Dollars Available For Private Sector In Federal Stimulus But Be Mindful of Important Details

Michael B. Manuel, Gerald L. Jenkins, and Stephen J. Legatzke


March 5, 2009

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (the "Act").  The purposes of the Act include:  preserving and creating jobs and promoting economic recovery; providing assistance to those most in need due to the economic recession; making investments that will spur advances in science and health; making investments in environmental protection and infrastructure that will yield long-term benefits; and stabilizing budgets of State and local governments.   To accomplish these purposes, the Act authorizes the federal government to spend money and reduce tax burdens.  The size and ambition of the Act is unprecedented, as has already been well chronicled in various media outlets. 

In this Client Alert, we highlight some specific outlay programs and changes to tax policy that we feel might be of greatest interest to our clients and friends.  The Act is gargantuan in its scope and as a result we expect that many of our clients and friends will encounter some aspects of the Act, directly or indirectly over the coming months and years.  Consistent with its stated purposes, much of the Act is designed to spur economic activity and thus will offer business opportunities.  At the same time, Congress was very concerned about the quality of economic activity generated by the new law.  So the Act includes a new set of requirements designed to ensure transparency and accountability.  The Act also imposes a variety of labor and materials standards and protections on projects benefiting from the Act's appropriations.

Our Client Alert is organized into the four sections listed below.  Click on the title of each section to view the entire section.

Section 1.  Energy and Resource Conservation and Climate Change

In this section we summarize select provisions of the Act that support, encourage or even mandate the development, commercialization and adoption of various types of renewable energy resources; energy efficiency improvements and retrofits; and technologies to control or capture, or mitigate the adverse effects of, greenhouse gas emissions from man-made sources.  The Act uses a combination of tax incentives and federal expenditures to achieve these goals.  In this section we discuss various appropriations that are to be used to support the objectives referred to above.  Provisions encouraging tax-exempt bond financing and those related to investment tax credits and production tax credits are discussed in the section entitled "Changes to the Federal Internal Revenue Code." 

Section 2.  Changes to the Federal Internal Revenue Code 

This section provides a summary of significant tax provisions of the Act for businesses, large and small, including (i) a description of the energy provisions, such as the renewal energy production tax credit, expansion of the investment tax credit for other renewable energy facilities, and grants in lieu of these credits; (ii) provisions to encourage new business investment in assets and workers, (iii) tax provisions dealing with tax-exempt bonds and other measures to help state and local governments; and (iv) some tax changes to COBRA.  Some of these provisions are quite complex and will require further guidance from the Treasury Department and Internal Revenue Service so the summary contained in this section should not be viewed or relied upon as a full discussion of the law or as legal advice.  In addition, the actual application to any particular taxpayer will depend on that taxpayer's facts and each taxpayer should, therefore, seek advice from the taxpayer's own tax advisors with respect to how the tax provisions of the Act will actually impact his or her businesses.  Finally, it must be noted that this section does not discuss the tax provisions in the Act that are primarily directed to individual taxpayers, such as the making work pay credit (to be accomplished through reduced wage withholding) and the increase in alternative minimum tax (AMT) exemption amounts, many of which have already received significant media attention.

Section 3.  Information Technology in the Healthcare Sector and other Miscellaneous Programs

The new portion of the Act entitled "Health Information Technology for Economic and Clinical Health Act" (or HITECH Act) is a full-fledged health care law that attempts to create a single national standard for complicated data. A few decades ago HIPAA revolutionized health care law in the United States.  It pushed what had historically been within the sphere of health care providers, their patients and varying state laws into the realm of national solutions.  The HITECH Act, summarized in this section, is another giant leap in the same direction. 

Section 4.  Transparency and Labor and Materials Requirements 

New bureaucracies are created by the Act and this section discusses these new bureaucracies that are designed to prevent waste, fraud and abuse in the Act's programs and initiatives.  The Act invigorates the roles of the offices of the inspectors general within each agency receiving stimulus funds and expands the scope of their investigatory authority.  The Act establishes new oversight and accountability entities that will work, sometimes in tandem with, and sometime as an adjunct to, the inspectors general.  Last, certain provisions of the Act imply that the obligations to account for the use of stimulus money and to be accountable for any failure to use the money in compliance with any conditions or restrictions imposed by the Act, will also apply to contractors, subcontractors and others in the private sector directly or indirectly receiving the funds.  This section also summarizes some important rules imposing on all projects that receive funds appropriated under the Act certain minimum wage and construction materials standards, such as "Buy American" provisions.

Click here for a pdf of the complete Stimulus Package Client Alert.