American Jobs Plan Proposes $2 Trillion in Infrastructure Spending

Pillsbury Winthrop Shaw Pittman LLP

President Biden’s American Jobs Plan includes ambitious spending proposals and modifications of the tax code that will affect businesses in all sectors of the U.S. economy.

TAKEAWAYS

  • President Biden announced the American Jobs Plan Act of 2021, a $2 trillion proposal that will direct targeting spending to improve and modernize the country’s infrastructure.
  • Under the Plan, infrastructure spending will occur over eight years and be paid for primarily through corporate taxes over a 15-year period.
  • Congress will negotiate the details of the Plan over the coming weeks and months and it is likely that the final bill will differ substantially from this initial proposal. The upcoming negotiations provide an important opportunity for businesses and other entities with an interest in the outcome of the bill to influence it.

On March 31, 2021, President Biden unveiled the American Jobs Plan of 2021, a $2 trillion proposal aimed at improving and modernizing the country’s infrastructure. The expansive plan includes funding to repair and build roads, bridges and airports, address grid and essential service resiliency, develop and expand clean energy, and deploy broadband service, among many other initiatives. In short, the plan sets forth a very broad definition for the term “infrastructure.” Under the plan, infrastructure spending would occur over eight years, and be paid for primarily through corporate taxes over a 15-year period.

The American Jobs Plan includes ambitious spending proposals and modifications to the tax code that will affect businesses in many sectors of the American economy. The Plan further pairs spending with measures aimed at key White House policy priorities, including spurring workforce development and job creation, supporting unions and collective bargaining rights, advancing clean energy and climate change mitigation measures, and addressing historic economic and racial inequities.

The American Jobs Plan is likely to be the first installment of a two-part package. The second proposal, known as the American Families Plan and not yet released, will center on social programs, like education and health care reforms, and is expected to be announced by the White House in the near term.

While the President’s American Jobs Plan will serve as a legislative roadmap, many critical details will be addressed in Congress over the coming weeks and months. Since Democrats control both the House of Representatives and the Senate, some version of the American Jobs Plan is expected to be distilled into legislation and ultimately passed. Indeed, Speaker Pelosi has announced an ambitious goal of passing a bill through the House of Representatives by July 4, 2021. However, with a closely divided Senate and near uniform opposition from Republicans to the President’s plan in its current form, some delay and fierce negotiations are likely. Businesses and state and local governments that might benefit from the bill should consider getting involved now to ensure that their priorities are protected and promoted.

Highlights of the American Jobs Plan proposal follow.

Transportation Investments

  • Roads, Highways, and Bridges. The Plan calls for $621 billion in spending to improve 20,000 miles of highway; fix the country’s top 10 “economically significant” bridges; repair 10,000 smaller bridges; and support road safety initiatives.
  • Public Transit Systems. The Plan calls for Congress to significant increase federal funding—to the tune of $85 billion—to modernize and expand transit systems.
  • Rail and Freight Services. The Plan seeks $80 billion in rail investments, to modernize high-traffic rail routes, make needed repairs, improve and expand existing rail corridors, and fund programs to support rail efficiency and electrification.
  • The Plan allocates $25 billion for the Airport Improvement Program, terminal renovations, car-free access to air travel, and upgrades of Federal Aviation Administration assets and systems.
  • Waterways and Ports. Under the Plan, $17 billion would be directed to waterways and ports. This funding includes support for programs to mitigate port-related pollution.
  • Address Inequities. The Plan calls for $20 billion to create a new program to reconnect neighborhoods cut off by historic transportation developments and ensure new projects advance racial equity and environment justice and promote access. The Plan further would create a $25 billion dedicated fund to support projects that are important to the national and regional economies but are not addressed by existing funding programs.

Power Generation Modernization and Clean Electricity Investments

  • Clean Energy Generation and Storage Tax Credits. The Plan proposes a 10-year extension and phase down of an expanded direct-pay investment tax credit and production tax credit for clean energy generation and storage. This initiative aligns with President’s Biden’s previously announced goals of achieving a carbon pollution-free power sector by 2035. Tax credits would be paired with strong labor standards designed to ensure that newly created jobs are high quality and that workers have an option to unionize and bargain collectively.
  • State, Local, Tribal Transition to Clean Energy. The Plan supports state, local and tribal government efforts to modernize power infrastructure through complementary policies—like clean energy block grants—that can be used to support clean energy, worker programs and environmental justice initiatives.
  • Federal Purchasing. The Plan envisions using the federal government’s massive purchasing power to drive clean energy deployment across the market by purchasing 24/7 clean power for federal buildings.
  • Energy Efficiency and Clean Electricity Standard. The Plan calls for the establishment of an Energy Efficiency and Clean Electricity Standard designed to lower electric bills and pollution, increase market competition, incentivize efficiency, and leverage carbon pollution-free energy provided by existing sources like nuclear and hydropower, in addition to wind, solar and other renewable resources.
  • Plugging Orphan Oil-and-Gas Wells and Reclaiming Abandoned Mines. The Plan would commit an upfront $16 billion investment focused on plugging oil-and-gas wells, and restoring and reclaiming abandoned coal and uranium mines.
  • Energy Transition in Distressed Communities. The Plan calls for a number of initiatives designed to harness the opportunities and benefits associated with a market-based shift towards clean energy. In particular, the Plan calls for pairing an investment in 15 decarbonized hydrogen demonstration projects in distressed communities with a new production tax credit. The Plan would also establish 10 pioneer carbon-capture retrofit projects for large, steel, cement and chemical production facilities while instituting measures to protect vulnerable communities from increased pollution.
  • Carbon Capture. In order to accelerate carbon capture efforts, the Plan would reform and expand the Section 45Q tax credit, making it direct pay and easier to use for hard-to-decarbonize industrial applications, direct air capture and retrofits of existing power plans.

Electric Vehicle Investments

  • The Plan calls for a $174 billion investment to support the U.S. electric vehicle market. This investment would be used to enable automakers to spur domestic supply chains from raw materials to parts, retool factories, and support American production of batteries and electric vehicles.
  • This funding would further provide for consumer rebates and tax incentives to encourage the sale of American-made electric vehicles; establish grant and incentive programs to spur state and local governments and the private sector to build 500,000 electric vehicle chargers by 2030; replace 50,000 diesel transit vehicles and electrify at least 20 percent of the country’s yellow school bus fleet; and to electrify the federal vehicle fleet, including vehicles used by the U.S. Postal Service.

Resiliency Investments

  • Electric Transmission System. -The Plan would create an investment tax credit to incentivize industry to develop at least 20 gigawatts of high-voltage capacity power lines. The Plan would further establish a new Grid Deployment Authority at the Department of Energy that allows for better leverage of existing rights-of-way—along roads and railways—and supports financing tools additional high-voltage transmission lines.
  • The Plan calls for $50 billion in dedicated investments to increase resilience of essential services such as the electric grid, food systems, urban infrastructure, community health centers and hospitals, roads, rail, and other transportation systems.

Clean Water Infrastructure

  • Replace 100 Percent of Lead Pipes and Service Lines. The Plan would allocate $45 billion for the Environmental Protection Agency’s Driving Water State Revolving Fund and Water Infrastructure Improvements for the Nation Act grants to eliminate all lead pipe and service lines across the country.

Broadband and Digital Investments

  • Broadband Spending. The plan calls for $100 billion to build high-speed broadband infrastructure to reach 100 percent coverage.
  • The Plan also calls for measures to promote price transparency and competition among internet providers and reduce the cost of broadband for all Americans.

Manufacturing, Supply Chain, and Research and Development Investments

  • The Plan would invest $300 billion on American manufacturing and domestic supply chains to increase competitiveness across sectors. This spending includes: $50 billion for a new office within the Department of Commerce to support the supply chain for critical goods; $50 billion in semiconductor manufacturing and research; and $52 billion in domestic manufacturing investment, including support for modernizing supply chains through the 48C tax credit, among other spending programs.
  • Research and Development for Critical Technologies and Climate Change. The Plan would target $180 billion to advance U.S. leadership in areas such as new artificial intelligence, biotechnology and climate change by upgrading research infrastructure as well as targeting funding to create jobs in rural areas and to eliminate racial and gender inequities in research and development and STEM. This R&D funding would be allocated across federal agencies.

Job Creation and Investment in Workforce Development

  • The Plan would tie federal investments in clean energy and infrastructure to job creation and would enhance the ability of workers to unionize.
  • The Plan would further dedicate $100 billion to workforce development programs, including a new Dislocated Workers Program.
  • Home Care Workers. The Plan includes a $400 billion investment to create jobs and raise wages and benefits for home care workers and expand access to affordable care for aging Americans and individuals with disabilities.

Build, Preserve and Retrofit Residential, Commercial and School Buildings

  • Affordable Housing. The Plan calls for $213 billion for affordable housing, including through new federal tax credits to support the construction and rehabilitation of 500,000 homes for low- and middle-income homebuyers and the creation of a grant program to incentivize states and local governments to eliminate exclusionary zoning and harmful land use policies.
  • Schools and Childcare The Plan seeks $100 billion to upgrade and build new public schools, and $25 billion to upgrade childcare facilities and increase the supply of childcare to meet rising demand. The Plan would invest in community college infrastructure like facilities and technology.

Tax Implications

Known as the “Made in America Tax Plan,” the tax provisions of the American Jobs Plan would aim to “pay for” many of the expenditures related to infrastructure through corporate tax measures.

  • Increase the corporate tax rate from 21 percent to 28 percent, largely reversing corporate tax cuts implemented through the 2017 Tax Cuts and Jobs Act. This proposed corporate tax increase is likely a “dealbreaker” for most, if not all, congressional Republicans, meaning that it will likely be an item for negotiation if the Biden Administration aims for bipartisan support for the overall legislation.
  • Discourage offshoring of jobs by increasing the global minimum tax for U.S. multinational corporations to 31 percent, calculated on a country-by-country basis to hit profits in tax havens. The Plan would also eliminate the rule that allows U.S. companies to pay zero taxes on the first 10 percent of return when they locate investments in foreign countries.
  • Encourage other countries to adopt strong minimum taxes on corporations to discourage U.S. corporations from reducing U.S. tax exposure by inverting and switching their headquarters to a foreign country. The Plan would further deny deductions to foreign corporations on payments that could allow them to strip profits out of the U.S. if they are based in a country that does not adopt a strong minimum tax.
  • Restrict the deduction of expenses for offshoring jobs and provide a new tax credit for onshoring jobs.
  • Enact a 15 percent minimum tax on “book income” for large corporations.
  • Prevent U.S. corporations from inverting and claiming foreign residency.
  • Eliminate tax preferences for the fossil fuel industry and restore payments to the Superfund Trust Fund.
  • Ramp up IRS enforcement against corporations.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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