The Biden-Harris administration announced its American Jobs Plan, a legislative framework laying out an ambitious $2 trillion investment in physical and human infrastructure, on March 31. The bulk of the proposed spending is directed to rebuild US infrastructure in the form of physical improvements on roads, bridges, airports, and ports, with additional investment and tax credits to support clean energy generation and storage, electric vehicles, and energy efficiency.
The American Jobs Plan (Plan) also includes significant proposed investments for housing and school construction, expansion of home- or community-based care for the elderly and those with disabilities, increased access to high-speed broadband internet, and manufacturing and research and development (R&D). The administration ties the federal investments in clean energy and infrastructure to a requirement to provide prevailing wages and requires transportation investments to meet existing transit labor protections. This adds to the administration’s public support of unionization and also calls on Congress to pass the Protecting the Right to Organize (PRO) Act.
To offset many of these costs, the Made in America Tax Plan would increase the corporate tax rate from 21% to 28%, as well as make various international tax changes, including to the global intangible low-taxed income, the base erosion and anti-abuse tax, and the deduction for foreign derived intangible income. These tax changes are anticipated to fund the $2 trillion over 15 years. The tax plan is described in a 25-page fact sheet that outlines the Biden-Harris administration’s policy ambitions to improve the country’s infrastructure, make targeted investments to improve the country’s global competitiveness, and address climate change. Thus begins the work with Congress to transform the proposal into legislation that can pass both chambers and be signed into law.
Given the administration’s goals, it is not surprising that the Plan has a significant focus on the energy sector. In particular, the Plan proposes (1) a nationwide Energy Efficiency and Clean Energy Standard for all of electric generation in order to be free of carbon pollution by 2035; (2) investments in the electric transmission grid; (3) investments in energy efficiency, including retrofitting existing buildings; (4) investments in climate science and R&D; and (5) investments in water infrastructure. We summarize the Plan’s proposals in these areas below.
ENERGY EFFICIENCY AND CLEAN ELECTRICITY STANDARD
A key component of the Plan is the Energy Efficiency and Clean Electricity Standard (EECES). The EECES seeks to move the electric generation sector to “100 percent carbon-pollution free power by 2035.” The Plan provided no details on whether there would be annual clean energy targets on the path to 100% carbon-free electricity or any enforcement mechanism.
The EECES sets an aggressive goal, much more so than any existing state standard. While several states recently enacted a 100% renewable or carbon-free electricity standard, the deadlines to meet these state goals occur between 2040 and 2050.
To meet the EECES goal, the Plan proposes the following programs and policies to encourage the deployment of clean energy:
- A 10-year extension and phase-down of an expanded direct pay investment tax credit (ITC) and production tax credit (PTC) for clean energy and energy storage
- An expansion of the Section 45Q tax credit for carbon sequestration that could be used to retrofit existing power plants
- Purchasing clean power for all government buildings
- Deploying clean energy block grants to support state, local, and tribal governments accelerate clean energy
- $27 billion for a Clean Energy and Sustainability Accelerator to mobilize private investment into distributed energy resources and other building retrofits
INVESTMENTS IN TRANSMISSION INFRASTRUCTURE
The Plan proposes investing $100 billion in the nation’s power infrastructure. The necessity of this investment was brought home during the recent Texas power outages, which showed the need for improvements and investments in the electric grid. To build a more resilient electric transmission system, the Plan calls for the creation of a targeted investment tax credit that incentivizes the buildout of at least 20 gigawatts (GW) of high-voltage capacity power lines.
The Plan would also establish a new Grid Deployment Authority at the US Department of Energy to leverage existing rights-of-way and support creative financing tools to promote additional high-priority, high-voltage transmission lines. A more efficient, resilient, data-driven, and responsive transmission system will also help unlock the full potential of the burgeoning offshore wind sector—which the Biden-Harris administration has also sought to boost, announcing earlier this week a variety of concrete initiatives that executive agencies will be taking to strive toward the construction of 30 GW of offshore wind energy generation by 2030.
The Plan also proposes spending to plug oil and gas wells and restore and reclaim abandoned coal, hard rock, and uranium mines to address safety and environmental hazards associated with these abandoned sites.
EMPHASIS ON ELECTRIC VEHICLES
The Plan proposes significant support for the development and deployment of electric vehicles (EVs). In furtherance of President Biden’s previously stated intention to support the development of EVs and clean transportation, the Plan marshals the spending and procurement power of the federal government in order to facilitate and spur continued development of both EVs and the infrastructure necessary for EV charging.
First, the Plan proposes a $174 billion investment to spur the development of EVs and charging infrastructure. Through that investment, the Plan would establish grant and incentive programs for both governments and municipalities and the private sector to develop a network of 500,000 charging stations. By comparison, approximately 42,000 EV charging stations are presently installed in the United States. In addition, the Plan proposes that 50,000 diesel transit vehicles and 20% of existing school buses nationwide would be replaced with EVs or electrified through a program administered by the Environmental Protection Agency, as supported by the Department of Energy.
Second, the Plan draws on the federal government’s procurement ability and proposes to electrify the federal fleet of vehicles, including US Postal Service vehicles. The Plan specifically proposes a $46 billion investment in federal procurement authority, which would be used for that purpose as well as for ports, pumps, clean materials, and critical technologies like advanced nuclear reactors and fuel.
Third, the Plan proposes the continuation of certain tax incentives and also new point-of-sale rebates for purchasers of EVs made in America. Currently, federal law provides for a $7,500 tax credit to purchasers of EVs unless or until the EV company has sold more than 200,000 EVs; at that point, no federal tax credit is available to purchasers of EVs manufactured by that company. Multiple manufacturers in the United States have surpassed that number already, which renders purchasers of those EVs ineligible for existing tax incentives.
ENERGY EFFICIENCY SPENDING
The Plan proposes spending on retrofitting buildings with energy efficiency measures. These proposed programs focus on retrofitting affordable housing, commercial buildings, schools, and childcare facilities. Home upgrades, including for low-income housing, would be implemented through block grant programs and the Weatherization Assistance Program and by extending and expanding home and commercial efficiency tax credits.
The Plan proposes a $27 billion Clean Energy and Sustainability Accelerator to mobilize private investment into distributed energy resources and retrofits of residential, commercial, and municipal buildings. The Plan also proposes spending $40 billion to improve public housing and $12 billion to improve community college facilities by, among other things, installing energy efficiency measures.
CLIMATE SCIENCE INVESTMENT AND RESEARCH AND DEVELOPMENT
The Plan proposes spending $180 billion for public investments in R&D related to infrastructure and advanced technologies. The Plan calls for a $50 billion investment in the National Science Foundation to create a technology directorate that will collaborate with and build on existing programs across the government and focus on semiconductors and advanced computing, advanced communications technology, advanced energy technologies, and biotechnology.
The Plan also proposes spending $30 billion to fund R&D that bolsters innovation and job creation, and $40 billion to invest in upgrading research infrastructure at laboratories throughout the United States. In addition, to reduce racial and gender inequities in R&D, the Plan is proposing $10 billion for R&D investments at historically black college and universities (HBCUs) and other minority-serving institutions (MSIs). It also proposes spending $15 billion for the creation of up to 200 centers of excellence that serve as research incubators at HBCUs and other MSIs to provide graduate fellowships and other opportunities.
The Plan also focuses on climate science and proposes spending $35 billion for innovation and R&D projects that address climate change and create clean energy technology. As part of this effort, the Plan proposes launching a new agency, the Advanced Research Projects Agency–Climate (ARPA-C), to develop new methods for reducing emissions and building climate resilience and to fund climate research.
Finally, the Plan proposes $15 billion for investments in utility-scale energy storage, carbon capture and storage, hydrogen, advanced nuclear, rare earth element separations, floating offshore wind turbines, biofuel/bioproducts, quantum computing, and electric vehicles.
INVESTMENTS TO DELIVER SAFE AND CLEAN DRINKING WATER TO AMERICAN COMMUNITIES
The Plan proposes spending $111 billion to address three important public health concerns regarding drinking water that the nation is facing today. First, the Plan recognizes that lead is a naturally occurring metal that can cause a variety of adverse health effects, including delays in normal physical and mental development of young children. Notable events, including those in Flint, Michigan, have heightened concern about the possible exposure to lead in drinking water, primarily as a result of corrosion of lead service lines or interior piping. The Plan calls for $45 billion in funding to remove and replace all remaining lead service lines and pipes in the country, which will eliminate potential sources of water-borne lead exposure in homes, schools, and childcare facilities.
Second, the Plan calls for $56 billion to upgrade the millions of miles of aging water and wastewater systems that stretch across the United States and create the potential for hazardous water contamination. This investment will help ensure quality water is available and accessible to everyone. Finally, the Plan calls for $10 billion to detect and address the presence of manmade chemicals called perfluoroalkyl substances in water supplies.
JOBS FOR OIL AND GAS INDUSTRY WORKERS
A key component of the Plan is the jobs created by increased investments in infrastructure and clean energy. But the Plan also recognizes that transitioning to zero-carbon energy sources would displace workers in the oil and gas sector. To help these workers, the Plan proposes spending $16 billion to plug oil and gas wells and restore and reclaim abandoned coal, hard rock, and uranium mines to address safety and environmental hazards associated with these abandoned sites. As the Plan notes, many of these sites are in rural areas that have suffered from underinvestment.
LEGISLATIVE PATH FORWARD
The announced Plan did not include proposed statutory text, but many of the Plan’s proposals are included in the CLEAN Future Act (HR 1512), being considered by the House Energy and Commerce Committee. It is unclear, however, whether the American Jobs Plan will be folded into the CLEAN Future Act or if they will advance as separate legislative initiatives. President Biden and his senior officials stated that the announcement of this Plan is the first step and that they will continue to engage with both parties in Congress to discuss the Plan, solicit feedback, and consider any ideas to improve the Plan and chart a path toward passage.
$100 BILLION INVESTMENT IN BROADBAND NETWORKS
Citing to the lack of broadband infrastructure that supports minimally acceptable speeds for 30 million Americans, the “highest broadband prices among OECD countries,” the lack of adequate access to broadband in rural and tribal areas, and the “stark digital divide” between white families as compared to Black or Latino families, President Biden’s plan calls for tailored broadband infrastructure investment. Specifically, the Plan proposes to build high-speed broadband infrastructure such that 100% of Americans would have access to such networks. The Plan would achieve this goal by prioritizing building “future proof” broadband infrastructure in unserved and underserved areas. There is no further detail provided with respect to the meaning of “future proof”; however, it is likely meant to signal a preference for fiber-based networks over wireless ones. It may also mean that coaxial cable–based networks are also not eligible for such funds.
According to the fact sheet, the Plan would distribute funds to support broadband networks owned, operated, or affiliated with local governments, nonprofits, and cooperatives to support “providers with less pressure to turn profits and with a commitment to serving entire communities.” On its face, it appears that the Plan intends to make government funds available to specific types of broadband network owners in order to compete with private companies that offer such services.
Additionally, the Plan proposes to reduce the retail price of internet service to enhance the “take rate” of such services by consumers. The fact sheet notes that providing subsidies to consumers to cover internet costs is “not the right solution for consumers or taxpayers” and vaguely references President Biden’s desire to working with Congress “to find a solution to reduce internet prices for all Americans.” We expect that the Plan will borrow from legislation introduced in the last Congress by Senators James Clyburn and Amy Klobuchar and impose an obligation on recipients of federal funds to offer an affordable service plan. The Plan addresses a number of issues that we will continue to track.
The Plan calls on Congress to pass the PRO Act. The PRO Act would make dozens of significant labor law changes that would expand joint employer status, narrow independent contractor status, override state right-to-work laws, diminish employer rights in union representation elections, increase damages, and invalidate class action waiver agreements, among other things.
The Plan also ties federal investments in clean energy and infrastructure to prevailing wages and requires transportation investments to meet existing transit labor protections. Prevailing wages are required for construction and service workers on federal contracts under the Davis-Bacon Act and Service Contract Acts, and these could be expanded to other types of federal funding as they were under the American Recovery and Reinvestment Act, when President Biden was vice president.
The Plan also states that federal investments should be tied to project labor, community workforce, local hire, and registered apprenticeships and other labor or labor-management training programs, and requests Congress to include a commitment to increasing American jobs through buy American and ship American provisions. The Plan calls for $40 billion for a new Dislocated Workers Program and sector-based training, including clean energy, manufacturing, and caregiving.
Interestingly, President Biden also asks Congress to eliminate the sub-minimum wage provisions in Section 14(c) of the Fair Labor Standards Act and expand access to competitive, integrated employment opportunities and fair wages for workers with disabilities.
The Plan requests $48 billion in American workforce development infrastructure, which would focus on registered apprenticeships and pre-apprenticeships, creating one to two million new registered apprenticeships slots. President Biden has already revoked a Trump-era executive order that led to the creation of Industry Recognized Apprenticeships (IRAPs), which expanded apprenticeships and provided IRAP sponsors access to federal funding sources but was not directly overseen by the US Department of Labor or subject to all the registered apprenticeship requirements, including nondiscrimination and affirmative action obligations.
Somewhat more opaquely, the Plan seeks funding to “strengthen the capacity of labor enforcement agencies to protect against discrimination, protect wages and benefits, enforce health and safety safeguards, strengthen health care and pensions plans, and promote union organizing and collective bargaining.” This presumably refers to additional funding for the Department of Labor, National Labor Relations Board, and Equal Employment Opportunity Commission. This is in addition to the request for increased penalties for workplace safety and health violations.
Newly confirmed Secretary of Labor Marty Walsh would be in charge of implementing many of these proposals, should they be enacted, in whole or in part.
CORPORATE TAX RATE
Currently, all entities taxable as corporations for US tax purposes are subject to a flat 21% federal income tax rate. The Made in America Tax Plan would increase the corporate tax rate to 28%, as well as make various international tax changes discussed further below. The fact sheet provides that the tax changes are anticipated to raise $2 trillion over 15 years, which is intended to offset many of the costs of the American Jobs Plan.
INTERNATIONAL TAX REFORM
President Biden’s Made in America Tax Plan would make changes to several provisions added to the Internal Revenue Code of 1986, as amended, by the 2017 Tax Cuts and Jobs Act, including global intangible low-taxed income (GILTI), the base erosion and anti-abuse tax (BEAT), and the deduction for foreign derived intangible income (FDII). The Made in America Tax Plan would
- modify GILTI by raising the rate of the GILTI minimum tax to 21%, eliminating the exception from GILTI for qualified business asset investment (QBAI), and having GILTI apply on a country-by-country basis;
- attempt to establish a global framework for minimum taxation by engaging in multilateral negotiations, encourage other countries to establish minimum taxation provisions, deny deductions to foreign corporations on payments that would strip profits out of the United States and into countries without such a minimum taxation provision, and replace the BEAT with a new provision (i.e., one that raises more revenue);
- propose new rules to restrict inversions by US companies and add other rules to discourage companies from claiming residence in so-called “tax haven” jurisdictions;
- deny tax deductions for offshoring jobs and provide credits for onshoring jobs;
- eliminate the deduction for FDII and use the resulting revenue to fund U.S. R&D development;
- add a 15% minimum federal income tax on book income (profits reported to investors), which would apply to what the fact sheet calls “the very largest corporations”;
- eliminate tax incentives for fossil fuels and restore polluter payments to cover the costs of environmental cleanups;
- increase funding to the US Internal Revenue Service to spur enforcement and collections; and
- provide various tax credits to incentivize clean energy and clean energy jobs.
Certain details about the Made in America Tax Plan, such as revenue estimates and whether the plan will ultimately include tax proposals by other members of Congress that are not otherwise discussed in this LawFlash, such as the implementation of a wealth tax, are not yet available. Further discussion of such other tax proposals may be found in our earlier LawFlash