The American Recovery and Reinvestment Act of 2009
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Click “Continue Reading” to view a chart that provides a side-by-side comparison of the tax provisions in the House and Senate versions of “The American Recovery and Reinvestment Act of 2009.” The House version is H.R. 1, as passed on January 28, 2009, with a 244 to 188 vote margin. The Senate version, S. 350, is the Senate Finance Committee version, with amendments.
TAX PROVISIONS
| Code Section | House | Senate |
| 24 Child Tax Credit |
§1102: • Temporary increase in refundable portion of credit • Applicable to tax years beginning in 2009 and 2010 |
§1003: • Same, except for reduced refundable portion of credit |
| 25A Hope and Lifetime Learning Credits |
§1201: American Opportunity Tax Credit • Increase in credit amount to maximum of $2,500 • Applicable to first four years of college • Also applicable to course materials • Increase in AGI amount that triggers phase out • Allowable against AMT • Partially refundable • Applicable to tax years beginning in 2009 and 2010 |
§1004: • Same, except smaller amount of credit is refundable |
| 25C Nonbusiness Energy Property Credit |
§§1603, 16212: • Eliminates reduction of credit for property financed by subsidized energy financing • Extends credit through 2010 • Raises credit rate to 30%, including property previously eligible for $50, $100, or $150 credits • Raises lifetime cap on credits to $1,500 per taxpayer for property placed in service in 2009 and 2010 • Effective for tax years beginning after December 31, 2008 |
§§1103, 1121: • Same |
| 25D Residential Energy Efficient Property Credit |
§1603, 1622: • Eliminates reduction of credit for property financed by subsidized energy financing • Eliminates caps on credits for solar hot water, geothermal, and wind property.Increases maximum credit for qualified fuel cell property • Effective for tax years beginning after December 31, 2008 |
§1103, 1122: • Same |
| 25E (new) Credit for Certain Home Purchases |
No provision | §1006: • Nonrefundable, one-time only credit for purchase of qualified residence • 10% of purchase price, limited to $15,000 ($7,500 for married filing separately) • No income limitation • Election to equally allocate credit amount between two tax years, beginning with purchase year • Recapture of credit upon certain dispositions (exceptions apply) • No repayment provisions as in §36 (not a loan) • Election to treat 2009 purchase as occurring in 2008 • Effective sunset of current §36 first-time homebuyer credit • Applicable to tax years beginning after 2008, for home purchases made in 2009 |
| 26 Limitation Based on Tax Liability |
No provision | §1011: • Extends AMT relief for nonrefundable personal credits through 2009 • Applicable to tax years beginning after 2008 |
| 30C Alternative Fuel Vehicle Refueling Property Credit |
§1623: • Increases maximum credit for business property to $200,000 for hydrogen refueling property and $50,000 for other property • Increases maximum credit for individuals to $2,000Increases credit rate to 50%, except for hydrogen refueling property • Effective for tax years beginning in 2009 and 2010 |
§1123: • Same |
| 30D Plug-in Electric Vehicle Credit |
No provision | §1161: • Increases number of vehicles eligible for credit to 500,000 • Excludes two and three wheeled electric vehicles from credit and creates new credit for such vehicles equal to 10% of cost of vehicle up to $40,000 • Increase in number of vehicles effective on date of enactment • Other changes effective for property placed in service after December 31, 2009, in tax years beginning after that date |
| 32 Earned Income Tax Credit |
§1101: • Temporary increase in EITC percentage for three or more children • Increase to amount added to phase out figure; increased amount indexed for inflation for 2010 • Applicable to tax years beginning in 2009 and 2010 |
§1002: • Same |
| 36 First-Time HomebuyerCredit |
§1301: • Waiver of recapture (repayment) and, under certain circumstances, accelerated recapture provisions • Applicable to residences purchased after December 31, 2008, and before July 1, 2009 |
§1006: • Extension of credit to residences bought before September 1, 2009 • Waiver of recapture (repayment) and, under certain circumstances, accelerated recapture provisions • Applicable to residences purchased after December 31, 2008, and before September 1, 2009 • Effective sunset of §36 (see proposed §25E, above) |
| 36A (new) Making Work Pay Credit |
§1001: • Refundable credit of 6.2% of earned income up to $500 ($1,000 joint return) • Phased out by 2% of MAGI that exceeds $75,000 ($150,000 joint return) • Applicable to tax years beginning in 2009 and 2010 |
§1001: • Refundable credit of 6.2% of earned income up to $500 ($1,000 joint return) • Phased out by 4% of MAGI that exceeds $75,000 ($150,000 joint return) • Reduced by amount of credit received for electricity produced from certain renewable resources (§45) • Applicable to tax years beginning in 2009 and 2010 |
| 38 General Business Credit |
No provision | §1142: • Temporarily allows general business credit to offset 100% of federal income tax liability • Effective for tax years ending in 2008 and 2009 |
| 39 Carryback and Carry-forward of Unused Credits |
No provision | §1141: • Increase of carryback period for general business credit to 5 years (from current one year limit) • Effective for carrybacks from 2008 and 2009 |
| 41 Research Credit |
§1631: • Creates additional 20% credit for qualified energy research expenses (fuel cells and battery technology, renewable energy, energy conservation technology, electricity transmission, carbon sequestration) • Effective for tax years beginning in 2009 or 2010 |
§1131: • Same, except definition of qualified energy research expenses includes research related to renewable fuels |
| 42(i)(9) (new) Low-Income Housing Credit |
§1302: • States may elect to receive allocation of grants in lieu of housing credits • Basis of qualified low-income building not reduced by amount of grant • JCT explanation states that grants are not taxable income to recipients |
No provision |
| 45 Renewable Energy Production Credit |
§1601: • Renewable electricity production credit extended 3 years (for wind facilities placed in service through 2012 and for closed-loop biomass, open-loop biomass, geothermal, solar, landfill gas, trash combustion, qualified hydropower, and marine and hydrokinetic power through 2013) • Technical correction integrating small irrigation power facility into marine/hydrokinetic power credit • Effective for property placed in service after date of enactment |
§1101: • Same |
| 45D New Markets Tax Credit |
No provision | §1403: • Increases maximum amount of qualified equity investments by $1.5 billion in both 2008 and 2009 • Provides AMT relief for investment subject to 2009 limits |
| 45Q Carbon Dioxide Sequestration Credit |
No provision | §1151: • Requires carbon dioxide sequestered for purposes of credit to be disposed of in secure geological storage • Effective for carbon dioxide sequestered after date of enactment |
| 48 Energy Credit |
§1602: • Allows taxpayers to elect 30% energy credit in lieu of kwh/hour renewable electricity production credit • Election is irrevocable • Credit applies to closed-loop biomass, open-loop biomass, geothermal, landfill gas, trash combustion, qualified hydropower, and marine and hydrokinetic power facilities • Election does not apply to wind facilities • Effective for facilities placed in service during 2009 or 2010 |
§1102: • Allows taxpayers to elect 30% energy credit in lieu of renewable electricity production credit based on amounts per kilowatt hour • Election is irrevocable • Credit applies to wind, closed-loop biomass, open-loop biomass, geothermal, solar, landfill gas, trash combustion, qualified hydropower, and marine and hydrokinetic power facilities • Effective for wind facilities placed in service during 2009 through 2012, and for other facilities during 2009 through 2013 |
| 48(c)(4) Energy Credit |
§1603: • Eliminates $4,000 credit cap for small wind energy property • Eliminates basis reduction for subsidized energy financing • Generally effective for periods after December 31, 2008 |
§1103: • Substantially same |
| 48(d) (new) Energy Credit |
§§1604, 1721: • Authorizes Department of Energy to provide grants in lieu of credits to taxpayers eligible for renewable electricity credit and/or energy credit • Grants not includible in gross income • 50% basis reduction for grant recipients • Effective for property placed in service during 2009 or 2010 |
No provision |
| 48A Advanced Coal Project Credit |
No provision | §1103(b): • Repeals limitation on property financed by subsidized energy financing • Effective for tax years beginning after December 31, 2008 |
| 48B Gasification Project Credit |
No provision | §1103(b) • Repeals limitation on property financed by subsidized energy financing • Effective for tax years beginning after December 31, 2008 |
| 48C (new) Qualified Advanced Energy Property Credit |
No provision | §1302: • Allows up to $2 billion in new 30% credit for investment in qualified advanced energy project • Generally effective for periods after date of enactment |
| 48D (new) Broadband Internet Access Credit |
No provision | §1271: • 10% credit for expenditures to provide current generation broadband access • 20% credit for expenditures to provide next generation broadband access • Applicable to expenditures incurred after December 31, 2008 |
| 51 Credit for Unemployed Veterans and Disconnected Youths Hired in 2009/2010 |
§1421: • Creates new targeted group of “unemployed veterans and disconnected youths” for purposes of work opportunity tax credit • Effective for individuals who begin work in 2009 or 2010 |
§1221: • Same, except expands definition of unemployed veteran |
| 54C New Clean Renewable Energy Bonds |
§1611: • Increase of national limitation amount by $1.6 billion to $2.4 billion |
§1111: • Same |
| 54D Qualified Energy Conservation Bonds |
§1612: • Increase of national limitation amount by $2.4 billion to $3.2 billion |
§1112: • Increase of national limitation amount from $800 million to $3.2 billion |
| 54E Qualified Zone Academy Bonds |
§1512: • Sets national limitation for 2009 and 2010 at $1.4 billion, effectively setting the 2008 limit at $400 million •Applicable to obligations issued after December 31, 2008 |
§1522: • Same |
| 54F (new) Qualified School Construction Bonds |
§1511: • New tax credit bonds for construction or repair of public schools • Imposes limitation on aggregate face amount of bonds from single issuer • National limitation of $10 billion for 2009, and $10 billion for 2010 • Provisions allocate limitation amounts among states and large educational agencies • Indian schools allocated $200 million for 2009, and $200 million for 2010 • Applicable to obligations issued after 2008 |
§1521: • New tax credit bonds for construction or repair of public schools • Imposes slightly different limitations on aggregate face amount of bonds from single issuer • Same, except increases national limitation amounts to $11 billion for 2009, and $11 billion for 2010 • Less restrictive allocation of limitation amounts among states; no allocations to large educational agencies • Same allocations to Indian schools • Applicable after date of enactment |
| 54AA (new) Taxable Bond Option for Governmental Bonds |
§1521(a): • New credit for taxable government bonds • Nonrefundable Credit amount equals 35% of interest payable by issuer • Special rules for qualified bonds issued before January 1, 2011: in lieu of §54AA credit, issuer may claim credit under new §6431 (discussed below) • Applicable to obligations issued after date of enactment |
§1531(a): Build America Bonds • New credit for “build America bonds,” i.e., non-private activity bonds, interest on which is excludable under §103, issued before January 1, 2012, and subject to §54AA through issuer election • Nonrefundable credit amount is 35% of interest payable by issuer • Interest generally includible in gross income for federal income tax purposes • Same special rules for qualified bonds issued before January 1, 2001 • Applicable to obligations issued after date of enactment |
| 55 Alternative Minimum Tax Imposed |
No provision | §1012: • Increases AMT exemption amounts for 2009 • Applicable to tax years beginning after 2008 |
| 56/57 Adjustments in Computing AMT Income (§56) Items of Tax Preference (§57) |
§1503: • Temporary modification of AMT limitations on tax-exempt bonds • Interest on private activity bonds issued in 2009 and 2010 not treated as tax preference item (§57) • No adjustment to adjusted current earnings for interest on tax-exempt bonds issued in 2009 and 2010 (§56) • Applicable to obligations issued after December 31, 2008 |
§1503: • Same |
| 85 Unemployment Compensation |
No provision | §1007: • First $2,400 of unemployment compensation excluded from gross income for 2009 • Applicable for tax years beginning after 2008 |
| 108 Income from Discharge of Indebtedness |
No provision | §1231: • Income from discharge of indebtedness connected with repurchase of debt instrument in 2009 and 2010 is includible in gross income ratable over an eight-tax-year period • For repurchase occurring in 2009, inclusion begins in second tax year following tax year in which repurchase occurs • For repurchase occurring in 2010, inclusion begins in first tax year following tax year in which repurchase occurs • Applicable to discharges in tax years ending after December 31, 2008 |
| 132(f) Certain Fringe Benefits |
No provision | §1251: • Exclusion amount for commuter transit benefits and transit passes is increased from $100 to $175 per month for any month beginning on or after the date of enactment and before January 1, 2011 |
| 142 Exempt Facility Bond |
No provision | §1504: • Modifies definition of “high-speed intercity rail facilities” to provide that vehicles servicing such facilities would be capable of attaining a maximum speed of 150 mph, rather than operating at speeds in excess of 150 mph • Applicable to obligations issued after December 31, 2008 |
| 144 Qualified Small Issue, Student Loan and Redevelopment Bonds |
No provision | §1301: • Temporary expansion of availability of proceeds from industrial development bonds issued in 2009 and 2010 to facilities manufacturing intangible property • Applicable to bonds issued after the date of enactment |
| 163(h) Interest |
No provision | §Not Assigned: • Provides above-the-line deduction for interest on debt incurred after November 12, 2008, and before January 1, 2010, to purchase qualified motor vehicle (“passenger vehicle” as defined by the EPA; not limited to fuel cell, advanced clean burn, hybrid or alternative fuel vehicles) • Aggregate amount of debt limited to $49,500 ($24,750 for married filing separately) • Income limitation phases out benefit • Provides above-the-line deduction for sales and excise taxes on purchase of certain motor vehicles • Same debt and income limitations as for interest deduction provision • Applicable to tax years beginning after December 31, 2008 |
| 168(k) ACRS |
§1401: • Extends 50% additional first-year depreciation through 2009 (2010 for certain longer-lived and transportation property) • Extends election to accelerate AMT & research credits in lieu of bonus depreciation (Ford/Chrysler/GM provision) |
§1201: • Extends 50% additional first-year depreciation through 2009 (2010 for certain longer-lived and transportation property) • Generally includes motion pictures fllm/video tape in definition of “qualified property” • Generally effective for property placed in service after December 31, 2008 |
| 172 Net Operating Losses |
§1411, 1412: • Allows taxpayers to irrevocably elect 3, 4, or 5-year carryback of 2008 or 2009 losses in lieu of 2-year carryback • Election made at due date of return (with extensions) • Provisions do not apply to TARP recipients • Any loss carried back under provision is reduced by 10% • Suspends 90% limitation on use of AMT NOL deduction • Effective for tax years ending during 2008 or 2009 for regular NOLs • Effective for AMT NOLs for tax years ending after 1997 for NOLs attributable to carrybacks from tax years ending during 2008 or 2009, and carryovers to those years |
§1211, 1212: • Same, except loss carried back not reduced by 10% |
| 179 Election To Expense Certain Depreciable Business Assets |
§1402: • Extends increased §179 expense for 2008 ($250,000) and phase-out amount ($800,000) to 2009 (indexed for inflation) |
§1202: • Same |
| 265 Expenses and Interest Relating to Tax-Exempt Income |
§1501: • Tax-exempt obligations issued in 2009 and 2010, up to 2% of average adjusted basis of all of taxpayer’s assets, disregarded in determining amount allocable to tax-exempt interest for purposes of interest disallowance provision • Amounts disregarded under this provision are financial institution preference items (§291) • Applicable to obligations issued after December 31, 2008 |
§1501: • Same |
| 265 Expenses and Interest Relating to Tax-Exempt Income |
§1502: • For obligations issued in 2009 and 2010, limitations on qualified small issuers and designated obligations increased from $10 million to $30 million • Special rules for pooled financing issues • Applicable to obligations issued after December 31, 2008 |
§1502: • Same, except that qualified §501(c)(3) bonds are treated as issued by benefiting organization |
| 382(m) Limitation on Net Operating Loss Carryforwards and Certain Built-in Losses Following Ownership Change |
§1431: • Notice 2008-83 exceeds Treasury’s authority under §382(m) by exempting class of taxpayers (banks) from limitation on built-in losses following ownership change • Gives Notice 2008-83 effect for ownership changes on or before January 16, 2009, but not after that date (unless pursuant to a binding written contract or a written agreement described in a public announcement or SEC filing) |
§1281: • Same |
| 529 Qualified Tuition Programs |
No provision | §1005: • Expenses paid or incurred in 2009 and 2010 by beneficiary of §529 account enrolled in eligible educational institution for computer technology and equipment are qualified higher education expenses • Expenses for computer software for sports, games or hobbies do not qualify unless the software is predominantly educational in nature • Applicable to expenses paid or incurred after December 31, 2008 |
| 810 Operations Loss Deduction |
§1411(c): • Allows insurance companies to elect 3, 4, or 5-year carryback of 2008 or 2009 losses • Election made at due date of return (with extensions) • Provisions do not apply to TARP recipients • Any loss carried back under provision is reduced by 10% • Effective for tax years ending during 2008 or 2009 |
§1211(c): Same, except loss not reduced by 10% |
| 1202 Partial Exclusion for Gain from Certain Small Business Stock |
No provision | §1241: • Increases percentage exclusion for qualified small business stock sold by individual from 50% to 75% • Applies to stock issued after date of enactment but before 2011 |
| 1374 Tax Imposed on Certain Built-in Gains |
No provision | §1261: • Temporarily reduces S corporation built-in gains holding period from 10 years to seven years • Applies to tax years beginning in 2009 and 2010 |
| 1400U Recovery Zone Bonds |
§1531: • National recovery zone economic development bond limitation and national recovery zone facility bond limitation are allocated among the states based on the proportion that each state’s 2008 employment decline bears to the aggregate 2008 employment decline of all of the states • National recovery zone economic development bond limitation of $10 billion • National recovery zone facility bond limitation of $15 billion • Applicable to obligations issued after the date of enactment |
§1401: • National recovery zone economic development bond limitation and national recovery zone facility bond limitation divided among states by allocating 1% of each limitation to each state, then allocating remainder based on proportion that each state’s 2008 employment decline bears to aggregate 2008 employment decline of all states • Special provisions for state allocations to counties and municipalities • National recovery zone economic development bond limitation of $10 billion • National recovery zone facility bond limitation of $15 billion • Applicable to obligations issued after the date of enactment |
| 3402(t) Withholding on Government Contractors |
§1541: • Repeals requirement for 3% withholding on government contractors. • Effective on date of enactment (but had never been put in effect) |
§1511: • Delays application of 3% withholding requirement until 2012 • Effective on date of enactment |
| 6432 (new) Credit for Qualified Bonds Allowed to Issuer |
§1521(b): • New credit for issuer for interest paid on qualified bonds • Credit amount equals 35% of interest paid • Subject to state law, interest on §54AA taxable government bonds and credit on that interest are, for state income tax purposes, exempt from federal income tax • Applicable to obligations issued after date of enactment |
§1531(b): • Same |
| 7871 Indian Tribal Governments Treated as States for Certain Purposes |
§1532: • National tribal economic development bond limitation of $2 billion • Not applicable to any portion of building used for gaming or located outside reservation • Applicable to obligations issued after date of enactment |
§1402: •Same |
| —- | §1701: • Davis-Bacon rules must be applied to projects financed by qualified clean renewable energy bonds, qualified energy conservation bonds, qualified zone academy qualified school construction bonds and recovery zone economic development bonds |
§1901: • Same |
HEALTH INSURANCE ASSISTANCE FOR THE UNEMPLOYED
| Code Section | House | Senate |
| 35 Health Insurance Costs of Eligible Individuals |
§3002(a)(14): Individual eligible for COBRA subsidy under House Bill §3002 not eligible for credit under Code §35 or §7527 for health insurance costs. Effective for tax years ending after date of enactment. | §3001(b)(14)(A): • Same |
| 139C (new) COBRA Premium Assistance |
§3002(a)(15)(A): COBRA subsidy not includible in gross income of individual. Effective for tax years ending after date of enactment. | §3001(b)(15)(A): • Same |
| 4980B Failure to Satisfy Continua-tion Coverage Require-ments of Group Health Plans |
§3002:• COBRA eligible individuals pay 35% of premium for full continuation coverage. Qualifying event must be involuntary termination between September 1, 2008 and December 31, 2009. Subsidy applies to beneficiaries of covered employees.
• Contributions to a health flexible spending account are not eligible for subsidy. • Subsidy applies to state law requirements for continuation coverage (e.g., state requirements for small employers). • Subsidy ends on or after earlier of: (1) 12 months after first day of first month of applicability; (2) end of maximum COBRA period under federal or state law; or (3) date individual is eligible for Medicare or other group health coverage. • Notice of COBRA coverage from plan administrator must include premium reduction. DOL must provide model notice within 30 days of enactment. • 10-day expedited review from DOL of denial of treatment by group health plan. • Employees age 55 or older or who have 10 or more years of service with their employer may continue COBRA coverage (unsubsidized) until enrollment in Medicare or termination of all health plans of employer that offer COBRA coverage. Includes qualified beneficiaries of covered employee. • Generally effective date of enactment. Note: No transition period. |
§3001:• Nine months of subsidized coverage.
• Does not include extension of unsubsidized COBRA benefits for older or longer service employees. • Generally effective date of enactment. Note: No transition period. |
| 6431 (new) COBRA Premium Assistance |
§3002(a)(12): Employer credited for 65% of premium, but only after it receives 35% premium from individual. Reimbursement is credit against liability for payroll taxes. Effective for premiums to which House Bill §3002(a)(1)(A) applies. | See Code §6432 (new), below. |
| 6432 (new) COBRA Premium Assistance |
§3001(b)(12)(A): Similar to Code §6431 (new) in House Bill, above, but employee eligible for subsidy but who pays full premium must be reimbursed or credited by employer. Effective for premiums to which Senate Bill §3001(a)(1)(A) applies. | |
| 6720C (new) Penalty for Failure to Notify Health Plan of Cessation of Eligibility for COBRA Premium Assistance |
§3002(a)(13)(A): Penalty for failure to notify health plan of cessation of eligibility for COBRA subsidy. Penalty is 110% of premium subsidy. Effective date of enactment. | §3001(b)(13)(A): • Same |
