American Recovery and Reinvestment Act Update
February 13, 2009
Today I voted for and the House of Representatives passed the American Recovery and Reinvestment Act.This legislation is the first crucial step in a concerted effort tocreate and save 3 to 4 million jobs, jumpstart our economy and begintransforming it with $478 billion in economic recovery tax cuts and$311 billion invested in targeted priorities.
This e-newsletter is very long and detailed because of the manyprovisions in the bill. As you read it, you will see that there areshort-term investments to address unemployment, healthcare help, andassistance to states in fiscal crisis. It also addresses creating jobsthrough critical sectors of public infrastructure, technology, science,and energy independence, all building blocks for America's future.
This package contains unprecedented accountability andtransparency measures to help ensure tax dollars are spent wisely andhelp restore confidence - another critical component of this recovery.There are no earmarks or pet projects whatsoever. In many cases fundsare distributed to existing initiatives with proven track records andwith tough accountability measures already in place. All announcementsof contract, grant competitions, awards, as well as formula grantallocations must be posted on a special website created by thePresident.
Below are the highlights of the legislation:
High Tech and Green Tech Provisions
- $7.2 billion for Broadband to increase broadbandaccess and usage in unserved and underserved areas of the nation, whichwill better position the U.S. for economic growth, innovation, and jobcreation.
- $11 billion for smart-grid related activities, including work to modernize the electric grid.
- $6.3 billion for energy efficiency and conservation grants.
- $2.5 billion for energy efficiency and renewable energy research.
- $2 billion in grant funding for the manufacturing of advanced batteries systems and components and vehicle batteries that are produced in the United States.
- $6 billion for new loan guarantees aimed at standard renewable projects such as wind or solar projects and for electricity transmission projects.
- $1 billion for other energy efficiency programs including alternative fuel trucks and buses, transportation charging infrastructure, and smart and energy efficient appliances.
- $19 billion, including $2 billion in discretionary fundsand $17 billion for investments and incentives through Medicare andMedicaid to ensure widespread adoption and use of interoperable healthinformation technology (IT). This provision will grow jobs inthe information technology sector, and will jumpstart efforts toincrease the use of health IT in doctors' offices, hospitals and othermedical facilities. This will reduce health care costs and improve thequality of health care for all Americans.
- Nationwide, $53.6 billion has been appropriated for the StateFiscal Stabilization Fund, including $39.5 billion to local schooldistricts using existing funding formulas which can be used forpreventing cutbacks and layoffs.
- The bill includes $13 billion in Title I money to be used for targeted grants from the Elementary and Secondary Education Act (ESEA),education finance incentive grants, school improvement grants, andeducation grants to help disadvantaged kids reach higher academicstandards.
- $12.2 billion will be used for increased funding for the Individuals with Disabilities Education Act (IDEA).It has been included to fund grants to schools to increase the federalshare of special education costs and prevent these mandatory costs fromforcing states to cut other areas of education.
- $15.6 billion is added to the maximum Pell Grant by $500. This aid will help 7 million students pursue postsecondary education.
- Head Start & Early Head Start programs are boosted by $2.1billion to allow an additional 124,000 children to participate in thisprogram, providing development, educational, health, nutritional,social and other activities that prepare children to succeed in school.
- $3.95 billion is provided for job training programs, including $1.2 billion to create up to one million summer jobs for youth.
- COBRA/ Medicaid Options for the Uninsured: Thelegislation contains two provisions intended to provide healthinsurance coverage to individuals who lose their jobs and aresubsequently uninsured.
The bill provides temporary subsidies for COBRA premiums so that peoplewho have lost their jobs can continue health care coverage and givesstate Medicaid programs a temporary option of covering one or more ofthe following groups of unemployed individuals without healthinsurance, and their dependents: Those receiving unemployment benefits,and those who have exhausted their unemployment benefits, those who arereceiving food stamps but who are not otherwise eligible for Medicaidand those in families with a gross income under 200% of the povertylevel.
State Medicaid Relief
Temporary Medicaid FMAP Increase: The legislation provides foradditional federal matching funds to help states maintain theirMedicaid programs in the face of recession-driven revenue declines andcaseload increases.
Temporary DSH Increase: A 2.5% increase in theDisproportionate Share Hospital adjustment for Fiscal Year 2009 willhelp hospitals who demonstrate more than 30% of their total netin-patient care revenues come from state and local governments forlow-income patients. For Fiscal Year 2010, states will get a 2.5%increase above FY09 increased levels.
Moratorium of Medicaid Regulations: Current law imposes amoratorium on six Medicaid regulations relating to cost limits onpublic providers, graduate medical education payments, provider taxes,rehabilitative services, targeted case management services, and schooladministration and transportation services. The bill extends thecurrent moratorium which expires March 31, 2009 to June 30, 2009.
Tax Cuts For Individuals
- Extension of AMT Relief for 2009: The bill wouldprovide more than 26 million families with tax relief in 2009 byextending AMT relief for nonrefundable personal credits and increasingthe AMT exemption amount to $70,950 for joint filers and $46,700 forindividuals.
- "Pay" Tax Credit: The bill would cut taxes formore than 95% of working families in the United States. For 2009 and2010, the bill would provide a refundable tax credit of up to $400 forworking individuals and $800 for working families. This tax creditwould be calculated at a rate of 6.2% of earned income, and would phaseout for taxpayers with adjusted gross income in excess of $75,000($150,000 for married couples filing jointly). Taxpayers can receivethis benefit through a reduction in the amount of income tax that iswithheld from their paychecks, or through claiming the credit on theirtax returns.
- Increase in Earned Income Tax Credit: The billwould temporarily increase the earned income tax credit for workingfamilies with three or more children. Under current law, workingfamilies with two or more children qualify for an earned income taxcredit equal to 40% of the family's first $12,570 of earned income.This credit is subject to a phase-out for working families withadjusted gross income in excess of $16,420 ($19,540 for married couplesfiling jointly). The bill would increase the earned income tax creditto 45% of the family's first $12,570 of earned income for families withthree or more children and would increase the beginning point of thephase-out range for all married couples filing a joint return(regardless of the number of children) by $1,880.
- Increase Eligibility for the Refundable Portion of the Child Tax Credit:The bill would increase the eligibility for the refundable child taxcredit in 2009 and 2010. For 2008, the child tax credit is refundableto the extent of 15% of the taxpayer's earned income in excess of$8,500. The bill would reduce this floor for 2009 and 2010 to $3,000.
- "American Opportunity" Education Tax Credit. Thebill would provide financial assistance for individuals seeking acollege education. For 2009 and 2010, the bill would provide taxpayerswith a new "American Opportunity" tax credit of up to $2,500 of thecost of tuition and related expenses paid during the taxable year.Under this new tax credit, taxpayers will receive a tax credit based on100% of the first $2,000 of tuition and related expenses (includingbooks) paid during the taxable year and 25% of the next $2,000 oftuition and related expenses paid during the taxable year. 40% of thecredit would be refundable. This tax credit will be subject to aphase-out for taxpayers with adjusted gross income in excess of $80,000($160,000 for married couples filing jointly).
- Computers as Qualified Education Expenses in 529 Education Plans:Section 529 Education Plans are tax-advantaged savings plans that coverall qualified education expenses, including tuition, room & board,mandatory fees and books. The bill provides that computers and computertechnology qualify as education expenses.
- Refundable First-time Home Buyer Credit: Lastyear, Congress provided taxpayers with a refundable tax credit that wasequivalent to an interest-free loan equal to 10% of the purchase of ahome (up to $7,500) by first-time home buyers. The provision applies tohomes purchased on or after April 9, 2008 and before July 1, 2009.Taxpayers receiving this tax credit are currently required to repay anyamount received under this provision back to the government over 15years in equal installments, or, if earlier, when the home is sold. Thecredit phases out for taxpayers with adjusted gross income in excess of$75,000 ($150,000 in the case of a joint return). The bill eliminatesthe repayment obligation for taxpayers that purchase homes afterJanuary 1, 2009, increases the maximum value of the credit to $8,000,and removes the prohibition on financing by mortgage revenue bonds, andextends the availability of the credit for homes purchased beforeDecember 1, 2009. The provision would retain the credit recapture ifthe house is sold within three years of purchase.
- Sales Tax Deduction for Vehicle Purchases: Thebill provides all taxpayers with a deduction for State and local salesand excise taxes paid on the purchase of new cars, light trucks,recreational vehicles, and motorcycles through 2009. This deduction issubject to a phase-out for taxpayers with adjusted gross income inexcess of $125,000 ($250,000 in the case of a joint return).
- Temporary Suspension of Taxation of Unemployment Benefits:Under current law, all federal unemployment benefits are subject totaxation. The average unemployment benefit is approximately $300 permonth. The proposal temporarily suspends federal income tax on thefirst $2,400 of unemployment benefits per recipient. Any unemploymentbenefits over $2,400 will be subject to federal income tax. Thisproposal is in effect for taxable year 2009.
- Extension of Emergency Unemployment Compensation:Through December 31, 2009, the bill continues the EmergencyUnemployment Compensation program, which provides up to 33 weeks ofextended unemployment benefits to workers exhausting their regularbenefits. It increases unemployment weekly benefits by an additional$25 through 2009.
Science and Energy Funding and Incentives
- Federal Building Energy Efficiency - $4.5 billion
- Fossil Energy Research and Development - $3.4 billion
- Weatherization Assistance Program - $5 billion
- National Aeronautics and Space Administration (NASA) - $1 billion
- National Science Foundation - $3 billion
- Science at the Department of Energy - $2 billion, including $400 million to Advanced Research Projects Agency-Energy (ARPA-E)
- National Oceanic and Atmospheric Association - $830 million
- National Institute of Standards and Technology - $580 million which includes the Technology Innovation Program
- and the Manufacturing Extension Partnership.
Energy Tax Credits:
Advanced Energy Investment Credit: Establishes a newmanufacturing investment tax credit for investment in advanced energyfacilities, such as facilities that manufacture components for theproduction of renewable energy, advanced battery technology, and otherinnovative next-generation green technologies.
Plug-in Hybrid Vehicles: Provides a tax credit forfamilies that purchase plug-in hybrid vehicles of up to $7,500 to spurthe next generation of American cars.
Long-term Extension and Modification of Renewable Energy Production Tax Credit:Includes a three-year extension of the production tax credit (PTC) forelectricity derived from wind (through 2012) and for electricityderived from biomass, geothermal, hydropower, landfill gas,waste-to-energy, and marine facilities (through 2013).
Temporary Election to Claim the Investment Tax Credit in Lieu of the Production Tax Credit:Facilities that produce electricity from wind, closed-loop biomass,open-loop biomass, geothermal, small irrigation, hydropower, landfillgas, waste-to-energy, and marine renewable facilities are eligible fora production tax credit. The bill would allow facilities to elect toclaim the investment tax credit in lieu of the production tax credit.
Removal of Dollar Limitations on Certain Energy Credits:The bill would repeal the individual dollar caps. As a result, each ofthese properties would be eligible for an uncapped thirty percent (30%)credit.
Repeal Subsidized Energy Financing Limitation on the Investment Tax Credit:The bill would repeal this subsidized energy financing limitation onthe investment tax credit in order to allow businesses and individualsto qualify for the full amount of the investment tax credit even ifsuch property is financed with industrial development bonds or throughany other subsidized energy financing.
Clean Renewable Energy Bonds ("CREBs"): The billauthorizes an additional $1.6 billion for new clean renewable energybonds to finance facilities that generate electricity from thefollowing resources: wind, closed-loop biomass, open-loop biomass,geothermal, small irrigation, hydropower, landfill gas, marinerenewable, and trash combustion facilities.
Qualified Energy Conservation Bonds: The billauthorizes an additional $2.4 billion for qualified energy conservationbonds to finance State, municipal and tribal government programs andinitiatives designed to reduce greenhouse gas emissions.
Tax Credits for Energy-Efficient Improvements to Existing Homes:Promotes energy-efficient investments in homes by extending andexpanding tax credits through 2010 for purchases such as new furnaces,energy-efficient windows and doors, or insulation.
Business Tax Incentives
Extension of Bonus Depreciation: Businesses areallowed to recover the cost of capital expenditures over time accordingto a depreciation schedule. Last year, Congress temporarily allowedbusinesses to recover the costs of capital expenditures made in 2008faster than the ordinary depreciation schedule would allow bypermitting these businesses to immediately write-off 50% of the cost ofdepreciable property (e.g., equipment, tractors, wind turbines, solarpanels, and computers) acquired in 2008 for use in the United States.The bill would extend this temporary benefit for capital expendituresincurred in 2009.
Election to Accelerate Recognition of Historic AMT/R&D Credits:Last year, Congress temporarily allowed businesses to accelerate therecognition of a portion of their historic AMT or research anddevelopment (R&D) credits in lieu of bonus depreciation. The amountthat taxpayers may accelerate is calculated based on the amount thateach taxpayer invests in property that would otherwise qualify forbonus depreciation. This amount is capped at the lesser of 6% ofhistoric AMT and R&D credits or $30 million. The bill would extendthis temporary benefit through 2009. This proposal is estimated to cost$805 million over 10 years.
Extension of Enhanced Small Business Expensing: Inorder to help small businesses quickly recover the cost of certaincapital expenses, small business taxpayers may elect to write-off thecost of these expenses in the year of acquisition in lieu of recoveringthese costs over time through depreciation. Until the end of 2010,small business taxpayers are allowed to write-off up to $125,000(indexed for inflation) of capital expenditures subject to a phase-outonce capital expenditures exceed $500,000 (indexed for inflation). Lastyear, Congress temporarily increased the amount small businesses couldwrite-off for capital expenditures incurred in 2008 to $250,000 andincreased the phase-out threshold for 2008 to $800,000. The bill wouldextend these temporary increases for capital expenditures incurred in2009.
Incentives to Hire Unemployed Veterans and Disconnected Youth:Under current law, businesses are allowed to claim a work opportunitytax credit equal to 40% of the first $6,000 of wages paid to employeesof one of nine targeted groups. The bill would create two new targetedgroups of prospective employees: (1) unemployed veterans, and (2)disconnected youth. An individual would qualify as an unemployedveteran if they were discharged or released from active duty from theArmed Forces during the five-year period prior to hiring and receivedunemployment compensation for more than four weeks during the yearbefore being hired. An individual qualifies as a disconnected youth ifthey are between the ages of 16 and 25 and have not been regularlyemployed or attended school in the past 6 months.
Small Business Capital Gains: Under current law,Section 1202 provides a 50% exclusion for the gain from the sale ofcertain small business stock held for more than five years. The amountof gain eligible for the exclusion is limited to the greater of 10times the taxpayer's basis in the stock, or $10 million gain from stockin that small business corporation. This provision is limited toindividual investments and not the investments of a corporation. Thenon-excluded portion of section 1202 gain is taxed at the lesser ofordinary income rates or 28%, instead of the lower capital gains ratesfor individuals. The provision allows a 75% exclusion for individualson the gain from the sale of certain small business stock held for morethan five years. This change is for stock issued after the date ofenactment and before January 1, 2011. This provision is estimated tocost $829 million over 10 years. Temporary Small Business Estimated TaxPayment Relief. The bill reduces the 2009 required estimated taxpayments for certain small businesses.
Transportation and Infrastructure Funding
- The legislation will invest $8.4 billion for investments in publictransportation. State and local governments will be eligible for anadditional $1.5 billion in competitive grants for transportationinvestments.
- $9.3 billion will be invested in Amtrak, High Speed and IntercityRail. The American Recovery and Reinvestment Act will allow high-speedrail exempt facility bonds to be used to develop rail facilities thatare used by trains that are capable of attaining speeds in excess of150 miles per hour.
- The legislation will invest $27.5 billion for road and bridgeinvestments. These projects create jobs in the short-term, while makingneeded repairs to our nation's aging infrastructure.
The American Recovery and Reinvestment Act willprovide a much needed extension in unemployment benefits and healthinsurance coverage for the 2 million Californians out of work.According to the Federal Funds Information for States, California willreceive $26 billion in economic recovery funding, which includes $6billion for a State Fiscal Stabilization Fund. This bill will create orretain nearly 400,000 jobs in the state, including 7,500 jobs in the14th Congressional District.
I hope that you find these provisions worthy investments of your taxdollars which will in the short-term prevent the loss of jobs andcreate new ones, and in the long-term, provide the needed investmentsto spur innovation.
In 1959, John Kennedy at a campaign rally in Indianapolis said"the Chinese use two brush strokes to write the word 'crisis'. Onebrush stroke stands for danger; the other for opportunity. In a crisis,be aware of the danger-but recognize the opportunity." I recognize thedangers of the condition of our country and by voting for this measure,I recognize the opportunity this moment presents.
If you have any other questions or comments, let me hear from you. I value what my constituents say to me because I need your thoughts and benefit from your ideas.
Anna G. Eshoo
Member of Congress