This article was originally published on November 8, 2021. It was updated on November 16, 2021 to reflect that IIJA was signed into law on November 15, 2021.
- The Infrastructure Investment and Jobs Act includes $550 billion in new federal spending over the next five years.
- The bill aims to renew current programs and provides financial support to infrastructure, transportation, clean energy, cybersecurity and other initiatives.
- The IIJA eliminates the employee retention tax credit for most employers as of September 30, 2021.
- Intended recipients may need to actively review the available opportunities to benefit from the Act.
What opportunities does the IIJA have for you?
Let the building begin
The Infrastructure Investment and Jobs Act (IIJA or “Act”) was signed into law on Monday, November 15. The $1.2 trillion package was introduced under President Biden’s American Jobs Plan in March 2021 and passed by the Senate in mid-August. After a three-month stalemate in the House (as a result of key Democrats tying its passage to the reconciliation bill, the Build Back Better Act), it was passed on November 5.
The new 2,700+ page infrastructure law holds two main objectives:
- First, it renews numerous current infrastructure and transportation programs, which were recently extended through December 3, 2021.
- Second, the IIJA includes $550 billion in new federal spending over the next five years.
The majority of the new spending focuses on all modes of transportation — including revitalization and improvements to the national supply chain infrastructure — from the country’s ports to aging roadways and bridges. The Act also provides federal spending for clean energy resources, power and water infrastructures, public transit, and the expansion of cybersecurity and broadband services across the United States.
The massive package also provides direct and/or indirect support for businesses, state and local governments, and other entities (e.g., nonprofits) that support these initiatives. However, intended recipients may need to actively review the available opportunities, generally through new or expanded grant programs, to benefit from the Act.
For the transportation and logistics industry, the IIJA focuses on the aging national infrastructure while enhancing safety programs and regulations both for companies and enforcement bodies. Of the total new spending included in the Act, $110 billion is designated for fixing roads and bridges across the physical supply chain. Also, the IIJA renews funding for numerous infrastructure programs that have been under short-term extensions.
The IIJA includes numerous safety and regulatory provisions. For example, all new commercial motor vehicles are required to have automatic emergency braking technology along with rear/side underride guard protection for all trailers. Additional funds will be made available to the Federal Motor Carrier Safety Administration (FMCSA) for enhanced enforcement efforts and studies analyzing the cost and effectiveness of electronic logging devices. Funding will also be available to local and state governments that undertake new or enhanced safety enforcement programs.
Other provisions include a truck leasing taskforce to consider the fairness of lease-purchase agreements, guidance on truck broker and dispatcher operations, and a pilot program to study the effect drivers under the age of 21 operating interstate commercial motor vehicles could have on the current driver shortage.
State and local governments
The legislation will have a substantial effect on state and local governments that are both direct beneficiaries of initiatives and “financial funnels” for recipients within their jurisdiction. For example, funds provided through the Surface Transportation Block Grant are intended to help local governments address transportation needs. Additional programs have been put in place to improve infrastructure technology and resiliency.
Many state and local governments have infrastructure projects that are ready to utilize the funding; however, some of these entities are still struggling to balance their continued response to the pandemic with infrastructure and other priorities. The administration of COVID-relief and unemployment programs over the last 18+ months stretched resources for many entities. (State and local governments are not immune to the labor shortage facing private sectors.) Given limited resources, many state and local governments are utilizing professional advisors to manage program administration, review and approve vendor activity, as well as assist with compliance monitoring.
Energy and utilities
Other critical infrastructure sectors, energy and water, received allocations of roughly $73 billion and $55 billion, respectively. This aid is intended to assist in the areas of sustainability, cybersecurity, and mitigating the future effect of climate change.
- Investments in green technology (i.e., hydro, wind, nuclear energy, and carbon capture technology)
- Funding for sustainable manufacturing
- Education and job training for green energy careers
- Sustainable residential and commercial infrastructure for energy efficient appliances and green buildings
- Grants for improving current policies designed to protect data
- Legislation requires certain recipients of federal funding to standardize cybersecurity practices
- Improve responses to wildfires
- Upgrade the safety and reliability of transmission lines
- Help mitigate the effect of droughts
To meet the ever-rising expectation to help fight the effect of climate change and reduce carbon emissions, the energy and utility industry will likely have to increase operational and capital spending for investments in green energy, improvements to the energy grid (stronger transmission lines to cybersecurity), enhancements to drinking and wastewater infrastructure, and employee training. Utilizing the programs in the IIJA can help finance these costs and reduce the effect on organizations and their customers.
Though the legislation is focused on transportation, energy, and other sectors, the construction industry is also a big winner. Industry advocates and trade associations, such as Associated General Contractors of America, have been pursuing this legislation for over a decade. With significant dollars flowing through government bodies and grant programs to build infrastructure (for utilities, roads, ports, bridges, rail, and other initiatives), construction companies and businesses that support the industry are among the biggest beneficiaries of the legislation.
Contractors focused on highway, airport, rail, energy, and other heavy construction sectors could notice up to a doubling of federal dollars supporting state and local budgets for diverse projects. To benefit from the increasing cash flow to the construction industry, contractors will need to stay on top of traditional funding sources while learning about new grants, bidding opportunities, and regulatory and administrative requirements.
One of our nation’s most vulnerable areas is the cybersecurity of our critical infrastructure. This is why cybersecurity funding, enhancement, and maturity are woven throughout the bill. The IIJA provides new mandates for establishing cybersecurity plans and adopting cybersecurity “maturity models” that standardize cybersecurity policies and practices. The Act also provides assistance for businesses, state and local governments, and other entities to prepare for and protect against cyberattacks.
The heightened awareness for enhanced cybersecurity comes after many employers were forced to accommodate a remote workforce in response to COVID-19. Without any time to plan or prepare, they experienced an exponential increase in their cyber risk exposure. Cybersecurity and ransomware incidents on critical infrastructure earlier this year were also key drivers of this initiative.
As cybersecurity risk continues to grow, the IIJA can help businesses and state and local governments finance a risk assessment of current systems and design a cybersecurity program to address current and emerging threats.
The IIJA allocates $65 billion to expand basic broadband connectivity and service, with a focus on underserved areas. It will address middle mile network expansion to allow easier access to connectivity for providers. Funding will be pushed to local municipalities for both infrastructure and expansion. Low-income households will continue to receive subsidies, similar to the voice lifeline programs.
The distribution for the funds will occur in four phases:
- Grants to states for qualifying broadband infrastructure and complimentary projects ($42.5 billion)
- Middle mile broadband infrastructure ($1 billion)
- Competitive grant programs for digital equity ($2.75 billion)
- Broadband affordability ($14.2 billion)
Public, nonprofit, and private providers will need to understand how to qualify for grants and subsidies, which agency to pursue a grant from, and how to comply with new rules and regulations for performance and completion statistics. More guidance is expected on grant applications, requirements, reporting, and compliance.
Employee retention tax credit
The IIJA eliminates the employee retention tax credit for most employers as of September 30, 2021. Most organizations that would have qualified for the fourth quarter of 2021 under the expanded provisions of the American Rescue Plan will not be able to claim the credit as planned. However, assuming they qualified under either the partial suspension or the gross receipts test, they will still be able to amend prior quarter returns for the next three years to claim the credit.
New businesses that qualify as “recovery startup entities” — if they began after February 15, 2020 and had less than $1 million in revenue for each of the prior three years — will continue to be eligible for the credit in the fourth quarter. The only criteria for eligibility for the credit is the starting date of the business and the limited receipts. The entity will not have to meet a government shutdown test or a reduction in gross receipts. However, the credit amount is now capped at $50,000 for these new entities for both the third and fourth quarters.
How we can help
CLA can help businesses and state and local governments navigate the new law, provide industry insights, and work with you to address specific challenges you are facing.
Roll-up your sleeves and dig into the bill to identify opportunities that could benefit your organization. CLA exists to create opportunities for our clients, our people, and our communities.
Federal funding generally has red tape, such as matching requirements, eligible costs, and activities. It’s important to understand these requirements and develop a compliance plan.
Develop a cybersecurity plan, adopt a framework, and integrate security vulnerability assessments, penetration testing, and incident response into your cybersecurity strategy.
Engaging with state and local governments now can make it easier for your organization to receive a portion of the funding. CLA can provide guidance on how the federal government will allocate funds to state and local governments and help you throughout the grant-making and management process.
Employee retention credit
If you have questions about prior or continued eligibility for the employee retention tax credit, or how to proceed if you have been preemptively reducing withholding deposits in the fourth quarter, contact your CLA advisor.