On February 17, 2009 President Obama signed into law the much publicized American Recovery and Reinvestment Act of 2009 (ARRA) which contained $787 billion worth of tax incentives and spending provisions intended to help revitalize the economy. The provisions range from significant relief for businesses that restructure their debt, to those that encourage individuals to make investments in houses and cars. Notable incentives are provided for energy investments – it is truly the time to become clean and green. Below are highlights of key elements of the act, organized in three sections - business, energy and individual provisions.

BUSINESS PROVISIONS

I. General

Deferral of Debt Cancellation Income

When debt is cancelled or repurchased at a discount, cancellation of indebtedness income may be generated. Under the new law, if a corporation or any entity that issues debt in its business has the debt discharged or reduced in 2009 or 2010, rather than having the income included in the year of the transaction, the taxpayer can elect to be taxed on the cancellation of indebtedness income ratably over a period of years. For income arising in 2009 or 2010 the income inclusion rules are the same, and the income is included in each year from 2014 to 2018, inclusive. The discharge can occur by: the debtor or a related party acquiring the debt for cash or for another debt, the complete forgiveness of the debt, the contribution of the debt to capital, or the exchange of the debt for stock or a partnership interest.