Washington, D.C. – As the country faces the worst economic crisis in a generation, the House of Representatives today approved a $789 billion investment in the recovery of the economy. Congressman Dale E. Kildee (D-MI) supported the measure which is expected to create or save as many as 3.5 million jobs. H.R. 1, the American Recovery and Reinvestment Act, makes unprecedented investments in modernizing aging roads and infrastructure and provides immediate tax cuts for 95 percent of workers and their families.

“Not only will this bill provide a timely boost to the economy, but provisions focused on new vehicle sales will help consumers purchase new cars and trucks as the credit freeze is preventing many Americans from getting loans,” said Kildee. “Dealers, suppliers and carmakers are suffering because of an economic crisis that was not of their making. Incentives to bolster car sales will help cut into retailers’ stockpiles and keep the supply chain moving.“

The bill provides incentives to buy new cars, including light trucks and sport utility vehicles, with a tax deduction for State and local sales taxes paid on the purchase. For taxpayers earning less than $125,000 per year ($250,000 for joint returns), a tax deduction will be available for all state and local taxes paid on the purchase of a new car, light truck, recreational vehicle or motorcycle. The credit is available for purchases of up to $49,500 through the end of 2009.

The American Recovery and Reinvestment Act also provides incentives that would spur development of advanced technology vehicles and provide tax credits to consumers who purchase vehicles powered by hybrid technology. Of the advanced vehicle technology development provisions, Kildee said “the development of hybrid technology will help the domestic auto industry recover and lead the way in manufacturing the leaner, greener vehicles of the future.”

Advanced Battery Technology

The bill provides a total of $2 billion for advanced battery manufacturing grants to domestic manufacturing facilities for the development of advanced vehicle batteries and components.

Plug-in Hybrid Tax Credit

The bill provides a tax credit for families that purchase plug-in hybrid vehicles of up to $7,500 to spur the next generation of American cars. A qualified vehicle is eligible for a $2,500 credit, and if the propulsion is drawn from a battery with at least 5 kilowatt hours of capacity, the credit is increased by $417 and by an additional $417 for each additional hour of capacity.

Alternatively Fueled Fleets

The Department of Energy will receive $300 million to distribute grants through its Clean Cities Program to state and local governments for the purchase of vehicles that utilize fuel cell, electric, or hybrid drive system technologies.

An additional $300 million will be invested in the replacement of federal vehicle fleets with alternatively fueled or hybrid vehicles.

Alternative Fuel Pumps

The harsh economic climate and the not-yet realized demand has made it difficult for many independently operated fuelling stations to install alternative fuel pumps. To alleviate the burden, the bill would increase business credits to 50 percent and caps credits at $50,000. Credits to an individual also are increased to 50 percent, with a cap of $2,000.

Tax Fix for General Motors

Tax code meant to prevent tax aversive mergers, could have created an enormous tax liability of $7 billion for General Motors. The $13.4 billion federal bridge loan extended to the company in December required that GM exchange unsecured debt with bond holders for equity and that half of the company’s payments into the Voluntary Employee Beneficiary Association be made in stock. Those transactions potentially would have created a large tax burden for GM, a burden of half the amount of the entire federal loan. The American Recovery and Reinvestment eliminated that burden to reflect congressional intent in extending the bridge loan. The elimination of this $7 billion liability can help General Motors achieve productivity and profitability.

The U.S. Senate is expected to approve the measure later this weekend, and President Obama is expected early next week to enact into law the American Recovery and Reinvestment Act.