Energy, Transportation & Business: Your Tax Dollars At Work?

On Tuesday, February 17th, President Obama signed into law The American Recovery and Reinvestment Act of 2009. Between spending and tax cuts the total cost of the stimulus bill is $787 billion. States are slated to receive billions of dollars for a variety of uses and initiatives including: infrastructure; renewable energy; education; extension of unemployment insurance; and Medicaid assistance. A sample of the estimated amounts that will flow to several of the States may be found at the end of this email. For individuals, the bill provides a variety of new and extended tax credits along with help for small businesses.

The monies that the States will soon be receiving may be distributed in the form of grants or allocated directly to ‘shovel ready’ projects. Regardless of how the money is distributed it is hoped that the stimulus monies flowing to the States will prove to be an immediate generator of jobs for private sector companies that operate in the renewable energy field, the construction industry and others. President Obama in his speech before Congress on February 24th , noted that “[o]ver the next two years, this plan will save or create 3.5m jobs. More than 90% of these jobs will be in the private sector - jobs rebuilding our roads and bridges; constructing wind turbines and solar panels; laying broadband and expanding mass transit.”

While we know what priorities the stimulus money is being directed to, it is still to be determined what specific projects will receive funding. In most instances it will be left to the States to determine what projects receive a portion of the stimulus funding. This means that it is imperative to closely monitor how States determine what projects receive stimulus funding so that businesses and individuals will have the opportunity to participate. Moye White is available to work with investors and companies to maximize their opportunities in this area. Our renewable energy and business practices are uniquely positioned to assist clients in navigating through the state and federal programs that will shortly be distributing stimulus funds.

Below is an overview of what is contained in the stimulus bill relating to energy, transportation and small business.

1. Energy

The President in his speech before Congress emphasized the nation’s commitment to invest in renewable energy. The President stated “[w]e will invest $15 billion dollars a year to develop technologies like wind power and solar power; advanced biofuels, clean coal and more fuel-efficient cars and trucks built right here in America.” Approximately $40 billion has been set aside for “renewable energy” in the stimulus bill. These funds will be used to promote the modernization of energy transmission, research and development of renewable energy technologies, and modernization of government buildings. The intention is that these funds will restart renewable energy projects that were cancelled or delayed because of funding shortfalls. As noted by President Obama the recovery plan “will double this nation's supply of renewable energy in the next three years.” Highlights of the renewable energy provisions within the stimulus bill include:

Tax Credits. Extension of the renewable energy production credit. The income tax credit available to qualified renewable energy facilities, such as wind and solar, has been extended. All facilities, except wind, that are put in service after December 31, 2008 and through 2013 will receive the credit. The credit for wind facilities is extended to all projects put in service after December 31, 2008 and through 2012.

Up to $2.3 billion is available to fund a 30% investment tax credit for manufacturing assets used in the manufacture of advanced energy. Qualifying advanced energy projects include:

  • Property that is used to produce renewable energy, refine or blend renewable fuels;
  • Electric grids;
  • Property that is used to capture and sequester carbon dioxide emissions; and
  • Property designed to reduce greenhouse gas emissions.

Businesses and individuals may now qualify for the full amount of the solar tax credit if the project receives some form of subsidized energy financing. Previously if a project received subsidized energy financing it would not be eligible for the full amount of the tax credit.

Grants and Loan Guarantees.

  • Solar project grants, equal to 30% of the cost of the solar property placed in service between 2009 and 2010 are available. Grants may still be available for a project even if the property is not placed in service before December 31, 2010, but construction on the project has begun.
  • A temporary Department of Energy loan guarantee program is established for renewable energy projects, renewable energy manufacturing facilities and electric power transmission projects. Under the program approximately $60 billion in loan guarantees are available.

Green Collar Jobs. $500 million is available to fund job training programs in energy efficiency and renewable energy.

State Energy Program. $3.1 billion is appropriated for the Program, which provides grants to States and directs funding to State energy offices. These grants are used to address energy priorities and program funding to adopt emerging renewable energy and energy efficiency technologies.

Weatherization Assistance Program. $5 billion is appropriated for the Program, which enables low-income families to make their homes energy efficient. Grants of up to $6,500 per dwelling may be made to fund the weatherization of homes.

Smart Grid. Approximately $11 million is set aside for Smart Grid demonstration projects such as the one already underway in Boulder, Colorado.

In addition to renewable energy efforts the stimulus bill devotes $3.4 billion to fossil energy research and development. Of note, the stimulus bill allocates:

  • $800 million for Clean Coal Power Initiative Round III Funding Opportunity Announcement.
  • $1.5 billion for carbon capture and energy efficiency improvement projects of which $20 million is available for geologic sequestration research.

The stimulus bill also provides support, but not funding, for the development of additional long distance transmission lines. The President stated in his speech before Congress that “[w]e will soon lay down thousands of miles of power lines that can carry new energy to cities and towns across this country.”

Interconnection-Based Transmission Plans. The Department of Energy and the Federal Energy Regulatory Commission will provide technical assistance to States, transmission owners, and the North American Electric Reliability Corporation to form interconnectionbased transmission plans for Eastern and Western Interconnections and ERCOT.

Western Area Power Administration. The WAPA is allowed to borrow up to $3.2 billion to be used in part for the planning, operating, maintaining or studying the construction of new or upgraded electric power transmission lines.

2. Transportation

Investment in our nation’s transportation infrastructure from the stimulus package is estimated at approximately $48.76 billion. These funds will be allocated as follows:

  • $27.5 billion for highway and bridge construction projects;
  • $8 billion for high-speed rail projects;
  • $6.9 billion for new equipment for public transportation projects;
  • $1.5 billion for competitive grants to state and local governments for transportation investments;
  • $1.3 billion for Amtrak;
  • $1.1 billion for improving airport security;
  • $750 million for the construction of new public rail transportation systems;
  • $750 million for the maintenance of existing public transportation systems;
  • $720 million for improving security at the border and ports of entry;
  • $240 million for the maintenance of United States Coast Guard facilities.

It is estimated that Colorado will receive approximately $403.9 million in Highway Funding for its activities under the Federal-Aid Highway Program’s Surface Transportation Program and approximately $103.5 million to develop and strengthen the State’s mass transit systems.

3. Small Business

The bill also provides some relief to small businesses. The bill, as described by the President creates “a new lending fund that represents the largest effort ever to help provide auto loans, college loans and small business loans to the consumers and entrepreneurs who keep this economy running.” Included in the stimulus bill for small businesses is:

  • $720 million to help support a number of programs at the U.S. Small Business Administration (primarily reducing fees on 7(a) guaranteed loan guarantees);
  • $400 million in support for economic development and entrepreneurship, particularly in distressed rural, urban, and low-income communities; and
  • tax incentives for small businesses, including a continuation of section 179 expensing up to $250,000 on new capital investments, loss carry back for up to five years, a delay in the three percent withholding tax for businesses having government contracts, and a reduced capital gains tax for small business investors holding stock for five years or more.

Because there are exceptions and additional requirements, small businesses should work with their tax and legal advisors to determine exactly how these provisions apply to and can benefit their business.

Below is a sample of how much several of the States are receiving from the stimulus bill.

Below is a sample of how much several of the States are receiving from the stimulus bill.

Moye White continues to monitor the stimulus package and its impact upon businesses and individuals. Contact John Kellogg or Paul Seby at 303-292-2900 to discuss how we may best position you or your company to take advantage of the opportunities presented with the stimulus package.

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Moye White LLP has prepared this bulletin to provide general information, however this bulletin does not provide legal advice and does not create an attorney-client relationship between the reader and Moye White. No legal or business decision should be based solely on the content of this bulletin.