Final Stimulus Package Offers Opportunities for SEMI Members
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 had been 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.
Federal R&D Investment
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:
- 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: 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.
- Renewable Energy: 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.
- 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.
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Feb 19, 2009