Recovery Act 101
With much debate, the Recovery Act of 2009 was passed by Congress to help pull the U.S. from the grips of a historic recession. There are many provisions in the new law that could help package printers in these difficult times.
April 2009 by Tom Polischuk
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Instead of directly giving us that kind of stimulus, the government has tailored the bill with the objective of saving or creating millions of jobs to halt the deepening recession and get the economy back on track. Pennsylvania’s Republican Senator, Arlen Specter, provided one of the key swing votes that allowed passage of the bill. Senator Specter said, “I supported the economic stimulus package for one simple reason: The country could not afford not to take action. The unemployment figures, the latest earning reports, and the continuing crisis in banking made it clear that failure to act would have left the United States facing a far deeper crisis in the future.”
As it was finally enacted, the Recovery Act includes close to $300 billion in tax breaks to individuals and businesses. The remainder of the funding will be in the form of government spending through a host of federal agencies, and will support a laundry list of projects affecting infrastructure, energy, healthcare, education, and so on.
Benefits for printers
The Recovery Act has a number of provisions that could have a positive impact on the package-printing community—primarily in the form of opening up credit markets to sustain and grow businesses, and also in the form of tax breaks. A press release issued by The White House, Office of the Press Secretary, on March 16 stated, “The Obama Administration firmly believes that economic recovery will be driven in large part by America’s small businesses, which have generated about 70 percent of net new jobs annually over the past decade.”
To support this belief, $730 million of the Recovery Act was allocated to the Small Business Administration (SBA, www.sba.gov). According to the SBA, this money will be used to make it easier and less expensive for small businesses to get loans; provide incentives for private lenders to make more small business loans; and boost liquidity in the credit markets.
This funding includes $375 million that will be used to temporarily eliminate fees (that are passed on to borrowers) on SBA-backed loans and to raise the SBA guarantee to participating lenders to 90 percent for its 7(a) loan program. The SBA says this program is the most commonly used type of loan. These measures are in force retroactively from Feb. 17 through the end of 2009, or until the funding is used up. The maximum loan available through the 7(a) program is $2 million.
As an example of how the bonus depreciation can positively impact both equipment suppliers and package printers, below are some excerpts from a letter written by Dick Chesnut, president of W.R. Chesnut Engineering (www.chesnuteng.com), to his congressman, The Honorable Rodney Frelinghuysen. Chesnut wrote this letter on Jan. 29, 2009 to encourage Congressman Frelinghuysen to support similar capital equipment write-off incentives in any new stimulus package.
“I would like to document the beneficial impact of the Tax Stimulus Package of 2008 that President Bush and Congress enacted.
About this time last year (February ‘08), we contacted our customer in Massachusetts who prints pressure-sensitive labels. At that time they were considering the purchase of a new Combination Flexo Gravure Press …
At that time we presented information about the Economic Stimulus Package. We informed them that they could write off 57 percent of the cost of the machine in the year ‘08, provided the machine was purchased and installed before December 31, 2008. They signed the order without delay. The rest is history …
What’s more important is that I have no question that this order was placed with us in a timely manner in order to allow time for the construction and installation of the press. As a result of this, Chesnut Engineering added 6 full-time people to its staff and placed many orders to outside subcontractors for materials and supplies.”
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