American Recovery and Reinvestment Act of 2009

THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 (ARRA) – FEBRUARY 12, 2009

SBA Summary Information Related to ARRA  

90 Percent Guarantee on 7(a) loan program

The bill allows SBA to temporarily raise guarantees on its 7(a) loan program to as much as 90 percent for some loans through calendar year 2009, or until the funds are exhausted. Increasing the SBA guarantee percentage will provide banks with the greater confidence they need to extend credit during the current recession and make more capital available to small business owners.At present, SBA can guarantee loans up to 85 percent on loans up to $150,000, and up to 75 percent on loans greater than $150,000. The 50 percent guarantee on SBA Express loans would remain unchanged.

Fees for Borrowers Eliminated

The bill also temporarily eliminates fees for borrowers on SBA 7(a) loans and for both borrowers and lenders on 504 Certified Development Company loans, through calendar year 2009, or until the funds are exhausted. This will mean more capital available to small businesses at a lower cost. The fee elimination is retroactive to February 17, the day the Recovery Act was signed.  SBA is developing a mechanism for refunding fees paid on loans since then.

Business Stabilization Loans

The bill creates a new SBA loan program to provide deferred-payment loans of up to $35,000 to viable small businesses that need the money to make payments on an existing, qualifying loan for up to six months. These loans will be 100 percent guaranteed by SBA. Repayment would not have to begin until 12 months after the loan is fully disbursed. The bill provides $255 million for this new program. These loans will help ensure that small businesses have time to re-focus their business plans in order to succeed in the long run.

Microloans

The bill expands SBA’s Microloan program, which provides small loans (up to $35,000) paired with technical assistance to start-up, newly established or growing small businesses. The bill provides funding to increase loans from SBA to participating microlenders by $50 million through September 30, 2010, and adds $24 million in grants to provide technical assistance to borrowers. Historically, these loans reach low-income individuals, women and minorities in both rural and urban areas. Expanding this program through the stimulus bill will help ensure these entrepreneurs are not left behind in the credit crunch.

Refinancing

The bill also gives SBA the power to use the 504 Certified Development Company program to refinance existing loans for fixed assets, providing fresh support for small business expansion. This change will help business owners expand their current development projects and create jobs in their communities.

Secondary Market Expansion

The bill authorizes SBA to establish a secondary market for pools of “first lien” loans under the 504 program. These “first lien” loans from commercial lenders currently have no SBA guarantee. The bill authorizes SBA to deploy federal guarantees for pools of these first lien loans, so that they can be sold to investors in a secondary market. Providing liquidity for these first mortgages will help encourage lenders to continue participating in SBA’s 504 loan program, which provides a key source of capital for community development and other projects.

The bill also empowers SBA to set up a Secondary Market Lending Authority that would make direct loans to broker-dealers that participate in the secondary market for SBA-guaranteed 7(a) loans. These broker-dealers would use the funds to purchase SBA-backed loans from commercial lenders, assemble them into pools and sell them to investors in the secondary loan market. This program may help address some of the issues facing the secondary market for SBA loans and may ultimately help SBA lenders make new loans to borrowers.

Investment Program

The bill helps SBA-licensed Small Business Investment Companies (SBICs) and families of SBIC funds better leverage the capital used to invest in small businesses. The bill sets maximum levels of funding the agency can provide to these companies at up to three times the private capital raised by those companies, or $150 million, whichever is less. It also raises the percentage any one SBIC can invest in a single small business to 10 percent of total capital, and raises from 20 percent to 25 percent the percentage of any licensee’s dollar investments that must be made in “smaller” businesses.

Surety Bonds

The bill also raises the maximum contract amount that can be covered by an SBA guaranteed surety bond from $2 million to $5 million, and, under certain circumstances, for contracts amounting to $10 million, and provides additional funds to cover the costs of expanding this program. Small businesses need surety bonds in order to bid on and obtain many federal and other contracts. The changes are particularly helpful to small and emerging contractors looking to bid on public construction and service projects. SBA guarantees surety bonds to small businesses that private surety companies would not otherwise be able to extend.

·         Recovery Act More Than Doubles Surety Bond Guarantee Ceiling for Small Businesses

·         Upcoming workshops about financing

·         Learn more about SBA’s financial assistance programs

COBRA Tax Credit

The Recovery Act of 2009 includes changes to the health benefit provisions of COBRA. If your small business has had to lay off workers due the recession, this may be important for you to know. Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.

IRS Summary Information Related to ARRA - http://www.irs.gov/newsroom/article/0,,id=204335,00.html

• Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid.

• Increased Transportation Subsidy. Employer-provided benefits for transit and parking are up in 2009.

• Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.

• Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago. Information on the carryback, an expanded section 179 deduction and other business-related provisions is now available.

• COBRA: Health Insurance Continuation Subsidy. The IRS has extensive guidance for employers, including an updated Form 941, as well as information for qualifying individuals.

• First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement.

• Enhanced Credits for Tax Years 2009, 2010. Details available on the earned income tax credit, additional child tax credit and American Opportunity Credit, a new higher education benefit.

• Payroll Checks Increase This Spring. The Making Work Pay Tax Credit will mean $400 to $800 for many Americans. The IRS has issued new withholding tables for employers.

• Health Coverage Tax Credit. Credit increases from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

COMPLETE LIST OF PROVISIONS - http://finance.senate.gov/press/Bpress/2009press/prb021209.pdf

TAX RELIEF FOR INDIVIDUALS AND FAMILIES

·         Increase Eligibility for the Refundable Portion of Child Credit

·         “American Opportunity” Education Tax Credit

·         Computers as Qualified Education Expenses in 529 Education Plans

·         Refundable First-time Home Buyer Credit

·         Sales Tax Deduction for Vehicle Purchases

·         Temporary Suspension of Taxation of Unemployment Benefits

·         Extension of AMT Relief for 2009.

TAX INCENTIVES FOR BUSINESSES

·         Extension of Bonus Depreciation

·         Election to Accelerate Recognition of Historic AMT/R&D Credits

·         Extension of Enhanced Small Business Expensing

·         5-Year Carryback of Net Operating Losses for Small Businesses

·         Delayed Recognition of Certain Cancellation of Debt Income

·         Incentives to Hire Unemployed Veterans and Disconnected Youth

·         Small Business Capital Gains

·         Temporary Small Business Estimated Tax Payment Relief

·         Temporary Reduction of S Corporation Built-In Gains Holding Period from 10 Years to 7 Years

·         Repeal of Treasury Section 382 Notice

·         Treatment of Certain Ownership Changes

MANUFACTURING RECOVERY PROVISIONS

·         Industrial Development Bonds (IDB)

·        Advanced Energy Investment Credit

ECONOMIC RECOVERY TOOLS

·         New Markets Tax Credit

·         Recovery Zone Bonds

·         Tribal Economic Development Bonds

·         Modify Speed Requirement for High-Speed Rail Exempt Facility Bonds

INFRASTRUCTURE FINANCING TOOLS

·         De Minimis Safe Harbor Exception for Tax-Exempt Interest Expense for Financial Institutions

·         Modification of Small Issuer Exception to Tax-Exempt Interest Expense Allocation Rules for Financial Institutions

·         Eliminate Costs Imposed on State and Local Governments by the Alternative Minimum Tax

·         Delay Application of Withholding Requirement on Certain Governmental Payments for Goods and Services

·         Qualified School Construction Bonds

·         Extension and Increase in Authorization for Qualified Zone Academy Bonds (QZABs)

·         Tax Credit Bond Option for State and Local Governments (“Build America Bonds”)

REINVESTMENT IN RENEWABLE ENERGY

·         Long-term Extension and Modification of Renewable Energy Production Tax Credit

·         Temporary Election to Claim the Investment Tax Credit in Lieu of the Production Tax Credit

·         Repeal Subsidized Energy Financing Limitation on the Investment Tax Credit

·         Removal of Dollar Limitations on Certain Energy Credits

·         Clean Renewable Energy Bonds (“CREBs”)

·         Qualified Energy Conservation Bonds

·         Tax Credits for Energy-Efficient Improvements to Existing Homes

·         Tax Credits for Alternative Refueling Property

·         Plug-in Electric Drive Vehicle Credit

·         Addition of Permanent Sequestration Requirement to CO2 Capture Tax Credit

OTHER PROVISIONS

·         Treasury Department Energy Grants in Lieu of Tax Credits

·         Treasury Department Low-Income Housing Grants in Lieu of Tax Credits

ASSISTANCE FOR FAMILIES & UNEMPLOYED WORKERS

·         Extension of Emergency Unemployment Compensation

·         Increase in Unemployment Compensation Benefits

·         Unemployment Compensation Modernization

·         Temporary Assistance to States with Advances to Unemployment Trust Funds

·         Additional Unemployment Provisions

·         Temporary Assistance for Needy Families Contingency Fund: (Extension of TANF Supplemental Grants &Child Support Enforcement)

HEALTH INSURANCE ASSISTANCE

·         Premium Subsidies for COBRA Continuation Coverage for Unemployed Workers

·         Medicare Payments for Teaching Hospitals

·         Medicare Payments to Hospice

·         Medicare Payments to Long Term Care Hospitals

STATE FISCAL RELIEF AND MEDICAID

·         Temporary Federal Medical Assistance Percentage (FMAP) Increase Temporary Increase in Disproportionate Share Hospital (DSH) Payments

·         Extension of Moratoria on Medicaid Regulations

·         Extension of Transitional Medical Assistance (TMA)

·         Extension of the Qualified Individual Program

·         Provisions from the Indian Health Care Improvement Act

·         Prompt Payment Requirements for Nursing Facilities and Hospitals

HEALTH INFORMATION TECHNOLOGY

·         Funding for Health Information Technology (IT) through Medicare and Medicaid Incentives

TRADE PROVISIONS

·         Expansion of Trade Adjustment Assistance (TAA) Programs (including Duty Refund Recollection)

DEBT LIMIT

·         Debt Limit Increase