$53.6 billion State Fiscal Stabilization Fund
Recovery Zone Bonds
Extend the bonus depreciation and increased small business expensing
Delayed tax on discharged indebtedness

$53.6 billion State Fiscal Stabilization Fund

Provision(s):
This provision includes:
• $40.6 billion to local school districts using existing funding formulae for purposes including, but not limited to: preventing cutbacks, preventing layoffs and school modernization.
• $5 billion to states as bonus grants for meeting key education performance measures
• $8 billion to states for other “high priority” needs such as public safety, and other critical services, which may include education.

Impact:
These measures should prevent education layoffs, which will maintain jobs with health benefits. School modernization programs could mean more workers in certain areas, which could translate to strengthened economies and an increase in the number of jobs with health benefits, reducing the strain on the Medicaid and Medicare systems.

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Recovery Zone Bonds

Provision(s):
The act permits an issuer to designate an area with: significant poverty, unemployment, general distress, home foreclosures, or an established empowerment zone or renewal community, as a recovery zone.

The act establishes a $10 billion national recovery zone economic development bond limit and creates a special rule for qualified bonds (a type of taxable government bond issued before January 1, 2011 and entitles the issuer to receive an advance tax credit equal to 35% of the interest payable). For bonds designated recovery zone economic development bonds, the credit percentage is 55%.

The act also establishes a separate national recovery zone facility bond limit of $15 billion. These are bonds used for recovery zone property used in the active conduct of a qualified business. The term “qualified business” means any trade or business, except rental of real property, and a business qualifies only if the property is not residential rental property (subject to further limitations). The Bond cap will be separately allocated among the states in proportion to the decline in employment.

Impact:
These bonds should help fuel investment in these areas, which could increase the number of jobs with health benefits, reducing the strain on the Medicaid and Medicare systems.

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Extend the bonus depreciation and increased small business expensing for businesses making investments in plants and equipment

Provision(s):
The act extends the bonus depreciation and increased small business expensing for businesses making investments in plants and equipment in 2009

Impact:
This should help businesses lower their taxable income and therefore retain more cash.

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Delayed tax on discharged indebtedness

Provision(s):
The act delays the tax on businesses that have discharged indebtedness.

Impact:
Because discharged indebtedness usually results in taxable income to an entity, this provision will delay that taxable event.

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