President Obama signed the American Recovery and Reinvestment Act (H.R.1) on February 17. After intense public debate and lightning speed negotiations, both the House of Representatives and Senate approved the final legislation on February 13. SEMI actively lobbied Capitol Hill on the stimulus bill and the final package contains several provisions favorable to SEMI member companies.

The final bill includes an extension of bonus depreciation rules. This provides a tax incentive for companies to buy equipment this year. Improved depreciation rules for equipment purchases have long been a SEMI priority so that the tax treatment more accurately reflects the lifespan for equipment used in the semiconductor industry.

The final stimulus bill includes an expansion of the net operating loss (NOL) carryover rules so that they can be applied over five years rather than two years. The final bill limits this provision to companies with $15 million in revenue or less and makes it available for 2008 only. The originally proposed provisions were much more generous, but Congress, in a surprise move, pared them back in order to reduce the overall size of the bill. This provision provides tax relief for smaller companies not currently profitable.

SEMI strongly supports increased federal investments in R&D to promote basic research and to expand grant opportunities for the private sector and universities. Both the House and Senate bills included increased funding for key science agencies in line with the overall goals of the America COMPETES Act that would double these agency budgets over seven years. The supplemental spending approved in the stimulus bill is in addition to what is normally spent each year through the federal budget.

The final agreement provides a significant boost in funding for a wide range of agencies. The programs most relevant to SEMI member companies fared very well:

• National Science Foundation: $3 billion
• National Institute for Standards and Technology: $600 million
• Department of Energy— Office of Science: $1.6 billion
• Department of Energy— Energy Efficiency and Renewables: $2.5 billion
• Advanced Research Projects— Energy: $400 million

Alternative energy is a centerpiece of this legislation. The final bill includes numerous provisions and billions of dollars in new spending intended to increase government use of alternative energies, spur development of the domestic market and create “green” jobs. SEMI and the PV Group lobbied especially hard in support of solar provisions and the final results demonstrate a significant U.S. government commitment to alternative energy. Some highlights:

• New Manufacturing Tax Credit: A major win is the new manufacturing tax credit of 30 percent for facilities that manufacture renewable energy products. The credit is capped at $2.3 billion and the Treasury Department must act within 180 days to create a certification program with a competitive application process. With over 90 percent of worldwide solar panel production outside of the United States, the suppliers of manufacturing equipment to make solar panels are pressed to locate their factories near the solar panel makers. This new tax credit provides an incentive for solar panel manufacturers and their suppliers to locate in the United States.
• Loan Guarantee Program: The Department of Energy will create a new, temporary loan guarantee program for renewable energy projects to address the challenges companies face with access to capital. The program will receive $6 billion in federal funding to cover associated costs. This will enable the DOE to guarantee approximately $60 billion in loans. The loan guarantees are an area of intense focus right now given the challenges and limited activity of the existing DOE program. As a result, we expect to see structural improvements to the program and perhaps the creation of a Clean Energy Bank.
• Government Spending on Renewables: The government is significantly increasing spending on renewable energies at federal buildings and military installations. SEMI is analyzing the extensive final bill for exact figures but it appears there are several billion dollars available for new federal spending and government procurement of solar and other renewable energies.
• Alternative to the Investment Tax Credit (ITC): The final bill provides DOE grants as an alternative to the investment tax credit. SEMI commends Congress for passing an eight-year extension of the solar ITC last year, but unfortunately, the credit’s effectiveness has been diminished since many companies are not able to claim the credit given current economic and financial circumstances. Under the new arrangement, unprofitable companies will be able to get a grant from DOE of the amount that they would have been able to claim in the credit.

Lobbying in Washington was intense on the stimulus bill with many industries and interest groups seeking to include favorable provisions. SEMI was an active part of that mix and started a lobbying campaign last fall when it became clear there would be a stimulus bill. We met with numerous congressional offices to emphasize critical issues—targeting outreach to leadership and key committees.

In terms of leadership, SEMI met with the tax and innovation advisors to Senate Majority Leader Reid (D-NV) and helped rank-and-file members prepare their input to House Majority Leader Hoyer (D-MD). SEMI also met with staff to Rep. George Miller (D-CA), chairman of the House Education Committee and a conferee on the final bill. In terms of committees, SEMI met with tax staff for the Senate Finance Committee and the House Ways and Means Committee as well as a senior advisor to Senate Energy Committee chairman Bingaman (D-NM).

SEMI and our member companies weighed in with many more policymakers through calls and letters. SEMI sent three letters to congressional leadership at various stages of the negotiations and member companies contacted their constituent congressional offices in response to a SEMI Action alert. SEMI also provided input to the Obama Administration through a joint letter and meetings with a group of leading high-tech trade associations.

As part of the lobbying effort, a group of technology CEOs met with President Obama to discuss ways to address the significant challenges that companies face. Mike Splinter, CEO of Applied Materials, participated in this meeting and spoke with President Obama about the potential for PV/solar energy to create new jobs and stimulate the economy. “Structured and implemented in the right way, the recovery package can be much more than just an interim financial rescue plan,” said Splinter. “Wise investment today can lead to a much brighter future for America by putting in place the foundation on which to build a stronger and more competitive economy.”

The stimulus bill provides increased funding for government grants that are available to the private sector. SEMI encourages companies interested in grants to start preparing now and consider doing initial outreach to government agencies. Agencies are expected to quickly release requests for proposals. The government plans to act with urgency and get these funds disbursed quickly to provide immediate economic stimulus.

Deadlines for grant applications could be as short as 30 days for formula-based funds, 90 days for competitive grants and 120 days for new competitive grant programs. Decision-making also is expected to move quickly. Companies interested in government grants are encouraged to contact the SEMI Washington office (semidc@semi.org).

We expect other legislative activities this year that could provide opportunities for companies. The Senate and House Energy Committees already are working on an energy bill and hope to make substantial progress by this spring. The bill likely will focus on a cap-and-trade carbon emissions system but could also include a renewable portfolio standard requiring a percentage of electricity to be generated from renewables, changes to the DOE loan guarantee program, creation of a Clean Energy Bank and other issues.

In addition, the annual appropriations process is heating up with FY09 funding soon to be finalized and the FY10 budget proposal due soon. Congress may also take up a tax extenders bill to deal with items like the R&D tax credit which is scheduled to expire at the end of the year.

For information on the PV Group, please visit www.pvgroup.org. For more information on U.S. Public Policy, please click here. For information on public policy and advocacy in other countries, please click here.

February 17, 2009