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Stimulus Bill Mixed Bag for C-stores

By Mehgan Belanger

WASHINGTON -- With both houses of Congress in agreement and expected to vote late Friday and over the weekend on a $790 billion economic stimulus package backed by President Obama, the bill's stakeholders, including the stock market, U.S. citizens, and big and small corporations alike, waited to see whether the bill's measures could boost a fragile economy and spur consumer spending and job creation.

The $790 billion plan consists of $286 billion in tax cuts; $311 billion in programs funded by the appropriations committees; and roughly $193 billion in spending for benefit programs such as unemployment assistance, The Associated Press reported.

"It is the biggest fiscal expansion in our country's history," Larry Summers, a former Clinton administration Treasury secretary and now head of Obama's White House-based economics council, told NBC's "Today" show Friday, adding the bill should not be considered a "silver bullet," but part of a "multipart strategy to contain this decline."

He continued: "We don't have a viable alternative," he said. "We're going to have starts and stops" along the way to recovery.

While NACS -- the association for Convenience and Petroleum Retailing is not taking a stance on the bill, convenience store retailers should pay attention to the provisions in the bill relating to small business tax incentives, John Eichberger, vice president of government relations for NACS, told CSNews Online.

"There are things in there that if retailers look at it and talk to their accountants, they could find things to help the retailers out," he said.

Such small business incentives -- a summary of which was available through House Majority Leader Steny Hoyer's Web site -- cited by NACS include:

-- Temporary Small Business Estimated Tax Payment Relief: The bill reduces the 2009 required estimated tax payments for certain small businesses.

-- Extension of Enhanced Small Business Expensing: This extends the temporary increases given in 2008 for the cost of write-offs small businesses can claim of expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. For 2009, small businesses can write-off $250,000 of capital expenditures subject to a phase-out once capital expenditures exceed $800,000.

-- Small Business Capital Gains: This provision allows a 75-percent exclusion for individuals on the gain from the sale of certain small business stock held for more than five years, on stock issued after the date of enactment and before Jan. 1, 2011.

Other measures relevant to c-stores include a final approval of $200 million for the Leaking Underground Storage Tank (LUST) Trust Fund, which assists in the cleanup of abandoned gas stations, but will not pay for inspections or to assist state reimbursements programs, according to Eichberger.

"This does not directly benefit retailers, but we hope it will take some of the pressure off of state tank funds and they can use regular money for operations and expenses of inspections," he said. "We tried to get a broader language for the Environmental Protection Agency to be able to use it for operational compliance, but inspections don’t create jobs."

And another provision is an increase in the tax credit for installing alternative fuel systems during 2009 and 2010. The previous credit of 30 percent capped at $30,000, was upped to 50 percent, capped at $50,000.

One of the bill's keystones, "Making Work Pay," is a provision that would provide a $400-per-worker credit for lower- and middle-income taxpayers, and $800 per couple. Officials estimated the $400 credit would equate to about $13 a week more in peoples' paychecks in 2009, and next year, the measure could yield about $8 a week, the AP reported.

Any additional money in consumers' hands is a positive thing, Eichberger told CSNews Online.

"In general, each individual in the country will make a decision on whether this is good or bad thing for the economy," he said. "The more money in consumers' pockets the better for our industry. The backside is it will have to be paid for someday, but for the short term, getting money in their pockets is a fairly good thing."

Critics, however, argued this wouldn't do much to spark the economy immediately.

Among them is the National Retail Federation (NRF), which said in a statement earlier this week, "still doesn’t do enough to provide the jumpstart that would bring shoppers back into stores."

While the credits will provide stimulus, the bill does not provide the "direct and targeted tax relief needed to stimulate consumer spending," said NRF senior vice president for government relations, Steve Pfister. "With consumer spending representing two-thirds of GDP and consumer confidence at the lowest level since records have been kept, it is difficult, if not impossible, to foresee an improvement to overall economic growth until consumers regain confidence and resume spending," he said.

The NRF has argued the best tool to stimulate spending would be a series of national sales tax holidays, which it estimated could save the average family $175, based on the $236 billion in sales tax collected nationwide each year, according to Pfister.

He continued, "The increased sales resulting from these holidays would provide a direct infusion of liquidity into the economy estimated at $20 billion, benefiting consumers and cash-starved states, and would preserve and create significant numbers of jobs through interrelated sectors of the economy including the retail, manufacturing and transportation industries."

Other business-focused provisions in the bill include:

-- Extension of AMT relief for 2009: this would extend AMT relief for nonrefundable personal credits and increasing the AMT exemption amount by $70,950 for joint filers and $46,700 for individuals.

-- Extension of Bonus Depreciation: this extends the temporary benefit established for 2008 allowing businesses to recover the costs of capital expenditures faster than the ordinary depreciation schedule, by permitting immediate write-offs of 50 percent of the cost of depreciable property. This will now cover expenditures made in 2009.

-- Delayed Recognition of Certain Cancellation of Debt Income: Certain businesses will be allowed to recognize cancellation of debt income (CODI) over 10 years for specified types of business debt repurchased by the business after Dec. 31, 2008 and before Jan. 1, 2011.

-- Election to Accelerate Recognition of Historic AMT/R&D Credits: This measure extends a benefit through 2009 that was established to temporarily allow businesses to accelerate the recognition of a portion of their historic AMT or research and development (R&D) credits in lieu of bonus depreciation, based on the amount that each taxpayer invests in property that would otherwise qualify for bonus depreciation. This amount is capped either 6 percent of historic AMT/R&D credits, or $30 million, whichever if lower.

-- Incentives to Hire Unemployed Veterans and Disconnected Youth: This adds two more categories of employees to a current law that allows businesses to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to employees of one of nine targeted groups. One of the new groups is unemployed veterans, or those who were discharged or released from active duty from the Armed Forces up to five years before hiring, and also received unemployment compensation for more than four weeks during the year before hiring. The other group is disconnected youth, or those who are between 16- and 25-years-of-age and have not been regularly employed or attended school in the past six months.

-- Temporary Reduction of S Corporation Built-In Gains Holding Period from 10 Years to 7 Years: This measure temporarily reduces the holding period that an S corporation must hold its assets to avoid a tax on any built-in gains that existed at the time of the conversion to its current state from a taxable corporation. The time was reduced from 10 years to seven years on sales occurring in 2009 and 2010.

-- Premium Subsidies for COBRA Continuation Coverage for Unemployed Workers: To help Americans maintain health coverage when losing their jobs, the bill provides a 65 percent subsidy for COBRA continuation premiums for up to 9 months for those workers who have been involuntarily terminated and their families. This provision also applies to health care continuation coverage if required by states for small employers. To qualify for assistance, a worker must be involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009.

To see a summary of the bill's provisions from Hoyer's Web site, click the link below to download a pdf:

The American Recovery And Reinvestment Act of 2009

CSNews Editor-in-Chief Don Longo discusses what he thinks the true nature of the stimulus bill is in today's Spare Change blog post. To read his thoughts and share your own, click here.
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