Unpacking the $1 Trillion Senate-Passed Infrastructure Bill: H.R. 3864’s New Opportunities, Requirements, and Potential Liabilities

U.S. President Joe Biden is one step closer to delivering on his campaign promise to modernize the nation’s infrastructure. On August 11, 2021, the Senate passed HR 3684, a roughly $1 trillion bipartisan infrastructure bill (the Infrastructure Bill) by a vote of 69 to 30. The Senate-passed package does not include all of the elements of President Biden’s proposed $2.3 trillion American Jobs Plan, but the bill reflects a notable compromise among an otherwise divided Congress and the White House. The 2,700+-page bill provides significant funding for infrastructure improvements in surface transportation, energy, water, and broadband, among others, and it imposes new and amends certain taxes and fees and rescinds past appropriations for COVID-19-related programs to help pay for new spending. Separately, in addition to funding projects and programs, the bill includes substantive provisions that change federal policy ranging from the issuance of new permits and licenses to streamlining permit application efforts to imposing new environmental and automotive safety standards and requisites to receive federal assistance.

Below is a summary of the bill’s opportunities, requirements, and newly created or amended liabilities for companies and individuals, which include (I) new and expanded funding opportunities through pilot and demonstration projects, grants, financial and technical assistance, tax exemptions and credits, and other incentives; (II) new or revised permitting, leasing, and licensing opportunities and other property rights considerations; (III) new or updated federal standards, reporting requirements, and requisites for funding; and (IV) new, modified, or extended federal tax provisions and fees as well as the termination of funding that has been available for certain programs, particularly those associated with the COVID-19 relief and stimulus efforts.

The bill is now pending before the House of Representatives, which has signaled its intent to consider it at the same time as a $3.5 trillion “budget reconciliation” bill, later this month. Notwithstanding the budget reconciliation effort, there is increasing momentum for the House to pass the bipartisan-backed infrastructure bill on its own. President Biden has promised to sign this bill into law.

I. Funding Opportunities

If enacted, a wide array of funding opportunities would become available through the Infrastructure Bill, and they are cross-cutting among many industries and sectors including energy (including production, transmission, storage, and efficiency), electric vehicles, cybersecurity, transportation, water, and broadband.

Energy

Billions of dollars would be made available for projects, pilot programs, prize competitions, and new tax exemptions in the energy sector. The funding would focus on carbon capture and emissions, renewables, energy storage and recycling, grid improvement and security, rare earths and critical materials, and energy efficiency and sustainability. Below we highlight sections of the Infrastructure Bill that would afford these opportunities.

• Carbon Capture and Emissions: projects to improve smart city infrastructure to reduce emissions and increase efficiency (Sec. 11403); carbon capture, removal, and transportation research and development (R&D) demonstration and pilot programs, grants, prize competitions, and tax exempt bonds (Secs. 40302, 40303, 40304, 40305, 40308, 41004, 41005, and 80402); and industrial emissions demonstration projects (Sec. 41008). These provisions provide for more than $8 billion of funding opportunities.
• Renewables: demonstration projects for clean energy on current/former mine land (Sec. 40342); clean hydrogen R&D programs (Secs. 40313 and 40314); nuclear R&D programs and tax credits (Secs. 41002, 40321, and 40323); solar, wind, and geothermal R&D programs (Sec. 41007); and hydropower and marine energy R&D, efficiency, and system integration programs (Secs. 41006, 40331, 40332, 40333, and 40334). These provisions provide for more than $18 billion of funding opportunities.
• Energy Storage and Recycling: energy storage R&D demonstration projects (Sec. 41008); battery R&D for processing and manufacturing and recycling programs (Sec. 40207); and energy recycling projects for industrial and manufacturing facilities (Sec. 40209). These provisions provide for more than $4 billion of funding opportunities.
• Grid Improvement and Security: programs to prevent outages and increasing grid resiliency (Sec. 40101); loan facilities and grants for the construction of transmission facilities including electric power transmission lines (Sec. 40106); and funding to support state energy transmission and distribution programs that include a focus on energy conservation and emissions reductions (Sec. 40109). These provisions provide for more than $7.5 billion of funding opportunities.
• Rare Earths and Critical Materials: R&D projects to enhance separation technologies for rare earths and critical materials from coal, more efficient uses of each, and the recycling of them (Sec. 41003). These provisions provide for approximately $500 million of funding opportunities.
• Energy Efficiency and Sustainability: loans and grants to increase energy efficiency for commercial and residential facilities and to improve compliance with energy-efficient building codes (Secs. 40502 and 40511); grants to energy-efficient transportation and transportation infrastructure (Sec. 40552); R&D programs for industrial process and sustainable manufacturing (Secs. 40521 and 40522); and additional rebates for energy-efficient commercial and industrial and transformer systems (Sec. 40555).

Electric Vehicles

There are several provisions focused on promoting electric vehicles and electric vehicle infrastructure. These include demonstration and other R&D projects that target second-life applications through the grid or otherwise and recycling of the electric vehicle battery (Secs. 40112 and 40208). The bill also would authorize the provision of grants for public entities to contract with private entities for construction of electric vehicle charging stations and related infrastructure (Sec. 11401) and provision of loans to support the production of domestic critical materials that are essential for electric vehicles (Sec. 40401). These provisions, among others, provide for approximately $7.5 billion of funding opportunities.

Cybersecurity

Under the bill, a fund would be established to provide financial assistance to those who are subject to significant cybersecurity incidents (Sec. 70602). Grants, technical assistance, and other incentives would be offered for promotion, implementation, and use of updated cybersecurity technology investments in the energy sector (Secs. 40123 and 40124).

Transportation

The bill provides new and expanded funding resources and codifies current resources for transportation projects related to airports, surface transportation, and rail systems.

• Airports: The bill expands the eligibility of financing through the Transportation Infrastructure Finance and Innovation Act of 1998 to include airport-related projects (Sec. 12001). These provisions, among others, provide for approximately $25 billion of funding opportunities.
• Surface Transportation: Funding will be made available through pilot programs and other R&D programs to promote new, advanced, and improved surface transportation infrastructure (Secs. 13005 and 13006). The cap on private activity bonds will also be increased for use by qualified highway and surface freight transportation facilities from $15 billion to $30 billion (Sec. 80403).
• Rail: The bill codifies the loan and loan guarantee programs available through the Railroad Rehabilitation and Improvement Financing program for acquisition, improvement, rehabilitation, development, and establishment of intermodal and railroad facilities and connectivity to those facilities (Sec. 21301). These provisions, among others, provide for approximately $110 billion of funding opportunities.

Water

Grants, pilot programs, tax incentives, and other funding mechanisms related to water management, including publicly owned treatment works and drinking water infrastructure, would be made available through the bill. In particular, the bill would authorize funding for development of small water storage, groundwater storage, and aquifer storage projects (Secs. 40903 and 40910); grants for large-scale water recycling and reuse programs in Arizona, California, Colorado, Idaho, Kansas, Montana, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Utah, Washington, and Wyoming (Sec 40905); grants for the improvement of drinking water infrastructure and technology that protect resiliency of the water systems and improve their cybersecurity (Secs. 50107 and 50112); grants for wastewater efficiency to promote waste-to-energy systems (Sec. 50202); the extension of funding available under the Water Infrastructure Finance and Innovation Act of 2014 for water system resiliency projects until 2026 (Sec. 50215); and changes to the tax treatment of capital contributions related to water or sewerage disposal services (Sec. 80601). The bill focuses largely on lead pipes and drinking water infrastructure. These provisions, among others, provide for approximately $54 billion of funding opportunities.

Broadband

The bill would provide grants, technical assistance, and tax exemptions for projects to increase broadband internet accessibility, particularly in underserved communities. This would include grants for projects to build and deploy broadband infrastructure networks and provide reliable broadband services (Sec. 60102). It also would expand the eligibility of private activity bonds that allow for special tax exemptions to include qualified broadband projects (Sec. 80401). These provisions, among others, provide for approximately $65 billion of funding opportunities.

II. Permits, Leases, Licenses, and Property Rights

In addition to funding opportunities, the Infrastructure Bill introduces new opportunities for permits, leases, licenses, and property rights. These opportunities and amendments are made available primarily to the energy and communications sectors.

Specifically, permits would be made available to inject carbon dioxide for the purpose of geologic sequestration both on land in the Outer Continential Shelf (Secs. 40306 and 40307). It also would expand the availability of leases, easements, and rights-of-way for energy purposes on the Outer Continental Shelf to include energy storage (Sec. 40343).

The bill would provide the Department of Energy the authority to issue construction permits for construction of certain interstate electric transmission facilities when state commissions or other authorities fail to make a determination within certain periods (Sec. 40105). In addition, requirements and oversight measures are included to ensure improvement in the quality and timeliness of federal permitting for critical mineral production on federal land (Sec. 40206).

The Department of Energy would also be afforded the right to assign an entity, including the United States, fee title or any other real property interest (excluding intellectual property interests) to certain property involving projects related to advanced nuclear reactor activities. It also would extend the term during which information cannot be disclosed related to federal contracts for such advanced nuclear reactor activities potentially by up to 30 years (Sec. 40322).

In addition to the energy sector-related permits, leases, and property rights, the bill would require the Department of Commerce to commence a competitive auction process to grant new licenses for electromagnetic spectrums covering frequencies between 3100 and 3450 megahertz for federal and nonfederal commercial use (Sec. 90008).

III. Federal Standards and Requirements

The Infrastructure Bill introduces new and updated federal standards and requirements across various industries. In the energy sector, the Department of Energy may require cybersecurity plans as a prerequisite to receive funding from the agency (Sec. 40126). For certain leases of hydropower privileges near or on the Colville Reservation or Spokane Reservation, the Department of the Interior would require a study plan agreement that includes the affected tribe (Sec. 40336). In addition, the bill introduces a definition of what qualifies as “clean hydrogen” and thus what projects would qualify to receive federal benefits for clean hydrogen programs (Sec. 40315). Any energy-related project that received funding under Division D of the bill would also be subject to wage rate requirements based on the local prevailing rates where the project is situated (Sec. 41101).

The motor vehicle and highway sector would be subject to multiple new standards including updates to standards for local roadway projects and new standards for electric vehicle charging stations (Sec. 11129); oversight requirements for public-private partnership transportation projects with estimated total costs of $100 million or more (Sec. 11508); extension of certain motor vehicle standards to limousines (Sec. 23015); updated standards for freight transportation brokers (Sec. 23021); and requirements to include new or improved safety features in motor vehicles such as automatic emergency breaking, recall completion, automatic shutoff, crash avoidance technology, headlamps, hood and bumpers, and child safety features (Secs. 23010, 24202, 24205, 24208, 24212, 24214, and 24222).

Certain requirements are also streamlined under the bill. This includes reporting requirements for federal land management projects under the National Environmental Policy Act (Sec. 11311) and revising the need for final investment-grade rating opinion letters from two to one to be eligible to receive funding under the Water Infrastructure Finance and Innovation Act of 2014 (Sec. 50214).

IV. Taxes, Fees, and Termination of Funding

Various sections of the Infrastructure Bill include provisions that extend or modify taxes and fees related to the transportation sector, the environment, trade and customs, employee benefits, and cryptocurrencies. In particular, the bill would extend certain highway- and fuel-related tax rates and exemptions currently in effect to fiscal year 2028 (Sec. 80102); extend, modify, and increase excise taxes on certain chemicals and chemical products when such products are imported (Sec. 80201); extend current customs user fees related to the use of U.S. ports by one year (Sec. 80301); and extend and set the minimum and maximum percentage for present valuations of employee pension plans through fiscal year 2029 (Sec. 80602).

One of the more contentious and debated provisions in the bill is the tax provision related to trading of cryptocurrencies. The bill would require brokers of cryptocurrencies to file tax returns with the Internal Revenue Service and would clarify that digital assets will be treated as cash for tax purposes (Sec. 80603). Notably, amendments to the provision were added to ensure that persons solely engaged in mining or solely in the business of selling hardware or software for use as key wallets would be excluded from the definition of “broker” and thus from the tax return requirements. Several House Democrats want to further amend the bill to modify these tax reporting provisions, but additional changes seem unlikely.

Finally, certain provisions of the bill would also terminate appropriations and tax credits associated with COVID-19-related relief efforts. This includes the rescission of unobligated balances under the Coronavirus Aid, Relief, and Economic Security Act for the Small Business Administration (SBA) Economic Injury Disaster Loan Subsidy, the SBA Targeted Economic Injury Disaster Loan Advance, the Economic Stabilization Program, the SBA Business Loans Program Account, the Pandemic Relief for Aviation Workers, the Education Stabilization Fund, and the SBA Salaries and Expenses funds (Sec. 90007). This also includes the rescission of tax credits afforded to employers for retaining employees when closed because of COVID-19 (Sec. 80604).