds have a national limitation of $10 billion to be allocated among states and within states on the basis of 2008 employment decline. These bonds must be issued prior to January 1, 2011.

Recovery Zone Facility Tax-Exempt Bonds

A new type of bond for facility financing in recovery zones

These bonds must be used (95% or more of the net proceeds) to construct, reconstruct, renovate, or acquire moot projects. All property must be in the recovery zone to qualify. A national limitation of $15 billion is to be allocated among the states and within the states on the basis of 2008 employment decline.

Qualified School Construction Tax Credit Bonds

State and local governments may issue tax credit bonds to fund construction and rehabilitation of public school facilities.

The national limitation is $11 billion for 2009 and 2010. 60% of this will be allocated to the states in proportion to the respective amount of local educational grants received by each state under the Elementary and Secondary Education Act. The remaining 40% will be allocated to the largest local educational agencies in the nation.

Public Housing

Public Housing Capital Fund

$4 billion of funding set aside by Congress

To be used for capital and management activities for public housing agencies. Specifically it is meant to address the $32 billion shortfall by public housing agencies.

Community Development Fund

$1 billion in funding

This funding is earmarked to improve energy efficiency in aging developments.

Section 8 Rental Assistance

$2.25 billion to assist owners

This funding will be used for investments in low-income housing tax credit projects.

Neighborhood Stabilization Program

$2 billion in appropriations

To assist with the redevelopment of abandoned and foreclosed homes as authorized under the Housing and Economic Recovery Act of 2008.

Homeless Prevention

$1.5 billion in funding

This funding will be sent to state and local governments and private non-profit organizations for rapid re-housing activities for the homeless.

Housing Stability and Green Retrofits

$2.25 billion in funding

$2 billion is to be used for assisting owners of properties receiving project-based assistance pursuant to the Housing Act of 1959, the Cranston-Gonzalez National Affordable Housing Act or the United States Housing Act of 1937. $250 million is for grants or loans for energy retrofit and green investments in assisted housing.