Federal Acquisition Regulation (FAR) Council Interim Rules

The ARRA requires that federal projects directly administered by the federal agencies are to be governed by the Federal Acquisition Regulation (FAR). The legislation also clarifies that the FAR will not apply to Federal-aid projects, such as highway and bridge construction and clean water investment. The FAR Council issued new guidelines on March 31 for contractors and procurement officials disbursing stimulus funds. The deadline to submit public comments on the interim final rules is June 1.

Reporting Requirements (FAR Case 2009-009)

• Prime contractors who win work funded by the economic recovery package must file detailed public reports to the government on the nature of their work,job creation/retention data, and salary information - for themselves as well as first-tier subcontractors. Read More

Buy American Requirements for Construction Material (FAR Case 2009-008)

• Requires all construction, repair or maintenance projects use only iron, steel and manufactured goods produced in the United States. The rule provides a number of narrow exceptions and waivers, such as cases when goods are not available domestically, or if the local price is not reasonable. Read More

Whistleblower Protections (FAR Case 2009-012)

• Prohibits nonfederal employers from firing, demoting or discriminating against whistleblowers who alert the government to questionable uses of stimulus funds. Contractors who refuse to abide by this rule will not be eligible for stimulus contracts.

Publicizing Contract Actions (FAR Case 2009-010)

• Acquisition officials must issue public notices on publicizing contract action worth more than $25,000.

GAO/IG Access (FAR Case 2009-011)

• Provides the Government Accountability Office with the authority to audit both contracts and subcontracts related to the stimulus, and to interview contractor and subcontractor employees. Provides inspectors general the right to interview contractors' employees. Read More

Office of Management and Budget Interim Guidance

The ARRA requires that Federal-aid projects, such as highway and bridge construction and clean water investment be governed by guidance issued by OMB. They issued advance guidance to the agencies on February 6, directing them to expect initial guidance for contractors and procurement officials disbursing stimulus funds, which was issued February 18. This guidance was supplemented by guidance issued on April 3. The deadline to submit public comments on this latest interim final guidance is June 22.

Implementation Guidance - Reporting Requirements (Released June 22)

• Provides overview and templates for recipients, sub-recipients and vendors as prescribed in the Recovery Act. Read More.

Interim Final Regulation (Released April 23)

• Provides regulations implementing Section 1512 (Reporting Requirements), Section 1605 (Buy America Provisions), and Section 1606 (Davis-Bacon prevailing wage requirements) of the Recovery Act legislation. Read More.

Supplemental Guidance (Released April 3)

• Provides overview of proposed interim final rules and regulations implementing Section 1512 (Reporting Requirements), Section 1605 (Buy America Provisions), and Section 1606 (Davis-Bacon prevailing wage requirements) of the Recovery Act legislation. Read More.

Initial Guidance (Released February 18)

• Provides guidance to the Federal agencies establishing requirements for: transparency and reporting, information collection and dissemination, budget execution, and risk management among others. Public comments were not solicited. Read More

Policy Provisions In Legislation

The stimulus package contained a number of policy provisions. Below you will find specific items that impact the construction industry.

Buy American

• The final Buy American language from H.R. 1, the American Recovery and Reinvestment Act, prohibits funding to projects unless all of the iron, steel, and manufactured goods used in the product are produced in the United States. This can be waived by agency and department heads if the provision raises the overall cost of the project by more than 25%, the products are not available in sufficient quality or quantity, or where it would be inconsistent with the public interest. However, the new language explicitly states that the Administration can use the waiver authority not just on a project basis, but also in any category of cases. While that more explicit authority will be useful to try to ensure that existing Buy American Act waivers are continued for stimulus projects, it does not ensure that result.
• The legislation clarifies that the President still retains his authority, under the Trade Agreements Act of 1979, to issue waivers to ensure that the United States complies with the WTO Agreement on Government Procurement, and other trade agreement obligations. It also provides that the new Buy American restrictions will not apply to least developed countries to the same extent that these restrictions do not apply to trade agreement partners (i.e., the least-developed country exception in current regulatory practice). The language makes no other mention of existing waivers provided under the 1933 Buy American Act.

COBRA

• Under the new COBRA provisions, employees terminated involuntarily (except for gross misconduct) between September 1, 2008 and December 31, 2009, and their dependents, will automatically qualify for a 65% subsidy for COBRA premiums for up to nine months after their date of termination or lay-off. Qualifying individuals may not have an individual income of more than $125,000 or $250,000 for couples. Also, covered individuals who become eligible for coverage under another group health care plan or become eligible for Medicare coverage before the end of the nine month period must notify the health plan providing COBRA in writing or face a 110% penalty of the subsidy received. Effective for premiums beginning on March 1, 2009, the subsidy will be reimbursed to employers by the Treasury Department in the form of a payroll tax credit.
• Additionally, qualifying individuals are now eligible to elect different coverage under the plan when electing COBRA continuation coverage. If applicable, this allows individuals who may have been participating in a more expensive group health plan through the employer (i.e., high deductible plan or PPO) to select a less expensive plan, also provided by the employer (i.e., low deductible plan or HMO).
• The COBRA notice, which was already required of employers, must now include information on the premium subsidy and the ability to change plan options. This notice must be sent out within 60 days of enactment to employees who currently have COBRA continuation coverage and also to employees who were eligible for COBRA after September 1, 2008 but did not elect coverage. These individuals must now be given a second chance to elect COBRA coverage with the subsidy, with an effective date of or after March 1, 2009, but expiring 18 months after the date COBRA coverage would have begun because of the original qualifying event. Eligible employees will have 60 days from the date of notice to take advantage of this special election period, so employers are encouraged to notify qualified individuals as soon as possible. Look for the Department of Labor to issue a sample notice within the next 30 days.
• Employers using third-party COBRA administrators should coordinate with the administrator as quickly as possible regarding the proper way to communicate this information to both eligible past employees and dependents, as well as future eligible COBRA recipients.
• A COBRA Premium Reduction Fact Sheet can be found on the Department of Labor’s website. Review AGC’s Human Resource and Labor News for an FAQ page on the changes.

Davis-Bacon

• In an All-Agency Memorandum issued on May 29, 2009, the U.S. Department of Labor (DOL) Employment Standards Administration's Wage and Hour Division (WHD) has provided guidance to contracting agencies on the applicability of Davis-Bacon labor standards to federal and federally-assisted construction work funded in whole or in part under the American Recovery and Reinvestment Act of 2009 (ARRA). The memorandum provides a summary of the prevailing wage labor standards applicable to construction projects funded under Division A of the ARRA, highlights federal agencies' responsibilities in implementing Davis-Bacon labor standards, and provides links to online resources for additional information.
• A brief summary and link to the memorandum, along with other construction HR & labor-related current events can be found in AGC?s Human Resource and Labor News.

E-Verify

• There is no requirement that contractors use the E-Verify electronic employee verification system. The House version of the bill did include a requirement that only companies that use E-Verify would be eligible to compete for projects funded under the bill, but that provision was removed from the final agreement.

Government Mandated Project Labor Agreements

• The stimulus bill does not have any language requiring the use of project labor agreements, however a recently issued Executive Order (EO) from President Obama could lead to the use of some on stimulus projects. This EO encourages agencies to consider imposing a project labor agreement, but falls short of making it a requirement for agencies to impose.

HIPAA (Certificates of Creditable Coverage)

• Employers must now disregard any breaks in coverage, including those of more than 63 days, for employees and their qualifying dependents that lost coverage between September 1, 2008 and February 17, 2009 when providing certificates of creditable coverage when group health coverage ends. Originally, the Health Insurance Portability and Accountability Act (HIPAA) required employers with group health plans or their plan administrators to provide certificates of creditable coverage to disregard any gaps in coverage of less than 63 days. Employers who do not administer certificates of creditable coverage in house should work with health plan providers or third-party administrators to send revised certificates to qualifying current and former employees as well as their qualifying dependents as soon as possible.

Payroll & Executive Compensation

• The ARRA will make it necessary for employers to communicate more with payroll processors to ensure compliance with the new law. In addition to the payroll tax credit that will reimburse employers for the 65% COBRA subsidy, workers with an individual income of up to $75,000 or $150,000 for couples filing jointly, will receive a 6.2% earned income tax credit that may be withheld from employee paychecks or claimed on individual tax returns.
• Executive compensation is also affected by the ARRA, limiting compensation and bonuses for the highest paid individuals of companies that receive financial assistance from the Troubled Asset Relief Program (TARP).

Recruiting & Immigration

• Employers who receive financial assistance from the TARP or certain federal loans may not be able to reach outside of the United States for applicants for two years, unless they can show that they have made good faith efforts to recruit domestic workers for the job. Covered employers who typically use the H-1B visa program to bring in foreign workers are now required to offer any such job to an equally or better-qualified U.S. worker that has applied.

Transit Benefits

• Pre-tax transit benefits have also been temporarily adjusted by the economic stimulus package. The monthly limit for pre-tax transit benefits, such as transit passes and/or vanpooling benefits under Code Section 132(f) of the Internal Revenue Service Code was temporarily increased from $120 per month to $230 beginning on March 1, 2009. This temporary increase will continue through December 2010. Because the increase cannot be implemented automatically, employers who offer this benefit must require employees who wish to take advantage of the temporary increase to submit new election forms. The adjustment cannot be made retroactively, which forces many employers to push the start date to April 1, 2009. The limit for qualified parking expenses remains at $230 per month.

Additional Information

The U.S. Department of Labor (DOL) recently launched www.dol.gov/recovery in an effort to include all of its information related to the Recovery Act in one place. The Web page provides details on DOL programs funded by the ARRA and other labor-related information such as:

• Davis-Bacon and Related Act Wage determinations and government contract labor standards enforcement;
• Workforce Investment Act programs;
• Unemployment insurance extension and modernization;
• COBRA premium subsidies;
• Employment service grants;
• and more.

Tax Provisions

The American Recovery and Reinvestment Act includes $211 billion in tax cuts, including many that will impact the construction industry.

Individuals:

• Extension of AMT Relief for 2009. The bill would provide more than 26 million families with tax relief in 2009 by extending AMT relief for nonrefundable personal credits and increasing the AMT exemption amount to $70,950 for joint filers and $46,700 for individuals. This proposal is estimated to cost $69.759 billion over 10 years.
• Refundable First-time Home Buyer Credit. Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10 percent of the purchase of a home (up to $7,500) by first-time home buyers. The provision applies to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit are currently required to repay any amount received under this provision back to the government over 15 years in equal installments, or, if earlier, when the home is sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The bill eliminates the repayment obligation for taxpayers that purchase homes after January 1, 2009, increases the maximum value of the credit to $8,000, and removes the prohibition on financing by mortgage revenue bonds, and extends the availability of the credit for homes purchased before December 1, 2009. The provision would retain the credit recapture if the house is sold within three years of purchase. This proposal is estimated to cost $6.638 billion over 10 years.

Business:

• Extension of Bonus Depreciation. Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow by permitting these businesses to immediately writeoff fifty percent of the cost of depreciable property (e.g., equipment, tractors, wind turbines, solar panels, and computers) acquired in 2008 for use in the United States. The bill would extend this temporary benefit for capital expenditures incurred in 2009. This proposal is estimated to cost $5.074 billion over 10 years. 
• 5-Year Carryback of Net Operating Losses for Small Businesses. Under current law, net operating losses (“NOLs”) may be carried back to the two taxable years before the year that the loss arises (the “NOL carryback period”) and carried forward to each of the succeeding twenty taxable years after the year that the loss arises. For 2008, the bill would extend the maximum NOL carryback period from two years to five years for small businesses with gross receipts of $15 million or less. This proposal is estimated to cost $947 million over 10 years.
• Extension of Enhanced Small Business Expensing. In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these 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-out once capital expenditures exceed $500,000 (indexed for inflation). Last year, Congress temporarily increased the amount that small businesses could write-off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The bill would extend these temporary increases for capital expenditures incurred in 2009. This proposal is estimated to cost $41 million over 10 years.
• Incentives to Hire Unemployed Veterans and Disconnected Youth. Under current law, businesses are allowed to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to employees of one of nine targeted groups. The bill would create two new targeted groups of prospective employees: (1) unemployed veterans; and (2) disconnected youth. An individual would qualify as an unemployed veteran if they were discharged or released from active duty from the Armed Forces during the five-year period prior to hiring and received unemployment compensation for more than four weeks during the year before being hired. An individual qualifies as a disconnected youth if they are between the ages of 16 and 25
  and have not been regularly employed or attended school in the past 6 months. This proposal is estimated to cost $231 million over 10 years.
• Repeal of Treasury Section 382 Notice. Last year, the Treasury Department issued Notice 2008-83, which liberalized rules in the tax code that are intended to prevent taxpayers that acquire companies from claiming losses that were incurred by the acquired company prior to the taxpayer’s ownership of the company. The bill would repeal this Notice prospectively. This proposal is estimated to raise $6.977 billion over 10 years. 
• Small Business Capital Gains. Under current law, Section 1202 provides a fifty percent (50%) exclusion for the gain from the sale of certain small business stock held for more than five years. The amount of gain eligible for the exclusion is limited to the greater of 10 times the taxpayer’s basis in the stock, or $10 million gain from stock in that small business corporation. This provision is limited to individual investments and not the investments of a corporation. The nonexcluded portion of section 1202 gain is taxed at the lesser of ordinary income rates or 28 percent, instead of the lower capital gains rates for individuals. The provision allows a seventy five percent (75%) exclusion for individuals on the gain from the sale of certain small business stock held for more than five years. This change is for stock issued after the date of enactment and before January 1, 2011. This provision is estimated to cost $829 million over 10 years. 
• Delayed Recognition of Certain Cancellation of Debt Income. Under current law, a taxpayer generally has income where the taxpayer cancels or repurchases its debt for an amount less than its adjusted issue price. The amount of cancellation of debt income (“CODI”) is the excess of the old debt’s adjusted issue price over the repurchase price. Certain businesses will be allowed to recognize CODI over 10 years (defer tax on CODI for the first four or five years and recognize this income ratably over the following five taxable years) for specified types of business debt repurchased by the business after December 31, 2008 and before January 1, 2011. This proposal is estimated to cost $1.622 billion over 10 years.
• Temporary Reduction of S Corporation Built-In Gains Holding Period from 10 Years to 7 Years. Under current law, if a taxable corporation converts into an S corporation, the conversion is not a taxable event. However, following such a conversion, an S corporation must hold its assets for ten years in order to avoid a tax on any built-in gains that existed at the time of the conversion. The bill would temporarily reduce this holding period from ten years to seven years for sales occurring in 2009 and 2010. This proposal is estimated to cost $415 million over 10 years.

State and Local Governments

• Delay Application of Withholding Requirement on Certain Governmental Payments for Goods and Services. For payments made after December 31, 2010, the Code requires withholding at a three percent rate on certain payments to persons providing property or services made by Federal, State, and local governments. The withholding is required regardless of whether the government entity making the payment is the recipient of the property or services (those with less than $100 million in annual expenditures for property or services are exempt). Numerous government entities and small businesses have raised concerns about the application of this provision. The provision would delay for one year (through December 31, 2011) the application of the three percent withholding requirement on government payments for goods and services in order to provide time for the Treasury Department to study the impact of this provision on government entities and other taxpayers. This provision is estimated to cost $291 million over 10 years.
• De Minimis Safe Harbor Exception for Tax-Exempt Interest Expense for Financial Institutions. Under current law, financial institutions are not allowed to take a deduction for the portion of their interest expense that is allocable to such institution’s investments in tax-exempt municipal bonds. In determining the portion of interest expense that is allocable to investments in tax-exempt municipal bonds, the bill would exclude investments in tax-exempt municipal bonds issued during 2009 and 2010 to the extent that these investments constitute less than two percent (2%) of the average adjusted bases of all the assets of the financial institution. The cost of this proposal is included in the estimated cost of the next provision.
• Modification of Small Issuer Exception to Tax-Exempt Interest Expense Allocation Rules for Financial Institutions. As described above, financial institutions are not allowed to take a deduction for the portion of their interest expense that is allocable to such institution’s investments in tax-exempt municipal bonds. For purposes of this interest disallowance rule, bonds that are issued by a “qualified small issuers” are not taken into account as investments in tax-exempt municipal bonds. Under current law, a “qualified small issuer” is defined as any issuer that reasonably anticipates that the amount of its tax-exempt obligations (other than certain private activity bonds) will not exceed $10,000,000. The bill would increase this dollar threshold to $30,000,000 when determining whether a tax-exempt obligation issued in 2009 and 2010 qualifies for this small issuer exception. The small issuer exception would also apply to an issue if all of the ultimate borrowers in such issue would separately qualify for the exception. For these purposes, the issuer of a qualified 501(c)(3) bond shall be deemed to be the ultimate borrower on whose behalf a bond was issued. These proposals are estimated to cost $3.234 billion over 10 years.
• Eliminate Costs Imposed on State and Local Governments by the Alternative Minimum Tax. The alternative minimum tax (AMT) can increase the costs of issuing tax-exempt private activity bonds imposed on State and local governments. Under current law, interest on tax-exempt private activity bonds is generally subject to the AMT. This limits the marketability of these bonds and, therefore, forces State and local governments to issue these bonds at higher interest rates. Last year, Congress excluded one category of private activity bonds (i.e., tax-exempt housing bonds) from the AMT. The bill would exclude the remaining categories of private activity bonds from the AMT if the bond is issued in 2009 or 2010. The bill also allows AMT relief for current refunding of private activity bonds issued after 2003 and refunded during 2009 and 2010. This proposal is estimated to cost $555 million over 10 years.
• Qualified School Construction Bonds. The bill creates a new category of tax credit bonds for the construction, rehabilitation, or repair of public school facilities or for the acquisition of land on which a public school facility will be constructed. There is a national limitation on the amount of qualified school construction bonds that may be issued by State and local governments of $22 billion ($11 billion allocated initially in 2009 and the remainder allocated in 2010). There is a national limitation on the amount of qualified school construction bonds that may be issued by Indian tribal governments of $400 million ($200 million allocated initially in 2009 and the remainder allocated in 2010). This proposal is estimated to cost $9.877 billion over 10 years. 
• Extension and Increase in Authorization for Qualified Zone Academy Bonds (QZABs). The bill would allow an additional $1.4 billion of QZAB issuing authority to State and local governments in 2009 and 2010, which can be used to finance renovations, equipment purchases, developing course material, and training teachers and personnel at a qualified zone academy. In general, a qualified zone academy is any public school (or academic program within a public school) below college level that is located in an empowerment zone or enterprise community and is designed to cooperate with businesses to enhance the academic curriculum and increase graduation and employment rates. QZABs are a form of tax credit bonds which offer the holder a Federal tax credit instead of interest. This proposal is estimated to cost $1.045 billion over 10 years.
• Tax Credit Bond Option for State and Local Governments (“Build America Bonds”). The Federal government provides significant financial support to State and local governments through the federal tax exemption for interest on municipal bonds. Both tax credit bonds and tax-exempt bonds provide a subsidy to municipalities by reducing the cash interest payments that a State or local government must make on its debt. Tax credit bonds differ from tax-exempt bonds in two principal ways: (1) interest paid on tax credit bonds is taxable; and (2) a portion of the interest paid on tax credit bonds takes the form of a Federal tax credit. The Federal tax credit offsets a portion of the cash interest payment that the State or local government would otherwise need to make on the borrowing. For 2009 and 2010, the bill would provide State and local governments with the option of issuing a tax credit bond instead of a tax-exempt governmental obligation bond. Because the market for tax credits is currently small given current economic conditions, the bill would allow the State or local government to elect to receive a direct payment from the Federal government equal to the subsidy that would have otherwise been delivered through the Federal tax credit for bonds. This proposal is estimated to cost $4.348 billion over 10 years. 
• Treasury Department Low-Income Housing Grants in Lieu of Tax Credits. Under current law, taxpayers are allowed to claim a low-income housing tax credit for certain investments made in low-income housing. These tax credits help attract private capital to invest in the construction, acquisition, or rehabilitation of qualified low-income housing buildings. Current economic conditions have severely undermined the effectiveness of these tax credits. As a result, the bill would allow taxpayers to receive a grant from the Treasury Department in lieu of tax credits. Under this provision, States housing agencies would receive a grant equal to up to eighty-five percent (85%) of forty percent (40%) of the state’s low-income housing tax credit allocation in lieu of the low-income housing tax credits they would have received. The subawards are subject to the same requirements (including rent, income, and use restrictions on such buildings) as the low-income housing tax credit allocations. The grant program would apply to each state’s 2009 low-income housing tax credit allocation. This provision is estimated to cost $69 million over 10 years. 
• Modify Speed Requirement for High-Speed Rail Exempt Facility Bonds. Under current law, States are allowed to issue private activity bonds for high-speed rail facilities. Under current law, a high-speed rail facility is a facility for the transportation of passengers between metropolitan areas using vehicles that are reasonably expected to operate at speeds in excess of 150 miles per hour between scheduled stops. The bill would allow these bonds to be used to develop rail facilities that are used by trains that are capable of attaining speeds in excess of 150 miles per hour. This proposal is estimated to cost $288 million over 10 years. 

Distressed Areas

• Recovery Zone Bonds. The bill would create a new category of tax credit bonds for investment in economic recovery zones. The bill would authorize $10 billion in recovery zone economic development bonds and $15 billion in recovery zone facility bonds. These bonds could be issued during 2009 and 2010. Each state would receive a share of the national allocation based on that state’s job losses in 2008 as a percentage of national job losses in 2008 (each state will receive a minimum allocation of these bonds). These allocations would be sub-allocated to local municipalities. Municipalities receiving an allocation of these bonds would be permitted to use these bonds to invest in infrastructure, job training, education, and economic development in areas within the boundaries of the State, city or county (as the case may be) that has significant poverty, unemployment or home foreclosures. This proposal is estimated to cost $5.371 billion over 10 years.
• Tribal Economic Development Bonds. Under current law, tribal governments are limited in their ability to issue tax-exempt bonds. Projects funded by bonds issued by tribal governments must satisfy an “essential governmental function” requirement. This requirement is not imposed on projects funded by bonds issued by State and local governments, and can limit the ability of tribal governments to use tax-exempt bonds for economic development. The bill would temporarily allow tribal governments to issue $2 billion in tax-exempt bonds for projects without this restriction in order to spur economic development on tribal lands, and would require the Secretary of the Treasury to study whether this restriction should be repealed on a permanent basis. This proposal is estimated to cost $315 million over 10 years.

Energy Tax Incentives

• Long-term Extension and Modification of Renewable Energy Production Tax Credit. The bill would extend the placed-in-service date for wind facilities for three years (through December 31, 2012). The bill would also 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. This proposal is estimated to cost $13.143 billion over 10 years.
• Temporary Election to Claim the Investment Tax Credit in Lieu of the Production Tax Credit. Under current law, facilities that produce electricity from solar facilities are eligible to take a thirty percent (30%) investment tax credit in the year that the facility is placed in service. Facilities that produce electricity from wind, closed-loop biomass, open-loop biomass, geothermal, small irrigation, hydropower, landfill gas, waste-to-energy, and marine renewable facilities are eligible for a production tax credit. The production tax credit is payable over a ten-year period. Because of current market conditions, it is difficult for many renewable projects to find financing due to the uncertain future tax positions of potential investors in these projects. The bill would allow facilities to elect to claim the investment tax credit in lieu of the production tax credit. This proposal is estimated to cost $285 million over 10 years. 
• Clean Renewable Energy Bonds (“CREBs”). The bill 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. This $1.6 billion authorization will be subdivided into thirds: 1/3 will be available for qualifying projects of State/local/tribal governments; 1/3 for qualifying projects of public power providers; and 1/3 for qualifying projects of electric cooperatives. This proposal is estimated to cost $578 million over 10 years.
• Qualified Energy Conservation Bonds. The bill authorizes an addition $2.4 billion of qualified energy conservation bonds to finance State, municipal and tribal government programs and initiatives designed to reduce greenhouse gas emissions. The bill would also clarify that qualified energy conservation bonds may be issued to make loans and grants for capital expenditures to implement green community programs. The bill also clarifies that qualified energy conservation bonds may be used for programs in which utilities provide ratepayers with energy-efficient property and recoup the costs of that property over an extended period of time. This proposal is estimated to cost $803 million over 10 years
• Removal of Dollar Limitations on Certain Energy Credits. Under current law, businesses are allowed to claim a thirty percent (30%) tax credit for qualified small wind energy property (capped at $4,000). Individuals are allowed to claim a thirty percent (30%) tax credit for qualified solar water heating property (capped at $2,000), qualified small wind energy property (capped at $500 per kilowatt of capacity, up to $4,000), and qualified geothermal heat pumps (capped at $2,000). The bill would repeal the individual dollar caps. As a result, each of these
  properties would be eligible for an uncapped thirty percent (30%) credit. This proposal is estimated to cost $872 million over 10 years.
• Tax Credits for Energy-Efficient Improvements to Existing Homes. The bill would extend the tax credits for improvements to energy-efficient existing homes through 2010. Under current law, individuals are allowed a tax credit equal to ten percent (10%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements installed during the taxable year. This tax credit is capped at $50 for any advanced main air circulating fan, $150 for any qualified natural gas, propane, oil furnace or hot water boiler, and $300 for any item of energy-efficient building property. For 2009 and 2010, the bill would increase the amount of the tax credit to thirty percent (30%) of the amount paid or incurred by the taxpayer for qualified energy efficiency improvements during the taxable year. The bill would also eliminate the property-by-property dollar caps on this tax credit and provide an aggregate $1,500 cap on all property qualifying for the credit. The bill would update the energy-efficiency standards of the property qualifying for the credit. This proposal is estimated to cost $2.034 billion over 10 years.
• Tax Credits for Alternative Refueling Property. The alternative refueling property credit provides a tax credit to businesses (e.g., gas stations) that install alternative fuel pumps, such as fuel pumps that dispense E85 fuel, electricity, hydrogen, and natural gas. For 2009 and 2010, the bill would increase the 30% alternative refueling property credit for businesses (capped at $30,000) to 50% (capped at $50,000). Hydrogen refueling pumps would remain at a 30% credit percentage; however, the cap for hydrogen refueling pumps will be increased to $200,000. In addition, the bill would increase the 30% alternative refueling property credit for individuals (capped at $1,000) to 50% (capped at $2,000). This proposal is estimated to cost $54 million
  over 10 years.
• Repeal Subsidized Energy Financing Limitation on the Investment Tax Credit. Under current law, the investment tax credit must be reduced if the property qualifying for the investment tax credit is also financed with industrial development bonds or through any other Federal, State, or local subsidized financing program. The bill would repeal this subsidized energy financing limitation on the investment tax credit in order to allow businesses and individuals to qualify for the full amount of the investment tax credit even if such property is financed with industrial development bonds or through any other subsidized energy financing.
• Treasury Department Energy Grants in Lieu of Tax Credits. Under current law, taxpayers are allowed to claim a production tax credit for electricity produced by certain renewable energy facilities and an investment tax credit for certain renewable energy property. These tax credits help attract private capital to invest in renewable energy projects. Current economic conditions have severely undermined the effectiveness of these tax credits. As a result, the bill would allow taxpayers to receive a grant from the Treasury Department in lieu of tax credits. This grant will operate like the current-law investment tax credit. The Treasury Department will issue a grant in an amount equal to thirty percent (30%) of the cost of the renewable energy facility within sixty days of the facility being placed in service or, if later, within sixty days of receiving an application for such grant. This proposal is estimated to cost $5 million over 10 years.

Manufacturing Recovery

• Industrial Development Bonds (IDB). Under current law, certain manufacturing facilities are eligible for tax exempt bond financing. Section 144(a)(12)(C) specifically limits the definition of a manufacturing facility for the purposes of such financing to facilities that are used in the manufacturing or production of tangible personal property. The proposal amends the definition of manufacturing facility to any facility used in the manufacturing, creation, or production of tangible or intangible property described in section 197(d)(1)(C)(iii). Intangible property is any patent, copyright, formula, process, design, pattern, knowhow, format, or other similar item. The proposal also clarifies which physical components of a manufacturing facility qualify as "ancillary" and therefore are subjected to a 25% limitation in the amount of bond issuance used to build or re-construct those components. This proposal is estimated to cost $203 million over ten years.
• Advanced Energy Investment Credit. The proposal establishes a new 30% investment tax credit for facilities engaged in the manufacture of advanced energy property. Credits are available only for projects certified by the Secretary of Treasury, in consultation with the Secretary of Energy, through a competitive bidding process. The Secretary of Treasury must establish a certification program no later than 180 days after date of enactment, and may allocate up to $2.3 billion in credits. Advanced energy property includes technology for the production of renewable energy, energy storage, energy conservation, efficient transmission and distribution of electricity, and carbon capture and sequestration. This proposal is estimated to cost $1.647 billion over 10 years.

Unemployment Benefits

• Extension of Emergency Unemployment Compensation. Through December 31, 2009, the bill continues the Emergency Unemployment Compensation program, which provides up to 33 weeks of extended unemployment benefits to workers exhausting their regular benefits. This provision is estimated to cost $26.96 billion. 
• Increase in Unemployment Compensation Benefits. The bill increases unemployment weekly benefits by an additional $25 through 2009. This provision is estimated to cost $8.8 billion. 
• Unemployment Compensation Modernization. The bill provides one-time grants to reward and encourage States enacting specific reforms designed to increase UC coverage among low-wage, part-time and other jobless workers, as well as provides an additional $500 million in administrative funding to all States. This provision is estimated to cost $2.975 billion.
• Temporary Suspension of Taxation of Unemployment Benefits. Under current law, all federal unemployment benefits are subject to taxation. The average unemployment benefit is approximately $300 per week. The proposal temporarily suspends federal income tax on the first $2,400 of unemployment benefits per recipient. Any unemployment benefits over $2,400 will be subject to federal income tax. This proposal is in effect for taxable year 2009. This proposal is estimated to cost $4.740 billion over 10 years.