Raw Finance

The House on March 4, 2010, approved a revised jobs bill that, among other provisions, would allow issuers selling four types of tax-credit bonds to receive a direct Build America Bond-style subsidy payment from the federal government at a far higher rate than was proposed in the Senate version of the bill.

The modified bill is “terrific,” said Michael Decker, managing director and co-head of the muni division of the Securities Industry and Financial Markets Association. “It means that those products will actually be able to be used, because right now they’re not nearly being used to the extent that Congress intended.”

Meanwhile, in an outline of the bill, House Speaker Nancy Pelosi, D-Calif., said the House will “act later to expand” the BAB program, marking the first time a congressional leader has made that promise. President Obama asked for the BAB program to be made permanent in his fiscal 2011 budget request.

H.R. 2847, the Hiring Incentives to Restore Employment (HIRE) Act, includes the House amendments to the Senate-passed bill and was approved by a vote of 217-201, and the Senate must now approve it. The bill combines the high subsidy rate offered in the original House bill with the broader reach of the Senate version, which would apply the BAB-style subsidies to four tax-credit bond programs, instead of two as the House had proposed.

Other provisions of the HIRE Act include:

New Tax Incentives for Businesses to Hire Unemployed Workers

• Tax incentives for businesses to spur immediate job growth. A new payroll tax exemption to provide employers with incentives to hire and retain new employees. The bill provides businesses with an exemption from Social Security payroll taxes for every worker hired in 2010 who has been unemployed for at least 60 days.  (The maximum value of this incentive is $6,621, which equals to 6.2 percent of wages paid in 2010 up to the FICA wage cap of $106,800.)  The longer that a business has a new qualified worker on its payroll, the greater the tax benefit.  The House amendments incorporate an IRS fix to make sure that small businesses can take advantage of the payroll tax holiday.
• Bonus for Keeping Employees Long Term.  Provides an additional $1,000 income tax credit for every new employee retained for 52 weeks.

Spur Small Business Investments to Grow

• Small Business Expensing. Extends Recovery Act provisions that double the amount small businesses can immediately write off their taxes for capital investments and purchases of new equipment made in 2010 from $125,000 to $250,000.  This is intended help small business make the investments they need to grow and hire more workers.

Highways and Infrastructure

• School Construction, Energy Conservation and Renewable Energy.  Expands Build America Bond’s successful direct payment option to include the issuers of qualified school construction bonds, qualified zone academy bonds, clean renewable energy bonds, and qualified energy conservation bonds.
• Transportation Extension.  Extends surface transportation programs through December 31, 2010 to provide states and localities with the certainty they need to make decisions on capital-intensive projects and allow for billions more to be invested in infrastructure throughout the United States.  It includes language continuing the application and enforcement of the minority-owned business enterprise contracting requirements for surface transportation projects.
• Avoiding a Highway Shortfall & Bolstering the Trust Fund. Transfers approximately $20 billion from the General Treasury and to the Highway Trust Fund (HTF), as the HTF is estimated to run short of funds in June. This transfer will reimburse the HTF for interest it should have collected in the past and will allow the federal government to support existing federal highway and transit programs through the end of this year at the levels authorized for Fiscal Year 2009.

Offsets

• Cracks down on Overseas Tax Havens.  Provides the U.S. Treasury Department with significant new tools to find and prosecute U.S. individuals that hide assets overseas from the Internal Revenue Service.  The bill would require new reporting by foreign financial institutions to give the IRS more data to detect fraud and tax evasion.
• Delaying tax break for foreign interest payments. Delays for 3 years (through 2020) a tax break enacted in 2004 that would let U.S. multinational companies that have shipped jobs overseas reduce their U.S. taxes by deducting more of their worldwide interest income against their U.S. income.  This provision has not gone into effect, and no company currently utilizes this provision.