[JPRT 109-2-06]
[From the U.S. Government Publishing Office]



                                                               JCS-2-06



                        [JOINT COMMITTEE PRINT]
 
                        ESTIMATES OF FEDERAL TAX
                            EXPENDITURES FOR
                         FISCAL YEARS 2006-2010

                            Prepared for the

                   HOUSE COMMITTEE ON WAYS AND MEANS

                                and the

                      SENATE COMMITTEE ON FINANCE

                               __________

                          By the Staff of the

                      JOINT COMMITTEE ON TAXATION

[GRAPHIC] [TIFF OMITTED] TONGRESS.#13


                             APRIL 25, 2006


                               -------

                    U.S. GOVERNMENT PRINTING OFFICE
26-853                      WASHINGTON : 2006


                      JOINT COMMITTEE ON TAXATION

                       109th Congress, 2d Session
                                 ------                                
               SENATE                               HOUSE
CHARLES E. GRASSLEY, Iowa,           WILLIAM M. THOMAS, California,
  Chairman                             Vice Chairman
ORRIN G. HATCH, Utah                 E. CLAY SHAW, Jr., Florida
TRENT LOTT, Mississippi              NANCY L. JOHNSON, Connecticut
MAX BAUCUS, Montana                  CHARLES B. RANGEL, New York
JOHN D. ROCKEFELLER IV, West         FORTNEY PETE STARK, California
    Virginia


                            C O N T E N T S

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                                                                   Page
Introduction.....................................................     1

 I. The Concept of Tax Expenditures...................................2

II. Measurement of Tax Expenditures..................................26

III.Tax Expenditure Estimates........................................29


        Table 1. Tax Expenditure Estimates by Budget Function, 
            Fiscal Years 2006-2010...............................    30

        Table 2. Distribution of All Returns, Taxable Returns, 
            Itemized Returns, and Tax Liability by Income Class..    43

        Table 3. Distribution of Selected Individual Tax 
            Expenditures by Income Class.........................    44


                              INTRODUCTION

    This report \1\ on tax expenditures for fiscal years 2006-
2010 is prepared by the staff of the Joint Committee on 
Taxation (``Joint Committee staff'') for the House Committee on 
Ways and Means and the Senate Committee on Finance. The report 
also is submitted to the House and Senate Committees on the 
Budget.
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    \1\ This report may be cited as follows: Joint Committee on 
Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2006-
2010 (JCS-2-06), April 25, 2006.
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    As in the case of earlier reports,\2\ the estimates of tax 
expenditures in this report were prepared in consultation with 
the staff of the Office of Tax Analysis in the Treasury 
Department (``the Treasury''). The Treasury published its 
estimates of tax expenditures for fiscal years 2005-2011 in the 
Administration's budgetary statement of February 2006.\3\ The 
lists of tax expenditures in this Joint Committee staff report 
and the Administration's budgetary statement overlap 
considerably; the differences are discussed in Part I of this 
report under the heading ``Comparisons with Treasury.''
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    \2\ Joint Committee on Taxation, Estimates of Federal Tax 
Expenditures, October 4, 1972 (JCS-28-72), June 1, 1973 (JCS-20-73), 
July 8, 1975 (JCS-11-75), March 15, 1976 (JCS-5-76), March 15, 1977 
(JCS-10-77), March 14, 1978 (JCS-9-78), March 15, 1979 (JCS-9-79), 
March 6, 1980 (JCS-8-80), March 16, 1981 (JCS-7-81), March 8, 1982 
(JCS-4-82), March 7, 1983 (JCS-4-83), November 9, 1984 (JCS-39-84), 
April 12, 1985 (JCS-8-85), March 1, 1986 (JCS-7-86), February 27, 1987 
(JCS-3-87), March 8, 1988 (JCS-3-88), February 28, 1989 (JCS-4-89), 
March 9, 1990 (JCS-7-90), March 11, 1991 (JCS-4-91), April 24, 1992 
(JCS-8-92), April 22, 1993 (JCS-6-93), November 9, 1994 (JCS-6-94), 
September 1, 1995 (JCS-21-95), November 26, 1996 (JCS-11-96), December 
15, 1997 (JCS-22-97), December 14, 1998 (JCS-7-98), December 22, 1999 
(JCS-13-99), April 6, 2001 (JCS-1-01), January 17, 2002 (JCS-1-02), 
December 19, 2002 (JCS-5-02), December 22, 2003 (JCS-8-03), and January 
12, 2005 (JCS-1-05).
    \3\ Office of Management and Budget, ``Tax Expenditures,'' Budget 
of the United States Government: Analytical Perspectives, Fiscal Year 
2007, February 6, 2006, pp. 285-328.
      
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    The Joint Committee staff has made its estimates (as shown 
in Table 1) based on the provisions in tax law as enacted 
through March 31, 2006. Expired or repealed provisions are not 
listed unless they have continuing revenue effects that are 
associated with ongoing taxpayer activity. Proposed extensions 
or modifications of expiring provisions are not included until 
they have been enacted into law. The tax expenditure estimates 
in this report are based on the January 2006 Congressional 
Budget Office revenue baseline and Joint Committee staff 
projections of the gross income, deductions, and expenditures 
of individuals and corporations for calendar years 2005-2010.
    Part I of this report contains a discussion of the concept 
of tax expenditures. Part II is a discussion of the measurement 
of tax expenditures. Estimates of tax expenditures for fiscal 
years 2006-2010 are presented in Table 1 in Part III. Table 2 
shows the distribution of tax returns by income class, and 
Table 3 presents distributions of selected individual tax 
expenditures by income class.

                   I. THE CONCEPT OF TAX EXPENDITURES

Overview
    ``Tax expenditures'' are defined under the Congressional 
Budget and Impoundment Control Act of 1974 (the ``Budget Act'') 
as ``revenue losses attributable to provisions of the Federal 
tax laws which allow a special exclusion, exemption, or 
deduction from gross income or which provide a special credit, 
a preferential rate of tax, or a deferral of tax liability.'' 
\4\ Thus, tax expenditures include any reductions in income tax 
liabilities that result from special tax provisions or 
regulations that provide tax benefits to particular taxpayers.
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    \4\ Congressional Budget and Impoundment Control Act of 1974 (Pub. 
L. No. 93-344), sec. 3(3).
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    Special income tax provisions are referred to as tax 
expenditures because they may be considered to be analogous to 
direct outlay programs, and the two can be considered as 
alternative means of accomplishing similar budget policy 
objectives. Tax expenditures are similar to those direct 
spending programs that are available as entitlements to those 
who meet the statutory criteria established for the programs.
    Estimates of tax expenditures are prepared for use in 
budget analysis. They are a measure of the economic benefits 
that are provided through the tax laws to various groups of 
taxpayers and sectors of the economy. The estimates also may be 
useful in determining the relative merits of achieving 
specified public goals through tax benefits or direct outlays.
    The legislative history of the Budget Act indicates that 
tax expenditures are to be defined with reference to a normal 
income tax structure (referred to here as ``normal income tax 
law''). The determination of whether a provision is a tax 
expenditure is made on the basis of a broad concept of income 
that is larger in scope than ``income'' as defined under 
general U.S. income tax principles. The Joint Committee staff 
has used its judgment in distinguishing between those income 
tax provisions (and regulations) that can be viewed as a part 
of normal income tax law and those special provisions that 
result in tax expenditures. A provision traditionally has been 
listed as a tax expenditure by the Joint Committee staff if 
there is a reasonable basis for such classification and the 
provision results in more than a de minimis revenue loss, which 
solely for this purpose means a total revenue loss of at least 
$50 million over the five fiscal years 2006-2010. The Joint 
Committee staff emphasizes, however, that in the process of 
listing tax expenditures, no judgment is made, nor any 
implication intended, about the desirability of any special tax 
provision as a matter of public policy.
    If a tax expenditure provision were eliminated, Congress 
might choose to continue financial assistance through other 
means rather than terminate all Federal assistance for the 
activity. If a replacement spending program were enacted, the 
higher revenues received as a result of the elimination of a 
tax expenditure might not represent a net budget gain. A 
replacement program could involve direct expenditures, direct 
loans or loan guarantees, regulatory activity, a mandate, a 
different form of tax expenditure, or a general reduction in 
tax rates. Joint Committee staff estimates of tax expenditures 
do not anticipate such policy responses.
    The Budget Act uses the term tax expenditure to refer to 
the special tax provisions that are contained in the Federal 
income taxes on individuals and corporations.\5\ Other Federal 
taxes such as excise taxes, employment taxes, and estate and 
gift taxes may also have exceptions, exclusions, and credits, 
but those special tax provisions are not included in this 
report because they are not part of the income tax. Thus, for 
example, the income tax exclusion for employer-paid health 
insurance is included, but the Federal Insurance Contributions 
Act (``FICA'') tax exclusion for employer-paid health insurance 
is not treated as a tax expenditure in this report.\6\
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    \5\ The Federal income tax on individuals also applies to estates 
and trusts, which are subject to a separate income tax rate schedule 
(Section 1(c) of the Internal Revenue Code of 1986, the ``Code''). 
Estates and trusts may benefit from some of the same tax expenditure 
provisions that apply to individuals. In Table 1 of this report, the 
tax expenditures that apply to estates and trusts have been included in 
the estimates of tax expenditures for individual taxpayers.
    \6\ Other analysts have explored applying the concept of tax 
expenditures to payroll and excise taxes. See, Jonathan Barry Forman, 
``Would a Social Security Tax Expenditure Budget Make Sense?'' Public 
Budgeting and Financial Management, 5, 1993, pp. 311-335, and Bruce F. 
Davie, ``Tax Expenditures in the Federal Excise Tax System,'' National 
Tax Journal, XLVII, March 1994, pp. 39-62. Prior to 2003, the 
President's budget contained a section that reviewed and tabulated 
estate and gift tax provisions that the Treasury considered tax 
expenditures. The Joint Committee staff considers estate and gift 
provisions as being outside of the normal income tax structure and thus 
omits them from its lists of tax expenditures.
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    Some provisions in the Internal Revenue Code provide for 
special tax treatment that is less favorable than normal income 
tax law. Examples of such provisions include (1) the denial of 
deductions for certain lobbying expenses, (2) the denial of 
deductions for certain executive compensation, and (3) the two-
percent floor on itemized deductions for unreimbursed employee 
expenses. Tax provisions that provide treatment less favorable 
than normal income tax law are not shown in this report because 
they are not included in the statutory definition of a tax 
expenditure.

Individual Income Tax
    Under the Joint Committee staff methodology, the normal 
structure of the individual income tax includes the following 
major components: one personal exemption for each taxpayer and 
one for each dependent, the standard deduction, the existing 
tax rate schedule, and deductions for investment and employee 
business expenses. Most other tax benefits to individual 
taxpayers can be classified as exceptions to normal income tax 
law.
    The Joint Committee staff views the personal exemptions and 
the standard deduction as defining the zero-rate bracket that 
is a part of normal tax law. An itemized deduction that is not 
necessary for the generation of income is classified as a tax 
expenditure, but only to the extent that it, when added to a 
taxpayer's other itemized deductions, exceeds the standard 
deduction.
    All employee compensation is subject to tax unless the tax 
code contains a specific exclusion for the income. Specific 
exclusions for employer-provided benefits include the 
following: coverage under accident and health plans,\7\ 
accident and disability insurance, group term life insurance, 
educational assistance, tuition reduction benefits, 
transportation benefits (parking, van pools, and transit 
passes), dependent care assistance, adoption assistance, meals 
and lodging furnished for the convenience of the employer, 
employee awards, and other miscellaneous fringe benefits (e.g., 
employee discounts, services provided to employees at no 
additional cost to employers, and de minimis fringe benefits). 
Each of these exclusions is classified as a tax expenditure in 
this report.
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    \7\ Present law contains an exclusion for employer-provided 
coverage under accident and health plans (Code sec. 106) and an 
exclusion for benefits received by employees under employer-provided 
accident and health plans (Code sec. 105(b)). These two exclusions are 
viewed as a single tax expenditure. Under normal income tax law, the 
value of employer-provided accident and health coverage would be 
includable in the income of employees, but employees would not be 
subject to tax on the accident and health insurance benefits 
(reimbursements) that they might receive.
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    Under normal income tax law, employer contributions to 
pension plans and income earned on pension assets generally 
would be taxable to employees as the contributions are made and 
as the income is earned, and employees would not receive any 
deduction or exclusion for their pension contributions. Under 
present law, employer contributions to qualified pension plans 
and employee contributions made at the election of the employee 
through salary reduction are not taxed until distributed to the 
employee, and income earned on pension assets is not taxed 
until distributed. The tax expenditure for ``net exclusion of 
pension contributions and earnings'' is computed as the income 
taxes forgone on current tax-excluded pension contributions and 
earnings less the income taxes paid on current pension 
distributions (including the 10-percent additional tax paid on 
early withdrawals from pension plans).
    Under present law, social security and tier 1 railroad 
retirement benefits are partially excluded or fully excluded 
from gross income.\8\ Under normal income tax law, retirees 
would be entitled to an exclusion for only the portion of the 
retirement benefits that represents a return of the payroll 
taxes that they paid during their working years. Thus, the 
exclusion of social security and railroad retirement benefits 
in excess of payroll tax payments is classified as a tax 
expenditure.
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    \8\ For taxpayers with modified adjusted gross incomes above 
certain levels, up to 85 percent of social security and tier 1 railroad 
retirement benefits are includable in income.
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    All Medicare benefits are excluded from taxation. The value 
of Medicare Part A insurance generally is greater than the 
Health Insurance (``HI'') tax contributions that enrollees made 
during their working years, the value of Medicare Part B 
insurance generally is greater than the Part B premium that 
enrollees must pay, and the value of Medicare Part D 
(prescription drug) insurance generally is greater than the 
Part D premium that enrollees must pay. The exclusion of the 
value of Medicare Part A insurance in excess of HI tax 
contributions is classified as a tax expenditure, as is the 
exclusion of the value of Medicare Part B insurance in excess 
of Part B premiums, and the exclusion of the value of Part D 
insurance in excess of Part D premiums.
    Public assistance benefits are excluded from gross income 
by statute or by Internal Revenue Service regulations. Table 1 
contains tax expenditure estimates for workers' compensation 
benefits, special benefits for disabled coal miners, and cash 
public assistance benefits (which include Supplemental Security 
Income benefits and Temporary Assistance for Needy Families 
benefits).
    The individual income tax does not include in gross income 
the imputed income that individuals receive from the services 
provided by owner-occupied homes and durable goods.\9\ However, 
the Joint Committee staff does not classify this exclusion as a 
tax expenditure. The measurement of imputed income for tax 
purposes presents administrative problems and its exclusion 
from taxable income may be regarded as an administrative 
necessity.\10\ Under normal income tax law, individuals would 
be allowed to deduct only the interest on indebtedness incurred 
in connection with a trade or business or an investment. Thus, 
the deduction for mortgage interest on a principal or second 
residence is classified as a tax expenditure.
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    \9\ The National Income and Product Accounts include estimates of 
this imputed income. The accounts appear in U.S. Department of 
Commerce, Bureau of Economic Analysis, Survey of Current Business, 
published monthly. However, a taxpayer-by-taxpayer accounting of 
imputed income would be necessary for a tax expenditure estimate.
    \10\ If the imputed income from owner-occupied homes were included 
in adjusted gross income, it would be proper to include all mortgage 
interest deductions and related property tax deductions as part of the 
normal income tax structure, since interest and property tax deductions 
would be allowable as a cost of producing imputed income. It also would 
be appropriate to allow deductions for depreciation and maintenance 
expenses for owner-occupied homes.
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    The Joint Committee staff assumes that, for administrative 
feasibility, normal income tax law would tax capital gains in 
full in the year the gains are realized through sale, exchange, 
gift, or transfer at death. Thus, the deferral of tax until 
realization is not classified as a tax expenditure, but reduced 
rates of tax, further deferrals of tax (beyond the year of 
sale, exchange, gift, or transfer at death), and exclusions of 
certain capital gains are classified as tax expenditures. It 
also is assumed that normal income tax law would not provide 
for any indexing of the basis of capital assets for changes in 
the general price level. Thus, under normal income tax law (as 
under present law), the income tax would be levied on nominal 
gains as opposed to real gains in asset values.
    There are many types of State and local government bonds 
and private purpose bonds that qualify for tax-exempt status 
for Federal income tax purposes. Table 1 contains a separate 
tax expenditure listing for each type of bond.
    Under the Joint Committee staff view of normal tax law, 
compensatory stock options would be subject to regular income 
tax at the time the options are exercised and employers would 
receive a corresponding tax deduction.\11\ The employee's 
income would be equal to the difference between the purchase 
price of the stock and the market price on the day the option 
is exercised. Present law provides for special tax treatment 
for incentive stock options and options acquired under employee 
stock purchase plans. When certain requirements are satisfied, 
(1) the income that is received at the time the option is 
exercised is excluded for purposes of the regular income tax 
but, in the case of an incentive stock option, included for 
purposes of the alternative minimum tax, (2) the gain from any 
subsequent sale of the stock is taxed as a capital gain, and 
(3) the employer does not receive a tax deduction with respect 
to the option. The special tax treatment provided to the 
employee is viewed as a tax expenditure by the Joint Committee 
staff, and an estimate of this tax expenditure is contained in 
Table 1. However, it should be noted that the revenue loss from 
the special tax treatment provided to the employee is 
accompanied by a significant revenue gain from the denial of 
the deduction to the employer.
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    \11\ If the option has a readily ascertainable fair market value, 
normal law would tax the option at the time it is granted and the 
employer would be entitled to a deduction at that time.
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    The individual alternative minimum tax (``AMT'') and the 
passive activity loss rules are not viewed by the Joint 
Committee staff as a part of normal income tax law. Instead, 
they are viewed as provisions that reduce the magnitude of the 
tax expenditures to which they apply. For example, the AMT 
reduces the value of the deduction for State and local income 
taxes (for those taxpayers subject to the AMT) by not allowing 
the deductions to be claimed in the calculation of AMT 
liability. Similarly, the passive loss rules defer otherwise 
allowable deductions and credits from passive activities until 
a time when the taxpayer has passive income or disposes of the 
assets associated with the passive activity. Exceptions to the 
individual AMT and the passive loss rules are not classified as 
tax expenditures by the Joint Committee staff because the 
effects of the exceptions already are incorporated in the 
estimates of related tax expenditures.

Business Income Taxation

    Regardless of the legal form of organization (sole 
proprietorship, partnership, or S or C corporation), the same 
general principles are used in the computation of taxable 
business income. Thus, most business tax expenditures apply 
equally to unincorporated and incorporated businesses.
    One of the most difficult issues in defining tax 
expenditures for business income relates to the tax treatment 
of capital costs. Under present law, capital costs may be 
recovered under a variety of alternative methods, depending 
upon the nature of the costs and the status of the taxpayer. 
For example, investments in equipment and structures may 
qualify for tax credits, expensing, accelerated depreciation, 
or straight-line depreciation. The Joint Committee staff 
generally classifies as tax expenditures cost recovery 
allowances that are more favorable than those provided under 
the alternative depreciation system (sec. 168(g)), which 
provides for straight-line recovery over tax lives that are 
longer than those permitted under the accelerated system. As 
indicated above, the Joint Committee staff assumes that normal 
income tax law would not provide for any indexing of the basis 
of capital assets. Thus, normal income tax law would not take 
into account the effects of inflation on tax depreciation.
    The Joint Committee staff uses several accounting standards 
in evaluating the provisions in the Code that govern the 
recognition of business receipts and expenses. Under the Joint 
Committee staff view, normal income tax law is assumed to 
require the accrual method of accounting, the standard of 
``economic performance'' (used in the Code to test whether 
liabilities are deductible), and the general concept of 
matching income and expenses. In general, tax provisions that 
do not satisfy all three standards are viewed as tax 
expenditures. For example, the deduction for contributions to 
taxpayer-controlled mining reclamation reserve accounts is 
viewed as a tax expenditure because the contributions do not 
satisfy the economic performance standard. (Adherence to the 
standard would require that the taxpayer make an irrevocable 
contribution toward future reclamation, involving a trust fund 
or similar mechanism, as occurs in a number of areas in the 
Code.) The deduction for contributions to nuclear 
decommissioning trust accounts is not viewed as a tax 
expenditure because the contributions are irrevocable (i.e., 
they satisfy the economic performance standard). However, 
present law provides for a reduced rate of tax on the income of 
nuclear decommissioning trust accounts, and this reduced rate 
of tax is viewed as a tax expenditure.
    The Joint Committee staff assumes that normal income tax 
law would provide for the carryback and carryforward of net 
operating losses. The staff also assumes that the general 
limits on the number of years that such losses may be carried 
back or forward were chosen for reasons of administrative 
convenience and compliance concerns and may be assumed to 
represent normal income tax law. Exceptions to the general 
limits on carrybacks and carryforwards are viewed as tax 
expenditures.

Corporate Income Tax

    The income of corporations (other than S corporations) 
generally is subject to the corporate income tax. The corporate 
income tax includes a graduated tax rate schedule. The lower 
tax rates in the schedule are classified by the Joint Committee 
staff as a tax expenditure (as opposed to normal income tax 
law) because they are intended to provide tax benefits to small 
business and, unlike the graduated individual income tax rates, 
are unrelated to concerns about ability of individuals to pay 
taxes.
    Exceptions to the corporate alternative minimum tax are not 
viewed as tax expenditures because the effects of the AMT 
exceptions are already incorporated in the estimates of related 
tax expenditures.\12\
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    \12\ See discussion of individual AMT on page 6.
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    Certain income of pass-through entities is exempt from the 
corporate income tax. The income of sole proprietorships, S 
corporations, most partnerships, and other entities (such as 
regulated investment companies and real estate investment 
trusts) is taxed only at the individual level. The special tax 
rules for these pass-through entities are not classified as tax 
expenditures because the tax benefits are available to any 
entity that chooses to organize itself and operate in the 
required manner.
    Nonprofit corporations that satisfy the requirements of 
Code section 501 also generally are exempt from corporate 
income tax. The tax exemption of certain nonprofit cooperative 
business organizations, such as trade associations, is not 
treated as a tax expenditure for the same reason applicable to 
for-profit pass-through business entities. With respect to 
other nonprofit organizations, such as charities, tax-exempt 
status is not classified as a tax expenditure because the 
nonbusiness activities of such organizations generally must 
predominate and their unrelated business activities are subject 
to tax. In general, the imputed income derived from nonbusiness 
activities conducted by individuals or collectively by certain 
nonprofit organizations is outside the normal income tax base. 
However, the ability of donors to such nonprofit organizations 
to claim a charitable contribution deduction is a tax 
expenditure, as is the exclusion of income granted to holders 
of tax-exempt financing issued by charities.

Recent Legislation

    H.R. 241 (Pub. L. No. 109-1), enacted on January 7, 2005, 
provided that cash contributions made in January 2005 for the 
relief of the December 26, 2004, Indian Ocean tsunami victims 
may be treated as if such contributions were made on December 
31, 2004, and not in January 2005. In Table 1, the effects of 
this provision are reflected in the tax expenditure estimate 
for ``Deduction for charitable contributions, other than for 
education and health.''
    H.R. 1134 (Pub. L. No. 109-7), enacted on April 25, 2005, 
modified section 139 to provide an exclusion for certain 
disaster mitigation payments, effective for amounts received 
before, on, or after the date of enactment. Under prior law, 
the section 139 exclusion was limited to disaster relief 
payments made to individuals for the reimbursement of living 
expenses, funeral expenses, transportation expenses, and 
residential repair or replacement expenses in connection with a 
qualified disaster.\13\ The exclusion of disaster relief 
payments is not viewed as a tax expenditure by the Joint 
Committee staff because normal law is assumed to include an 
exclusion for payments that promote the general welfare by 
providing relief to disaster victims. The new exclusion for 
disaster mitigation payments is viewed as a tax expenditure 
because the payments are for the purpose of disaster 
preparation and the recipients are not disaster victims. This 
new tax expenditure is not listed in Table 1 because the 
estimated revenue loss is below the de minimis amount.
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    \13\ Prior to the enactment of section 125, payments excludable 
under that section were generally excludable under administrative 
rulings as payments to promote the general welfare.
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    The Safe, Accountable, Flexible, Efficient Transportation 
Equity Act: A Legacy for Users (H.R. 3), enacted on August 10, 
2005 (Pub. L. No. 109-59), created two new tax expenditures:
    --A new income tax credit was provided for the cost of 
carrying tax-paid distilled spirits in wholesale inventories 
and in control-State bailment warehouses, effective for taxable 
years beginning after September 30, 2005.
    --The Secretary of Transportation was permitted to allocate 
up to $15 billion of private-activity bond authority for 
qualified highway or surface freight transfer facilities. In 
Table 1, this new bond authority is reflected in the tax 
expenditure estimate for ``Exclusion of interest on State and 
local government qualified private activity bonds for highway 
projects and rail-truck transfer facilities.''
    The Energy Tax Incentives Act of 2005 (H.R. 6), enacted on 
August 8, 2005 (Pub. L. No. 109-58), created a number of new 
tax expenditures, as follows:
    --A tax credit was provided for the holders of clean 
renewable energy bonds (``CREBs''), which are a new category of 
bonds issued to finance capital expenditures incurred by 
qualified borrowers for facilities that qualify under section 
45. The Secretary of the Treasury may allocate up to $800 
million of CREBs to qualified projects. The authority to issue 
CREBs expires after December 31, 2007.
    --A tax credit was provided for the production of 
electricity from qualifying advanced nuclear power facilities. 
The credit is equal to 1.8 cents per kilowatt-hour of 
electricity produced during the eight-year period starting when 
the facility is placed in service. The credit is effective for 
electricity produced in taxable years beginning after the date 
of enactment. This new tax expenditure is not listed in Table 1 
because it is estimated that qualifying advanced nuclear power 
facilities will not be placed in service until after fiscal 
year 2010.
    --Tax credits were provided for investments in qualified 
clean coal power generation facilities. The rate of the credit 
is 20 percent for qualified investments in integrated 
gasification combined cycle (``IGCC'') projects, 15 percent for 
investments in other advanced coal-based electricity generation 
projects, and 20 percent for investments in certified 
gasification projects. The Secretary of the Treasury may 
allocate up to $800 million of credits for IGCC projects, up to 
$500 million of credits for other advanced coal-based projects, 
and up to $350 million of credits for certified gasification 
projects. In Table 1, this tax expenditure is listed as ``Tax 
credits for investments in clean coal power generation 
facilities.''
    --Refiners were provided a temporary election to expense up 
to 50 percent of the cost of qualified property used in the 
refining of liquid fuels. The qualified property must be 
constructed pursuant to a binding contract in effect prior to 
January 1, 2008, the property must be placed in service before 
January 1, 2012, and certain other requirements must be 
satisfied. A cooperative organization may elect to pass the 
expensing deduction through to its owners.
    --Two-year amortization was provided for certain geological 
and geophysical costs incurred in connection with oil and gas 
exploration. The amortization is effective for costs paid or 
incurred in taxable years beginning after the date of 
enactment.
    --A deduction was provided for expenditures on qualified 
energy-efficient commercial building property. The deduction is 
effective for property placed in service after December 31, 
2005, and prior to January 1, 2008.
    --A tax credit was provided for the purchase of qualified 
energy efficiency improvements to existing homes. The credit 
applies to property placed in service after December 31, 2005, 
and prior to January 1, 2008.
    --A tax credit was provided for the production of certain 
energy-efficient dishwashers, clothes washers, and 
refrigerators. The credit applies to appliances produced after 
December 31, 2005, and prior to January 1, 2008.
    --A tax credit was provided for the purchase of qualified 
photovoltaic property and qualified solar water heating 
property that is used exclusively for purposes other than 
heating swimming pools and hot tubs. The credit applies to 
property placed in service after December 31, 2005, and prior 
to January 1, 2008. This tax expenditure is not listed in table 
1 because the estimated revenue loss is below the de minimis 
amount.
    --A tax credit was provided for eligible contractors for 
the construction of qualified energy-efficient homes. The 
credit applies to homes that are substantially completed after 
December 31, 2005, and purchased after December 31, 2005, and 
prior to January 1, 2008. This tax expenditure is not listed in 
table 1 because the estimated revenue loss is below the de 
minimis amount.
    --Tax credits were provided for alternative technology 
vehicles. The tax credit for fuel cell vehicles is equal to a 
base amount that depends upon the weight class of the vehicle 
and, in the case of automobiles and light trucks, an additional 
credit amount that depends upon the rated fuel economy of the 
vehicle compared to a base fuel economy. The tax credit for 
alternative fuel vehicles applies to vehicles powered by 
natural gas, liquefied natural gas, liquefied petroleum gas, 
hydrogen, and any liquid that is at least 85 percent methanol, 
and is equal to 50 percent of the incremental cost of the 
vehicle plus an additional 30 percent if the vehicle meets 
certain emissions standards. Mixed fuel vehicles that use a 
combination of an alternative fuel and a petroleum-based fuel 
are eligible for a reduced credit. The tax credit for hybrid 
automobiles, hybrid light trucks, and lean-burn technology 
vehicles is equal to a fuel economy credit amount that varies 
with the rated fuel economy of the vehicle compared to a 2002 
model year standard and a conservation credit based on 
estimated lifetime fuel savings. The tax credit for hybrid 
motor vehicles weighing more than 8,500 pounds is determined by 
the estimated increase in fuel economy and the incremental cost 
of the vehicle compared to a comparable vehicle that is powered 
solely by a gasoline or diesel engine and comparable in weight, 
size, and use of vehicle. All of these credits apply to 
vehicles placed in service after December 31, 2005. The tax 
credit for fuel cell vehicles expires for vehicles placed in 
service after December 31, 2014. The tax credits for 
alternative fuel vehicles, hybrid automobiles, hybrid light 
trucks, and lean-burn technology vehicles expire for vehicles 
placed in service after December 31, 2010. The tax credit for 
hybrid motor vehicles weighing more than 8,500 pounds expires 
for vehicles placed in service after December 31, 2009. In 
Table 1, the revenue effects of all of these credits are 
included in the tax expenditure estimate for ``Tax credits for 
alternative technology vehicles.''
    --A tax credit was provided for the cost of installing 
clean-fuel vehicle refueling property to be used in a trade or 
business of the taxpayer or installed at the principal 
residence of the taxpayer. The credit is effective for property 
placed in service after December 31, 2005. The credit expires 
for hydrogen refueling property placed in service after 
December 31, 2014, and all other refueling property placed in 
service after December 31, 2009.
    --A temporary five-year carryback period was provided for a 
portion of the net operating losses of certain electric utility 
companies. The carryback applies to losses arising in taxable 
years ending in 2003, 2004, and 2005.
    --A tax credit was provided for small agri-biodiesel fuel 
producers. The credit is 10 cents per gallon for up to 15 
million gallons of agri-biodiesel produced by persons whose 
agri-biodiesel production capacity does not exceed 60 million 
gallons per year. The credit is effective for agri-biodiesel 
produced in taxable years ending after the date of enactment, 
and expires for fuel produced and sold by a small agri-
biodiesel producer after December 31, 2008. In Table 1, this 
tax credit is reflected in the tax expenditure estimate for 
``Tax credits for biodiesel fuels.''
    The Energy Tax Incentives Act of 2005 also extended or 
modified some existing tax expenditures, as follows:
    --Two modifications were made to the rules governing 
nuclear decommissioning reserve funds: the repeal of the cost-
of-service requirement for deductible contributions, and the 
repeal of the limitation that a fund only accumulate amounts 
sufficient to pay for decommissioning costs incurred during the 
period that the fund is in existence. Both changes were 
effective for taxable years beginning after December 31, 2005. 
In Table 1, these changes are reflected in the tax expenditure 
estimate for ``Special tax rate for nuclear decommissioning 
reserve funds.''
    --Section 169 was amended to permit the amortization of 
certified pollution control facilities used in connection with 
an electric generation plant which is primarily coal fired and 
which was not in operation before January 1, 2006. In Table 1, 
this provision is reflected in the tax expenditure estimate for 
``Amortization of certified pollution control facilities.''
    --Small refiner cooperatives were allowed to pass through 
to their owners the deduction permitted for the costs paid or 
incurred for the purpose of complying with the Highway Diesel 
Fuel Sulfur Control Requirements of the Environmental 
Protection Agency. The pass-through provision is effective as 
if included in the American Jobs Creation Act of 2004. In Table 
1, this provision is reflected in the tax expenditure estimate 
for ``Tax credit and deduction for small refiners with capital 
costs associated with EPA sulfur regulation compliance.''
    --A statutory seven-year recovery period and a class life 
of 14 years were provided for natural gas gathering pipelines, 
and a statutory 15-year recovery period and a class life of 35 
years were provided for natural gas distribution lines, 
effective for property placed in service after April 11, 2005. 
In addition, a 15-year recovery period and a class life of 30 
years were provided for certain property used in the 
transmission of electricity for sale, effective for property 
placed in service after April 11, 2005, but excluding property 
subject to a binding contract on or before April 11, 2005. In 
Table 1, these changes are reflected in the tax expenditure 
estimate for ``Depreciation of equipment in excess of the 
alternative depreciation system.''
    --The tax credit for the production of non-conventional 
fuels was expanded to include coke and coke gas produced at 
facilities placed in service before January 1, 1993, or after 
June 30, 1998, and before January 1, 2010. The credit applies 
to coke and coke gas produced and sold during the period 
beginning on the latter of January 1, 2006, or the date the 
facility is placed in service, and ending on the date which is 
four years after such period began. The tax credit for the 
production of non-conventional fuels was also made a part of 
the general business credit, effective for taxable years ending 
after December 31, 2005.
    --Several modifications were made to the tax credits for 
electricity produced from certain renewable resources. The tax 
credits for electricity produced from wind energy, closed-loop 
biomass, open-loop biomass, geothermal, small irrigation power, 
landfill gas, and trash combustion facilities, which were 
scheduled to expire for facilities placed in service after 
December 31, 2005, were extended to include facilities placed 
in service through December 31, 2007. The tax credit for 
electricity produced from solar facilities was not extended and 
expired as scheduled for facilities placed in service after 
December 31, 2005. The tax credit for electricity produced from 
refined coal facilities was not modified and is scheduled to 
expire for facilities placed in service after December 31, 
2008. A new tax credit was provided for electricity produced 
from certain hydropower facilities that incorporate 
improvements, additions to capacity, or new capacity placed in 
service after the date of enactment and prior to January 1, 
2009. A new tax credit was also provided for certain sales of 
Indian coal from qualified facilities, effective for sales 
during the period January 1, 2006, through December 31, 2012. 
Eligible cooperatives that receive any of these credits may now 
elect to pass any portion of the credits through to patrons, 
effective for taxable years ending after the date of enactment. 
In Table 1, all of these changes are reflected in the tax 
expenditure estimate for ``Tax credits for electricity 
production from renewable resources.''
    --An extension was provided for the tax provision that 
allows taxpayers to elect to defer the recognition of gain from 
the disposition of electric transmission property to implement 
Federal Energy Regulatory Commission restructuring policy. The 
election was scheduled to expire for transactions occurring 
prior to January 1, 2007, and was extended to include 
transactions prior to January 1, 2008.
    --An exception was provided for the general rule that tax-
exempt bond-financed prepayments violate the arbitrage 
restrictions. The exception applies to prepayments for the 
purpose of obtaining a supply of natural gas for service area 
customers of a governmental utility. The exception is effective 
for bonds issued after the date of enactment. In Table 1, this 
change is reflected in the tax expenditure estimate for 
``Exclusion of interest on public purpose State and local 
government bonds.''
    --The definition of an independent oil and gas producer was 
modified by increasing the refinery run limitation from 50,000 
to 75,000 barrels of crude oil per day. Independent oil and gas 
producers are allowed to claim percentage depletion deductions 
rather than cost depletion. In Table 1, this change is 
reflected in the tax expenditure estimate for ``Excess of 
percentage over cost depletion: Oil and gas.''
    --The tax credit for solar energy business property was 
increased from 10 percent to 30 percent and the credit was 
extended to equipment that uses fiber-optic distributed 
sunlight to illuminate the inside of a structure, effective for 
periods after December 31, 2005, and before January 1, 2008, 
for property placed in service in taxable years ending after 
December 31, 2005. A tax credit was also provided for the 
purchase of qualified fuel cell power plants for businesses and 
the purchase of qualifying stationary microturbine power 
plants. Telecommunications companies may claim these credits 
notwithstanding their status as public utilities. These tax 
credits are effective for periods after December 31, 2005, and 
before January 1, 2008, for property placed in service in 
taxable years ending after December 31, 2005. The definition of 
solar energy property was modified to exclude property used to 
generate energy to heat swimming pools. In Table 1, all of 
these changes are incorporated in the tax expenditure estimate 
for the ``Energy credit (Section 48).''
    --An early termination was provided for the deduction for 
clean fuel vehicles and refueling property. The deduction was 
scheduled to expire for property placed in service after 
December 31, 2006, but was terminated for property placed in 
service after December 31, 2005. This tax expenditure is not 
listed in Table 1 because the estimated revenue loss is below 
the de minimis amount.
    --The income tax credit and excise tax credit for biodiesel 
were scheduled to expire for fuel sold or used after December 
31, 2006, but were extended to include fuel sold or used prior 
to January 1, 2011.
    --The definition of a small ethanol producer was modified 
by increasing the limit on production capacity from 30 million 
gallons to 60 million gallons per year. Small ethanol producers 
are eligible for an excise tax credit of 10 cents per gallon. 
The modified definition is effective for taxable years ending 
after the date of enactment. In Table 1, this change is 
reflected in the tax expenditure estimate for ``Tax credits for 
alcohol fuels.''
    --The research tax credit was modified as it applies to 
qualified energy research by providing that a taxpayer may 
claim a credit equal to 20 percent of expenditures on qualified 
energy research undertaken by an energy research consortium. In 
addition, the definition of contract research expenses was 
broadened to include 100 percent of amounts paid to eligible 
small businesses, universities, and Federal laboratories. These 
changes were effective for amounts paid or incurred after the 
date of enactment. However, the research tax credit expired for 
amounts paid or incurred after December 31, 2005, and is no 
longer listed in Table 1. There are revenue losses in fiscal 
years 2006 through 2010 that are associated with research 
credits earned in prior years and carried forward, but these 
revenue losses are not associated with ongoing taxpayer 
activity, and thus do not justify the inclusion of the research 
credit in Table 1.
    The Katrina Emergency Tax Relief Act of 2005 (H.R. 3768), 
enacted on September 23, 2005 (Pub. L. No. 109-73), created a 
number of new tax expenditures and modified several tax 
expenditures. In the descriptions that follow, the term 
``Hurricane Katrina disaster area'' means any area with respect 
to which a major disaster has been declared by the President 
before September 14, 2005, under section 401 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act by reason 
of Hurricane Katrina, and the term ``core disaster area'' means 
that portion of the Hurricane Katrina disaster area determined 
by the President to warrant individual or individual and public 
assistance from the Federal government under such Act. The new 
tax expenditures are as follows:
    --An employee retention credit was provided for qualified 
wages paid by an eligible employer to an eligible employee. An 
eligible employer is an employer that (1) conducted an active 
trade or business in the core disaster area on August 28, 2005, 
(2) ceased operating such business for at least one day after 
August 28, 2005, and before January 1, 2006, as a result of 
damage sustained by reason of Hurricane Katrina, and (3) 
employed an average of no more than 200 employees during the 
taxable year. An eligible employee is an employee whose 
principal place of employment on August 28, 2005, was with an 
eligible employer in the core disaster area. Qualified wages 
are wages (up to a maximum of $6,000 per employee) that were 
paid or incurred after August 28, 2005, and before January 1, 
2006, during the period beginning when the business became 
inoperable and ending when the business resumed significant 
operations. This new tax expenditure was later expanded to 
include employees affected by Hurricanes Rita and Wilma and 
modified to remove the employer size limitation. Thus, in Table 
1, the tax expenditure is listed as ``Tax credit for employee 
retention for employers affected by Hurricanes Katrina, Rita, 
and Wilma.''
    --An additional personal exemption was provided for 
taxpayers who provide 60 days or more of free housing in their 
personal residence to individuals displaced by Hurricane 
Katrina. The exemption is $500 per displaced individual, up to 
a maximum of four such individuals. The additional exemption 
may be claimed only once and applies to taxable years beginning 
in 2005 and 2006.
    --An exclusion was provided for the income from certain 
discharges of nonbusiness debt owed by individuals who were 
living in the core disaster area or the Hurricane Katrina 
disaster area on August 25, 2005, and suffered economic loss by 
reason of Hurricane Katrina. The exclusion applies to 
discharges made on or after August 25, 2005, and before January 
1, 2007.
    The Katrina Emergency Tax Relief Act of 2005 modified some 
existing tax expenditures, as follows:
    --Special tax treatment was provided for qualified 
Hurricane Katrina distributions from qualified retirement 
plans, 403(b) annuities, and IRAs. These distributions are not 
subject to the 10-percent early withdrawal tax, the 
distributions may be included in income ratably over three 
years, and the distributions may be recontributed to an 
eligible retirement plan within three years. These provisions 
became effective on the date of enactment. In Table 1, these 
provisions are reflected in the estimates for the various 
pension and IRA tax expenditures listed under ``Income 
Security.''
    --The work opportunity tax credit was broadened to include 
qualified Hurricane Katrina employees as a targeted group 
eligible for the credit, and the expiration date for the credit 
was waived for purposes of Hurricane Katrina employees. The 
credit applies to individuals who had a principal place of 
abode in the core disaster area on August 28, 2005, and during 
the two-year period beginning on that date, either (1) begin 
working in the core disaster area, or (2) are displaced from 
such abode and begin working outside the core disaster area. 
The work opportunity tax credit for other targeted groups 
expired for employees hired after December 31, 2005. However, 
the credit applies to wages paid to qualified employees during 
the first 12 months of employment. Thus employees hired in 
December 2005 will earn credits for their employers through 
November 2006. In Table 1, the tax expenditure estimate for the 
``Work opportunity tax credit'' is based on credits earned for 
Hurricane Katrina employees working in 2006 and 2007, credits 
earned for other targeted groups of employees working in 2006, 
and credits earned in prior years and carried forward to 
taxable years beyond 2006.
    --A temporary suspension was provided for certain 
limitations on charitable contributions by individuals and 
corporations. The suspension applies to qualified contributions 
made during the period August 28, 2005, through December 31, 
2005. In the case of a corporation, the qualified contributions 
must be for relief efforts related to Hurricane Katrina. In 
Table 1, this suspension is reflected in the various tax 
expenditure estimates for deductions for charitable 
contributions.
    --An increase in the standard mileage rate was provided for 
taxpayers who use a vehicle in providing donated services to 
charity for the provision of relief related to Hurricane 
Katrina. In addition, an exclusion was provided for certain 
mileage expense reimbursements received by volunteer drivers 
who are providing donated services to charity for the provision 
of relief related to Hurricane Katrina. These two provisions 
apply to services donated during the period August 25, 2005, 
through December 31, 2006. In Table 1, the effects of these two 
provisions are reflected in the various tax expenditure 
estimates for deductions for charitable contributions.
    --The enhanced deduction for contributions of food 
inventories by C corporations was extended to all taxpayers, 
effective for contributions made after August 28, 2005, and 
before January 1, 2006. In Table 1, the effects of this 
deduction are reflected in the various tax expenditure 
estimates for deductions for charitable contributions.
    --The enhanced deduction for contributions of food 
inventories was broadened to include contributions of books to 
certain public elementary and secondary schools, effective for 
contributions made after August 28, 2005, and before January 1, 
2006. In Table 1, the effects of this deduction are reflected 
in the tax expenditure estimate for ``Deduction for charitable 
contributions to educational institutions.''
    --A suspension was provided for certain limitations on 
personal casualty and theft losses. In general, such losses are 
deductible only if they exceed $100 per casualty or theft, and 
only to the extent that the sum of all such losses exceeds 10 
percent of an individual taxpayer's adjusted gross income. 
These two limitations were suspended for casualty and theft 
losses that occurred on or after August 25, 2005, in the 
Hurricane Katrina disaster area and were attributable to the 
hurricane. In Table 1, the suspension of these limitations is 
reflected in the tax expenditure estimate for ``Deduction for 
casualty and theft losses.''
    --The first-time homebuyer requirement for qualified 
mortgage bonds was waived for qualified Hurricane Katrina 
recovery residences, thereby authorizing the use of qualified 
mortgage bonds to finance purchases of such residences. The 
provision became effective on the date of enactment and applies 
to residences financed before January 1, 2008. In Table 1, this 
change is reflected in the tax expenditure estimate for 
``Exclusion of interest on State and local government qualified 
private activity bonds for owner-occupied housing.''
    --The replacement period for deferral of recognition of 
gain on involuntary conversions of property was extended for 
property in the Hurricane Katrina disaster area that was 
involuntarily convered on or after August 25, 2005, by reason 
of Hurricane Katrina. The replacement period for such property 
was extended from two years to five years, effective upon the 
date of enactment. In Table 1, this change is reflected in the 
tax expenditure estimate for ``Deferral of gain on like-lind 
exchanges.''
    --Qualified individuals may elect to calculate their earned 
income credit and refundable child credit for the taxable year 
which includes August 25, 2005, using their earned income from 
the prior taxable year. Qualified individuals are (1) 
individuals who on August 25, 2005, had their principal place 
of abode in the core disaster area or (2) individuals who on 
such date were not in the core disaster area but lived in the 
Hurricane Katrina disaster area and were displaced from their 
homes. Qualified individuals are permitted to make the election 
only if their earned income for the taxable year which includes 
August 25, 2005, is less than their earned income for the 
preceding taxable year. In Table 1, the effects of this 
election are reflected in the tax expenditure estimates for 
``Earned income credit'' and ``Tax credit for children under 
age 17.''
    The Gulf Opportunity Zone Act of 2005 (H.R. 4440), enacted 
on December 21, 2005 (Pub. L. No. 109-135), created several new 
tax expenditures and modified some existing tax expenditures. 
In the descriptions that follow, the term ``Gulf Opportunity 
Zone'' refers to that portion of the Hurricane Katrina disaster 
area determined by the President to warrant individual or 
individual and public assistance from the Federal government 
under the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act by reason of Hurricane Katrina. The term 
``Hurricane Rita disaster area'' means an area with respect to 
which a major disaster has been declared by the President 
before October 6, 2005, under section 401 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act by reason 
of Hurricane Rita. The term ``Rita GO Zone'' means that portion 
of the Hurricane Rita disaster area determined by the President 
to warrant individual or individual and public assistance from 
the Federal government under section 401 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act by reason 
of Hurricane Rita. The term ``Hurricane Wilma disaster area'' 
means an area with respect to which a major disaster has been 
declared by the President before November 14, 2005, under 
section 401 of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act by reason of Hurricane Wilma. The term 
``Wilma GO Zone'' means that portion of the Hurricane Wilma 
disaster area determined by the President to warrant individual 
or individual and public assistance from the Federal government 
under section 401 of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act by reason of Hurricane Rita. The new 
tax expenditures are as follows:
    --An additional first-year depreciation deduction was 
provided for qualified Gulf Opportunity Zone property. The 
deduction is effective for property placed in service on or 
after August 28, 2005, and expires for property placed in 
service after December 31, 2008.
    --Partial expensing was provided for Gulf Opportunity Zone 
clean-up costs, defined as amounts paid or incurred for the 
removal of debris from, or the demolition of structures on, 
real property located in the Zone, effective for amounts paid 
or incurred on or after August 28, 2005, and before January 1, 
2008.
    --A 10-year carryback period was provided for casualty 
losses of Gulf Opportunity Zone public utility property by 
reason of Hurricane Katrina, effective for losses arising in 
taxable years ending on or after August 28, 2005.
    --A five-year carryback period was provided for net 
operating losses attributable to various casualty losses and 
certain moving expenses, temporary housing expenses, repair 
expenses, and other expenses related to Hurricane Katrina, 
effective for losses paid or incurred after August 27, 2005, 
and before January 1, 2008.
    --A tax credit was provided for the holders of Gulf Tax 
Credit Bonds, which are a new category of bonds that may be 
issued in calendar year 2006 by the States of Louisiana, 
Mississippi, and Alabama.
    --Taxpayers who incurred casualty losses attributable to 
Hurricane Katrina with respect to public utility property 
located in the Gulf Opportunity Zone were provided the option 
to take such losses into account in the fifth taxable year 
preceding the taxable year in which the loss occurred, 
effective for taxable years ending on or after August 28, 2005. 
In Table 1, this tax expenditure is listed as ``Five-year 
carryback period for casualty losses of public utility property 
attributable to Hurricane Katrina.''
    --A temporary income exclusion was provided for the value 
of in-kind lodging provided for a month to a qualified employee 
(and spouse and dependents) by or on behalf of a qualified 
employer, with the employer receiving an income tax credit of 
30 percent of the value of the excluded lodging. A qualified 
employee is an individual who had a principal residence in the 
Gulf Opportunity Zone on August 28, 2005, and performed 
substantially all of his or her employment services in the Zone 
for an employer with a trade or business in the Zone. The 
provision applies to lodging provided during the period 
beginning on the first day of the first month after the date of 
enactment and ending on the date that is six months after such 
first day. In Table 1, this tax expenditure is listed as ``Tax 
credit for Gulf Opportunity Zone employers providing in-kind 
lodging for employees and income exclusion for the employees.''
    The Gulf Opportunity Zone Act modified or extended a number 
of existing tax expenditures, as follows:
    --The States of Alabama, Louisiana, and Mississippi were 
authorized to issue qualified Gulf Opportunity Zone private 
activity bonds to finance the construction and rehabilitation 
of residential and nonresidential property. The maximum amount 
of the bonds that may be issued in each State is limited to 
$2,500 multiplied by the population of the State. The bonds 
must be issued after the date of enactment and before January 
1, 2011. In Table 1, this new bond authority is reflected in 
the tax expenditure estimate for ``Exclusion of interest on 
public purpose State and local government bonds.''
    --An additional advance refunding was permitted for certain 
governmental and qualified 501(c)(3) bonds issued by the States 
of Alabama, Louisiana, and Mississippi, or any political 
subdivision thereof, notwithstanding the general prohibition on 
the advance refunding of such bonds. The advance refunding is 
effective for bonds issued after the date of enactment and 
before January 1, 2011. In Table 1, this new bond authority is 
reflected in the tax expenditure estimate for ``Exclusion of 
interest on public purpose State and local government bonds.''
    --The limits on section 179 expensing were increased for 
qualified Gulf Opportunity Zone property acquired on or after 
August 28, 2005, and placed in service on or before December 
31, 2007. In Table 1, the effects of this increase are 
reflected in the tax expenditure estimate for ``Expensing under 
section 179 of depreciable business property.''
    --A number of modifications were made to the low-income 
housing credit. Some of the modifications only apply to 
property within the Gulf Opportunity Zone while others also 
apply to property in the Rita and Wilma Gulf Opportunity Zones. 
The modifications have various effective dates. In Table 1, the 
effects of these modifications are reflected in the tax 
expenditure estimate for ``Tax credit for low-income housing.''
    --The expensing of environmental remediation costs, which 
was scheduled to expire for costs paid or incurred after 
December 31, 2005, was extended for two years (through December 
31, 2007) for qualified contaminated sites located in the Gulf 
Opportunity Zone.
    --The tax credit for rehabilitation expenditures was 
increased for certified historic structures and qualified 
rehabilitation buildings in the Gulf Opportunity Zone, 
effective for costs incurred on or after August 28, 2005, and 
before January 1, 2009.
    --The expensing limit for reforestation expenditures was 
doubled for qualified timber property located in the Gulf, 
Rita, and Wilma Opportunity Zones. The effective dates vary 
depending upon the Zone in which the property is located. The 
expensing expires for costs paid or incurred after December 31, 
2007. In Table 1, the effects of this expensing are reflected 
in the tax expenditure estimate for ``Amortization and 
expensing of reforestation expenditures.''
    --For the purpose of the five-year carryback rule for net 
losses from farming, the definition of a farming loss was 
broadened to include certain losses attributable to qualified 
timber property located in the Gulf or Rita Opportunity Zones. 
The proposal is effective for taxable years ending on or after 
August 28, 2005, for losses occurring after August 28, 2005 (in 
the Gulf Opportunity Zone; after September 23, 2005 (in the 
Rita Zone); after October 23, 2005 (in the Wilma Zone), and 
before January 1, 2007. In Table 1, the effects of this 
provision are reflected in the tax expenditure estimate for 
``Five-year carryback period for net operating losses 
attributable to farming.''
    --Additional allocations were provided for the new markets 
tax credit, in the amounts of $300 million for 2005 and 2006 
and $400 million for 2007, to be allocated among qualified 
community development entities to make qualified low-income 
community investments within the Gulf Opportunity Zone. In 
Table 1, these new allocations are reflected in the tax 
expenditure estimate for ``New markets tax credit.''
    --A temporary expansion of the Hope and Lifetime Learning 
credits was provided for students attending an eligible 
education institution located in the Gulf Opportunity Zone, 
effective for taxable years beginning in 2005 or 2006. In Table 
1, the effects of this expansion are reflected in the tax 
expenditure estimate for ``Tax credits for tuition for post-
secondary education.''
    --An extension was provided for the waiver of the first-
time homebuyer requirement with respect to qualified Hurricane 
Katrina recovery residences financed with qualified mortgage 
bonds. The extension applies to financing provided through 
December 31, 2010. In Table 1, the effects of this extension 
are reflected in the tax expenditure estimate for ``Exclusion 
of interest on State and local government qualified private 
activity bonds for owner-occupied housing.''
    --The Secretary of the Treasury was authorized to extend 
beyond December 31, 2005, on a case-by-case basis, the placed-
in-service date for bonus depreciation, for property placed in 
service or manufactured in the Gulf, Rita, or Wilma Opportunity 
Zones. The authority extends only to circumstances in which the 
taxpayer was unable to meet the December 31, 2005, deadline as 
a result of Hurricane Katrina, Rita, or Wilma. In Table 1, this 
extension is reflected in the tax expenditure estimate for 
``Depreciation of equipment in excess of the alternative 
depreciation system.''
    --The special tax treatment for qualified Hurricane Katrina 
distributions from qualified retirement plans, 403(b) 
annuities, and IRAs was expanded to include any ``qualified 
hurricane distribution,'' defined to include distributions 
related to Hurricanes Rita and Wilma, effective upon date of 
enactment. In Table 1, this expansion is reflected in the 
various pension and IRA tax expenditures listed under ``Income 
Security.''
    --The employee retention credit for employers affected by 
Hurricane Katrina was extended to include employers affected by 
Hurricanes Rita and Wilma and the employer size limitation was 
eliminated. The retention credit is effective for wages paid 
after September 23, 2005, in the case of Hurricane Rita and 
wages paid after October 23, 2005, in the case of Hurricane 
Wilma.
    --The temporary suspension of certain limitations on 
charitable contributions made by individuals and corporations, 
which applied to contributions for relief efforts related to 
Hurricane Katrina, was broadened to include relief efforts 
related to Hurricanes Rita and Wilma. In Table 1, this 
broadened suspension of limitations is reflected in the various 
tax expenditure estimates for deductions for charitable 
contributions.
    --The suspension of certain limitations on personal 
casualty and theft losses, which applied to losses occurring in 
the Hurricane Katrina disaster area, was broadened to include 
losses occurring in the Hurricane Rita disaster area on or 
after September 23, 2005, and losses occurring in the Hurricane 
Wilma disaster area on or after October 23, 2005. In Table 1, 
this broadened suspension of limitations is reflected in the 
tax expenditure estimate for ``Deduction for casualty and theft 
losses.''
    --The Hurricane Katrina look-back rules for calculating the 
earned income credit and refundable child credit were broadened 
to include qualified individuals affected by Hurricanes Rita 
and Wilma. The look-back rules apply to Hurricane Rita 
individuals in taxable years that include September 23, 2005, 
and Hurricane Wilma individuals in taxable years that include 
October 23, 2005. In Table 1, the effects of this broadening of 
the look-back rules are reflected in the tax expenditure 
estimates for ``Earned income credit'' and ``Tax credit for 
children under age 17.''
    --The waiver of the first-time homebuyer requirement for 
qualified Hurricane Katrina recovery residences was extended to 
include residences located in the Rita and Wilma Gulf 
Opportunity Zones, thereby authorizing the use of qualified 
mortgage bonds to finance the purchases of residences in these 
zones, and other rules governing the mortgage bonds were 
liberalized. The broadened waiver and other liberalized rules 
apply to residences financed before January 1, 2011. In Table 
1, the broadened waiver and liberalized rules are reflected in 
the tax expenditure estimate for ``Exclusion of interest on 
State and local government qualified private activity bonds for 
owner-occupied housing.''
    --The option to treat combat pay that is otherwise excluded 
from gross income under section 112 as earned income for 
purposes of the earned income credit, which was scheduled to 
expire for taxable years ending after December 31, 2005, was 
extended for one year, and is now effective for taxable years 
ending before January 1, 2006. In Table 1, the effect of this 
extension is reflected in the tax expenditure estimate for 
``Earned income credit.''

Expiring Tax Expenditure Provisions

    A number of tax expenditure provisions expired in 2005 or 
are scheduled to expire in 2006:
    --The above-the-line deduction for teacher classroom 
expenses expired for expenses incurred in taxable years 
beginning after December 31, 2005. This tax expenditure is no 
longer listed in Table 1.
    --The above-the-line deduction for qualified tuition and 
related expenses (section 222) expired for taxable years 
beginning after December 31, 2005. This tax expenditure is no 
longer listed in Table 1.
    --The option to deduct State and local sales taxes in lieu 
of State and local income taxes expired for taxable years 
beginning after December 31, 2005. In Table 1, this change is 
reflected in the tax expenditure estimate for ``Deduction for 
non-business State and local government income, sales, and 
personal property taxes.''
    --The enhanced deduction for corporate contributions of 
computer equipment to public libraries and elementary and 
secondary schools expired for contributions made after December 
31, 2005. In Table 1, this expiration is reflected in the tax 
expenditure estimate for ``Deduction for charitable 
contributions to educational institutions.''
    --The authority to issue qualified zone academy bonds 
expired for obligations issued after December 31, 2005. The tax 
expenditure estimate in Table 1 reflects the tax credits that 
will be earned by the holders of bonds issued prior to the 
expiration.
    --The tax incentives for the District of Columbia 
enterprise zone expired after December 31, 2005. This tax 
expenditure is no longer listed in Table 1.
    --The tax incentives for the New York City Liberty Zone 
include (1) an additional first-year depreciation deduction for 
qualified Liberty Zone property, which expires for property 
placed in service after December 31, 2009; (2) the authority to 
issue tax-exempt private activity bonds, which was extended by 
the Working Families Tax Relief Act of 2004 and expires after 
December 31, 2009; (3) a work opportunity tax credit for 
Liberty Zone employees, which expired for work performed after 
December 31, 2003; (4) the authority for one additional advance 
refunding for certain bonds for facilities located in New York 
City, which was extended by the Working Families Tax Relief Act 
of 2004 and expires after December 31, 2005; (5) an increase in 
section 179 expensing for qualified property used in the 
Liberty Zone, which expires for taxable years beginning after 
December 31, 2006; and (6) a five-year recovery period for 
Liberty Zone leasehold improvement property, which expires for 
property placed in service after December 31, 2006. In Table 1, 
these expirations are reflected in the tax expenditure estimate 
for ``New York City Liberty Zone tax incentives.''
    --The tax credit for research and experimentation expenses 
expired for expenses paid or incurred after December 31, 2005. 
This tax expenditure is no longer listed in Table 1.
    --The wage credit for Indian reservation employment expired 
for wages incurred after December 31, 2005. This tax 
expenditure is not listed in Table 1 because the estimated 
revenue loss in fiscal year 2006 is below the de minimis 
amount.
    --The 15-year straight-line cost recovery for qualified 
leasehold improvement property and qualified restaurant 
property expires for property placed in service after December 
31, 2005. In Table 1, these expirations are reflected in the 
tax expenditure estimate for ``Depreciation of buildings other 
than rental housing in excess of the alternative depreciation 
system.''
    --The deduction for clean-fuel vehicles and refueling 
property expired for property placed in service after December 
31, 2005. This tax expenditure is no longer listed in Table 1.
    --The tax credit for Puerto Rico and possession income and 
Puerto Rico economic activity expires for taxable years 
beginning after 2005. In Table 1, this expiration is reflected 
in the tax expenditure estimate for this provision.
    --After December 31, 2005, no new contributions may be made 
to Archer Medical Savings Accounts (``MSAs'') except by 
individuals who previously made Archer MSA contributions and by 
employees of small employers with prior Archer MSA 
participation. The Archer MSA tax expenditure is not listed in 
Table 1 because the estimated revenue loss is below the de 
minimis amount.

Comparisons with Treasury Department

    The Joint Committee staff and Treasury lists of tax 
expenditures differ in three respects. First, the Treasury uses 
a different classification of those provisions that can be 
considered a part of normal income tax law under both the 
individual and business income taxes. In general, the Joint 
Committee staff methodology involves a broader definition of 
the normal income tax base. Thus, the Joint Committee list of 
tax expenditures includes some provisions that are not 
contained in the Treasury list. The cash method of accounting 
by certain businesses provides an example. The Treasury 
considers the cash accounting option for certain businesses to 
be a part of normal income tax law, but the Joint Committee 
staff methodology treats it as a departure from normal income 
tax law that constitutes a tax expenditure.
    Second, the Joint Committee staff and Treasury estimates of 
tax expenditures span slightly different sets of years. The 
Treasury's estimates cover a seven-year period--the last fiscal 
year, the current fiscal year when the President's budget is 
submitted, and the next five fiscal years, i.e., fiscal years 
2005-2011. The Joint Committee staff estimates cover the 
current fiscal year and the succeeding four fiscal years, i.e., 
fiscal years 2006-2010.
    Third, the Joint Committee staff list excludes those 
provisions that are estimated to result in revenue losses below 
the de minimis amount, i.e. less than $50 million over the five 
fiscal years 2006 through 2010. The Treasury rounds all yearly 
estimates to the nearest $10 million and excludes those 
provisions with estimates that round to zero in each year, i.e. 
provisions that result in less than $5 million in revenue loss 
in each of the years 2005 through 2011.
    In some cases, two or more of the tax expenditure items in 
the Treasury list have been combined into a single item in the 
Joint Committee staff list, and vice versa. The Table 1 
descriptions of some tax expenditures also may vary from the 
descriptions used by the Treasury.
    The following is a list of tax provisions that are 
contained in the Joint Committee staff list of tax expenditures 
(and are shown in Table 1) but are not contained in the 
Treasury list:

National defense

--Deduction for overnight-travel expenses of National Guard and 
            Reserve Members

Energy

--Five-year carryback period for certain net operating losses 
            of electric utility companies

Natural resources and environment

--Exclusion of contributions in aid of construction for water 
            and sewer utilities
--Special rules for mining reclamation reserves
--Special tax rate for nuclear decommissioning reserve funds
--Amortization of certified pollution control facilities
--Amortization and expensing of reforestation expenditures

Agriculture

--Exclusion of cost-sharing payments
--Five-year carryback period for net operating losses 
            attributable to farming

Insurance companies

--Special treatment of life insurance company reserves
--Deduction of unpaid loss reserves of property and casualty 
            companies

Other business and commerce

--Expensing of magazine circulation expenditures
--Special rules for magazine, paperback book, and record 
            returns
--Completed contract rules
--Cash accounting, other than agriculture
--Deferral of gain on like-kind exchanges
--Exception from net operating loss limitations for 
            corporations in bankruptcy
--Tax credit for employer-paid FICA taxes on tips
--Tax credit for the cost of carrying tax-paid distilled 
            spirits in wholesale inventories

Employment

--Exclusion of miscellaneous fringe benefits
--Exclusion of employee awards
--Exclusion of income earned by voluntary employee beneficiary 
            associations
--Deferral of taxation on spread on acquisition of stock under 
            incentive stock option plans and employee stock 
            purchase plans

Health

--Exclusion of medical care and Tricare medical insurance for 
            military dependents, retirees, and retiree 
            dependents

Medicare

--Exclusion of Medicare Hospital Insurance (Part A)
--Exclusion of Medicare Supplementary Medical Insurance (Part 
            B)
--Exclusion of Medicare prescription drug insurance (Part D)
--Exclusion of certain subsidies to employers who maintain 
            prescription drug plans for Medicare enrollees

    The following tax provisions are not included in the Joint 
Committee staff list of tax expenditures or the Treasury list. 
However, these provisions are viewed as tax expenditures by the 
Joint Committee staff. These provisions are not listed in Table 
1 because the estimated revenue losses for fiscal years 2005 
through 2009 are below the de minimis amount ($50 million):

Energy

--Tax credit for enhanced oil recovery costs
--Expensing of tertiary injectants
--Tax credit for the residential purchase of qualified 
            photovoltaic and solar water heating property
--Tax credit for electric vehicles

Agriculture

--Cash accounting for agriculture

Financial institutions

--Exclusion of investment income from structured settlement 
            arrangements

Community and Regional Development

--Wage credit for Indian Reservation employment

Social services

--Exclusion of restitution payments received by victims of the 
            Nazi regime and the victims' heirs and estates

Income security

--Exclusion of survivor annuities paid to families of public 
            safety officers killed in the line of duty
--Exclusion of disaster mitigation payments

    The following is a list of the tax provisions that are 
included in the Treasury list and are viewed as tax 
expenditures by the Joint Committee staff but are excluded from 
Table 1 because the estimated revenue losses for fiscal years 
2005 through 2009 are below the de minimis amount ($50 
million):

Energy

--Tax credit for production of electricity from qualifying 
            advanced nuclear power facilities
--Tax credit for the construction of energy-efficient new homes

Agriculture

--Deferral of tax on gains from the sale of stock in a 
            qualified refiner or processor to an eligible 
            farmer's cooperative

Financial institutions

--Bad debt reserves of financial institutions

Insurance companies

--Special alternative tax on small property and casualty 
            insurance companies
--Tax exemption for certain small insurance companies

Other business and commerce

--Exclusion of income from discharge of indebtedness incurred 
            in connection with qualified real property

Community and Regional Development

--Expensing of environmental remediation costs 
            (``Brownfields'')

Health

--Archer medical savings accounts

    There are five additional tax expenditure provisions in the 
Treasury list that are not included in the Joint Committee 
staff list. Two of the provisions involve exceptions to the 
passive loss rules: the exception for working interests in oil 
and gas properties, and the exception for up to $25,000 of 
rental losses. The Joint Committee staff does not classify 
these two provisions as tax expenditures; the effects of the 
passive loss rules (and exceptions to the rules) are included 
in the estimates of the tax expenditure provisions that are 
affected by the rules.\14\ The third and fourth provisions are 
the tax exemption for certain mutual and cooperative telephone 
and electric companies and the exclusion of gain on the sale or 
exchange of certain brownfield sites by certain tax-exempt 
organizations. These two provisions are not in the Joint 
Committee staff list because the special tax rules for pass-
through entities are assumed to be a part of normal tax 
law.\15\ The fifth provision in the Treasury list that is not 
in the Joint Committee staff list is the alternative fuel and 
fuel mixture tax credit. This tax credit is not in the Joint 
Committee staff list because it is a credit against excise tax 
and has no effect on income tax liabilities.
---------------------------------------------------------------------------
    \14\ See discussion of the alternative minimum tax and passive loss 
rules, above on page 6.
    \15\ See discussion on pages 7-8, above.

                  II. MEASUREMENT OF TAX EXPENDITURES

Tax Expenditure Estimates Generally
    A tax expenditure is measured by the difference between tax 
liability under present law and the tax liability that would 
result from a recomputation of tax without benefit of the tax 
expenditure provision. Taxpayer behavior is assumed to remain 
unchanged for tax expenditure estimate purposes.\15\
---------------------------------------------------------------------------
    \15\ An alternative way to measure tax expenditures is to express 
their values in terms of ``outlay equivalents.'' An outlay equivalent 
is the dollar size of a direct spending program that would provide 
taxpayers with net benefits that would equal what they now receive from 
a tax expenditure. The Treasury Department presents estimates of outlay 
equivalents in the President's budget in addition to presenting 
estimates in the same manner as the Joint Committee staff.
---------------------------------------------------------------------------
    The tax expenditure estimates in this report are based on 
the January 2006 Congressional Budget Office revenue baseline 
and Joint Committee staff projections of the gross income, 
deductions, and expenditures of individuals and corporations 
for calendar years 2005-2010. These projections are used to 
compute tax liabilities for the present-law revenue baseline 
and tax liabilities for the alternative baseline that assumes 
that the tax expenditure provision does not exist.
    Internal Revenue Service (``IRS'') statistics from recent 
tax returns are used to develop projections of the tax credits, 
deductions, and exclusions that will be claimed under the 
present-law baseline. These IRS statistics show the actual 
usage of the various tax expenditure provisions. In the case of 
some tax expenditures, such as the earned income credit, there 
is evidence that some taxpayers are not claiming all of the 
benefits to which they are entitled, while others are filing 
claims that exceed their entitlements. The tax expenditure 
estimates in this report are based on projections of actual 
claims under the various tax provisions, not the tax benefits 
to which taxpayers are entitled.
    Some tax expenditure estimates are based partly on 
statistics for income, deductions, and expenses for prior 
years. Accelerated depreciation is an example. Estimates for 
this tax expenditure are based on the difference between tax 
depreciation deductions under present law and the deductions 
that would have been claimed in the current year if investments 
in the current year and all prior years had been depreciated 
using the alternative (normal income tax law) depreciation 
system.
    Each tax expenditure is estimated separately, under the 
assumption that all other tax expenditures remain in the tax 
code. If two or more tax expenditures were estimated 
simultaneously, the total change in tax liability could be 
smaller or larger than the sum of the amounts shown for each 
item separately, as a result of interactions among the tax 
expenditure provisions.
    Year-to-year differences in the estimates for each tax 
expenditure reflect changes in tax law, including phaseouts of 
tax expenditure provisions and changes that alter the 
definition of the normal income tax structure, such as the tax 
rate schedule, the personal exemption amount, and the standard 
deduction. Some of the estimates for this tax expenditure 
report may differ from estimates made in previous years because 
of changes in law and economic conditions, the availability of 
better data, and improved estimating techniques.
Tax Expenditures versus Revenue Estimates
    A tax expenditure estimate is not the same as a revenue 
estimate for the repeal of the tax expenditure provision for 
three reasons. First, unlike revenue estimates, tax expenditure 
estimates do not incorporate the effects of the behavioral 
changes that are anticipated to occur in response to the repeal 
of a tax expenditure provision. Second, tax expenditure 
estimates are concerned with changes in the tax liabilities of 
taxpayers. Because the tax expenditure focus is on tax 
liabilities as opposed to Federal government tax receipts, 
there is no concern for the timing of tax payments. Revenue 
estimates are concerned with changes in Federal tax receipts 
that are affected by the timing of tax payments. Third, some of 
the tax provisions that provide an exclusion from income also 
apply to the FICA tax base, and the repeal of the income tax 
provision would automatically increase FICA tax revenues as 
well as income tax revenues. There may also be interactions 
between income tax provisions and other Federal taxes such as 
excise taxes and the estate and gift tax.
    If a tax expenditure provision were repealed, it is likely 
that the repeal would be made effective for taxable years 
beginning after a certain date. Because most individual 
taxpayers have taxable years that coincide with the calendar 
year, the repeal of a provision affecting the individual income 
tax most likely would be effective for taxable years beginning 
after December 31 of a certain year. However, the Federal 
government's fiscal year begins October 1. Thus, the revenue 
estimate for repeal of a provision would show a smaller revenue 
gain in the first fiscal year than in subsequent fiscal years. 
This is due to the fact that the repeal would be effective 
after the start of the Federal government's fiscal year. The 
revenue estimate might also reflect some delay in the timing of 
the revenue gains as a result of the taxpayer tendency to 
postpone or forgo changes in tax withholding and estimated tax 
payments.
                     III. TAX EXPENDITURE ESTIMATES

    Tax expenditures are grouped in Table 1 in the same 
functional categories as outlays in the Federal budget. 
Estimates are shown separately for individuals and 
corporations. Those tax expenditures that do not fit clearly 
into any single budget category have been placed in the most 
appropriate category.
    Several of the tax expenditure items involve small amounts 
of revenue, and those estimates are indicated in Table 1 by 
footnote 1. For each of these items, the footnote means that 
the tax expenditure is less than $50 million in the fiscal 
year.
    Table 2 presents projections of tax return information for 
each of nine income classes on the number of all returns 
(including filing and nonfiling units), the number of taxable 
returns, the number of returns with itemized deductions, and 
the amount of tax liability.
    Table 3 provides distributional estimates by income class 
for some of the tax expenditures that affect individual 
taxpayers. Not all tax expenditures that affect individuals are 
shown in this table because of the difficulty in making 
reliable estimates of the income distribution of items that do 
not appear on tax returns under present law.

                                     Table 1.--Tax Expenditure Estimates by Budget Function, Fiscal Years 2006-2010
                                                                  [Billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Corporations                                 Individuals
                      Function                      ------------------------------------------------------------------------------------------   Total
                                                       2006     2007     2008     2009     2010     2006     2007     2008     2009     2010    2006-10
--------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense
  Exclusion of benefits and allowances to Armed      .......  .......  .......  .......  .......      2.8      2.8      2.9      3.0      3.0       14.5
   Forces personnel................................
  Exclusion of military disablity benefits.........  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1        0.4
  Deduction for overnight-travel expenses of         .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1        0.3
   National Guard and Reserve Members..............
International Affairs
  Exclusion of income earned abroad by U.S.          .......  .......  .......  .......  .......      3.8      4.0      4.2      4.4      4.6       21.0
   citizens........................................
  Exclusion of certain allowances for Federal        .......  .......  .......  .......  .......      0.6      0.6      0.7      0.7      0.8        3.4
   employees abroad................................
  Exclusion of extraterritorial income.............      3.9      1.9      0.1      0.1      0.1      0.1    (\1\)    (\1\)    (\1\)    (\1\)        6.2
  Deferral of active income of controlled foreign        3.4      5.8      6.4      7.0      7.5  .......  .......  .......  .......  .......       30.1
   corporations....................................
  Inventory property sales source rule exception...      6.2      6.4      6.6      6.8      7.0  .......  .......  .......  .......  .......       33.0
  Deferral of certain active financing income......      1.1      1.7  .......  .......  .......  .......  .......  .......  .......  .......        2.8
General Science, Space, and Technology
  Expensing of research and experimental                 2.0      3.7      5.5      6.0      5.8    (\1\)      0.1      0.1      0.1      0.1       29.4
   expenditures....................................
Energy
  Expensing of exploration and development costs:
    Oil and gas....................................      1.1      1.6      1.2      0.8      0.6    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        5.4
    Other fuels....................................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.2
  Excess of percentage over cost depletion:
    Oil and gas....................................      1.0      1.0      0.9      0.9      0.9    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        4.7
    Other fuels....................................      0.1      0.1      0.1      0.1      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.6
  Tax credit and deduction for small refiners with     (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......  .......  .......  .......  .......        0.1
   capital costs associated with EPA sulfur
   regulation compliance...........................
  Tax credit for production of non-conventional          2.7      3.2      1.2    (\1\)    (\1\)      1.0      1.0      0.2    (\1\)    (\1\)        8.8
   fuels...........................................
  Tax credit for alcohol fuels \2\.................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......  .......  .......  .......  .......        0.2
  Tax credit for biodiesel fuels \3\...............    (\1\)      0.1      0.1    (\1\)  .......  .......  .......  .......  .......  .......        0.2
  Exclusion of interest on State and local             (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.1      0.1      0.1      0.1      0.1        0.5
   government qualified private activity bonds for
   energy production facilities....................
  Exclusion of energy conservation subsidies         .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
   provided by public utilities....................
  Energy credit (Section 48).......................    (\1\)      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.2
  Tax credit for electricity production from             2.0      3.7      5.5      6.0      5.8      0.1      0.1      0.1      0.1      0.1       29.4
   renewable resources.............................
  Deferral of gain from the disposition of electric      0.6      0.5    (\4\)     -0.3     -0.3  .......  .......  .......  .......  .......        0.4
   transmission property to implement Federal
   Energy Regulatory Commission restructuring
   policy..........................................
  Tax credit for holders of clean renewable energy     (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.2
   bonds...........................................
  Tax credits for investments in clean coal power      (\1\)      0.1      0.1      0.2      0.2  .......  .......  .......  .......  .......        0.5
   generation facilities...........................
  Expensing of the cost of property used in the        (\1\)    (\1\)      0.1      0.2      0.3  .......  .......  .......  .......  .......        0.7
   refining of liquid fuels........................
  Amortization of geological and geophysical costs     (\4\)      0.1      0.2      0.2      0.1    (\4\)    (\1\)      0.1      0.1    (\1\)        0.8
   associated with oil and gas exploration.........
  Deduction for expenditures on energy-efficient       (\1\)      0.1    (\1\)    (\4\)    (\4\)    (\1\)      0.1    (\1\)    (\4\)    (\4\)        0.3
   commercial building property....................
  Tax credit for the purchase of qualified energy    .......  .......  .......  .......  .......      0.1      0.3      0.2  .......  .......        0.6
   efficiency improvements to existing homes.......
  Tax credit for the production of energy-efficient      0.1      0.1  .......  .......  .......  .......  .......  .......  .......  .......        0.2
   appliances......................................
  Tax credits for alternative technology vehicles..      0.1      0.1    (\1\)    (\1\)    (\1\)      0.2      0.2      0.1      0.1    (\1\)        0.8
  Tax credit for clean-fuel vehicle refueling          (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
   property........................................
  Five-year carryback period for certain net             0.1    (\1\)    (\1\)    (\4\)    (\4\)  .......  .......  .......  .......  .......        0.1
   operating losses of electric utility companies..
Natural Resources and Environment
  Expensing of exploration and development costs,        0.1      0.1      0.1      0.1      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.4
   nonfuel minerals................................
  Excess of percentage over cost depletion, nonfuel      0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1      0.1        1.0
   minerals........................................
  Expensing of timber-growing costs................      0.2      0.2      0.2      0.2      0.2    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        1.1
  Exclusion of interest on State and local               0.2      0.2      0.2      0.2      0.2      0.4      0.4      0.5      0.5      0.5        3.3
   government qualified private activity bonds for
   sewage, water, and hazardous waste facilities...
  Special rules for mining reclamation reserves....    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.2
  Special tax rate for nuclear decommissioning           0.5      0.6      0.7      0.8      0.8  .......  .......  .......  .......  .......        3.4
   reserve funds...................................
  Exclusion of contributions in aid of construction    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......  .......  .......  .......  .......        0.2
   for water and sewer utilities...................
  Amortization of certified pollution control          (\1\)    (\1\)      0.1      0.1      0.1  .......  .......  .......  .......  .......        0.3
   facilities......................................
  Amortization and expensing of reforestation          (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.1      0.1      0.1      0.1      0.1        0.6
   expenditures....................................
Agriculture
  Expensing of soil and water conservation             (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.2
   expenditures....................................
  Expensing of fertilizer and soil conditioner         (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.2      0.1      0.1      0.1      0.1        0.7
   costs...........................................
  Expensing of the costs of raising dairy and          (\1\)    (\1\)    (\4\)    (\4\)    (\1\)      0.1    (\1\)    (\4\)    (\4\)    (\1\)        0.2
   breeding cattle.................................
  Exclusion of cost-sharing payments...............    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
  Exclusion of cancellation of indebtedness income   .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1        0.4
   of farmers......................................
  Income averaging for farmers and fishermen.......  .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
  Five-year carryback period for net operating         (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
   losses attributable to farming..................
Commerce and Housing
  Financial institutions:
    Exemption of credit union income...............      1.7      1.8      1.9      2.0      2.1  .......  .......  .......  .......  .......        9.3
  Insurance companies:
    Exclusion of investment income on life               2.5      2.5      2.6      2.7      2.7     25.5     26.1     26.8     27.5     28.2      147.1
     insurance and annuity contracts...............
    Small life insurance company taxable income          0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......        0.3
     adjustment....................................
    Special treatment of life insurance company          1.9      2.0      2.0      2.1      2.2  .......  .......  .......  .......  .......       10.2
     reserves......................................
    Deduction of unpaid property loss reserves for       3.4      3.4      3.5      3.6      3.6  .......  .......  .......  .......  .......       17.5
     property and casualty insurance companies.....
    Special deduction for Blue Cross and Blue            0.9      1.0      1.0      1.0      1.0  .......  .......  .......  .......  .......        5.0
     Shield companies..............................
  Housing:
    Deduction for mortgage interest on owner-        .......  .......  .......  .......  .......     69.4     75.6     80.7     85.9     91.1      402.7
     occupied residences...........................
    Deduction for property taxes on owner-occupied   .......  .......  .......  .......  .......     19.9     13.8     13.5     13.4     13.2       73.8
     residences....................................
    Exclusion of capital gains on sales of           .......  .......  .......  .......  .......     24.1     25.2     25.7     26.3     27.1      128.4
     principal residences..........................
    Exclusion of interest on State and local             0.3      0.4      0.4      0.4      0.4      0.9      1.0      1.0      1.1      1.1        7.0
     government qualified private activity bonds
     for owner-occupied housing....................
    Exclusion of interest on State and local             0.2      0.2      0.2      0.2      0.2      0.5      0.5      0.5      0.6      0.6        3.7
     government qualified private activity bonds
     for rental housing............................
    Depreciation of rental housing in excess of          0.4      0.5      0.6      0.7      0.8      4.0      4.6      5.3      6.1      7.0       29.9
     alternative depreciation system...............
    Tax credit for low-income housing..............      3.4      3.6      3.8      4.1      4.4      1.4      1.5      1.6      1.7      1.9       27.4
    Tax credit for rehabilitation of historic            0.3      0.3      0.3      0.3      0.3      0.1      0.1      0.1      0.1      0.1        2.2
     structures....................................
    Tax credit for rehabilitation of structures,       (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.1      0.1      0.1      0.1      0.1        0.5
     other than historic structures................
    Additional exemption for housing provided to     .......  .......  .......  .......  .......      0.1    (\1\)  .......  .......  .......        0.1
     individuals displaced by Hurricane Katrina....
    Tax credit for Gulf Opportunity Zone employers       0.1    (\1\)  .......  .......  .......      0.1    (\1\)  .......  .......  .......        0.2
     providing in-kind lodging for employees and
     income exclusion for the employees............
  Other business and commerce:
    Reduced rates of tax on dividends and long-term  .......  .......  .......  .......  .......     92.2     94.5    101.7     99.6     50.2      438.1
     capital gains.................................
    Exclusion of capital gains at death............  .......  .......  .......  .......  .......     50.9     51.9     53.2     69.7     64.5      290.2
    Carryover basis of capital gains on gifts......  .......  .......  .......  .......  .......      5.4      5.5      5.7      7.6     56.1       80.3
    Deferral of gain on non-dealer installment           0.6      0.7      0.7      0.7      0.8      0.5      0.5      0.5      0.6      0.6        6.2
     sales.........................................
    Deferral of gain on like-kind exchanges........      2.0      2.1      2.2      2.4      2.5      0.8      0.8      0.9      0.8      1.0       15.5
    Depreciation of buildings other than rental          0.4      0.6      0.8      1.1      1.4      0.4      0.5      0.7      1.0      1.3        8.3
     housing in excess of alternative depreciation
     system........................................
    Depreciation of equipment in excess of the           5.7     11.0     17.7     23.4     27.7     -2.2      0.1      2.2      4.3      6.1       96.0
     alternative depreciation system...............
    Expensing under section 179 of depreciable           0.6      0.6     -0.1     -0.4     -0.2      2.8      2.6      0.1     -0.8     -0.4        4.8
     business property.............................
    Amortization of business startup costs.........    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.7      0.7      0.8      0.8      0.9        3.9
    Reduced rates on first $10,000,000 of corporate      4.3      4.3      4.3      4.3      4.3  .......  .......  .......  .......  .......       21.6
     taxable income................................
    Permanent exemption from imputed interest rules    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.4      0.4      0.4      0.4      0.5        2.1
    Expensing of magazine circulation expenditures.    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
    Special rules for magazine, paperback book, and    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.2
     record returns................................
    Completed contract rules.......................      0.3      0.3      0.4      0.4      0.5    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        1.9
    Cash accounting, other than agriculture........    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.8      0.8      0.8      0.9      0.9        4.2
    Exclusion of interest on State and local             0.1      0.1      0.1      0.1      0.1      0.3      0.3      0.3      0.4      0.4        2.3
     government small-issue qualified private
     activity bonds................................
    Exception from net operating loss limitations        0.6      0.6      0.6      0.6      0.6  .......  .......  .......  .......  .......        3.0
     for corporations in bankruptcy proceedings....
    Tax credit for employer-paid FICA taxes on tips      0.2      0.2      0.2      0.2      0.3      0.3      0.4      0.4      0.4      0.5        3.1
    Deduction of certain film and television             0.1      0.1      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.3
     production costs..............................
    Production activity deduction..................      2.7      3.9      5.5      5.9      7.4      0.9      1.3      1.8      2.0      2.6       34.0
    Tax credit for the cost of carrying tax-paid       (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......  .......  .......  .......  .......        0.1
     distilled spirits in wholesale inventories....
    Partial expensing of Gulf Opportunity Zone         (\1\)    (\1\)    (\1\)    (\4\)    (\4\)    (\1\)    (\1\)    (\1\)    (\4\)    (\4\)        0.1
     clean-up costs................................
    Additional first-year depreciation for Gulf          0.9      0.9      0.4     -0.1     -0.2      0.4      0.4      0.2    (\4\)     -0.1        2.9
     Opportunity Zone property.....................
    Ten-year carryback period for casualty losses        0.2    (\1\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......        0.2
     of public utility property attributable to
     Hurricane Katrina.............................
    Five-year carryback period for casualty losses       0.1    (\1\)    (\4\)    (\4\)    (\4\)  .......  .......  .......  .......  .......        0.1
     of public utility property attributable to
     Hurricane Katrina.............................
    Five-year carryback period for losses                1.0      0.3     -0.1     -0.2     -0.2  .......  .......  .......  .......  .......        0.9
     attributable to various expenses related to
     Hurricane Katrina.............................
    Tax credit for employers for retention of          (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......        0.2
     employees affected by Hurricanes Katrina,
     Rita, and Wilma...............................
Transportation
  Exclusion of interest on State and local             (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
   government qualified private activity bonds for
   highway projects and rail-truck transfer
   facilities......................................
  Provide a 50-percent tax credit for certain            0.1      0.1      0.1      0.1    (\1\)  .......  .......  .......  .......  .......        0.4
   expenditures for maintaining railroad tracks....
  Deferral of tax on capital construction funds of       0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......        0.4
   shipping companies..............................
  Exclusion of employer-paid transportation          .......  .......  .......  .......  .......      4.2      4.3      4.4      4.5      4.7       22.1
   benefits........................................
Community and Regional Development
  New York City Liberty Zone tax incentives........      0.4      0.2      0.1    (\4\)     -0.1     -0.1      0.2      0.1      0.2      0.1        1.0
  Empowerment zone tax incentives..................      0.3      0.4      0.4      0.4      0.2      0.4      0.4      0.4      0.5      0.3        3.7
  Renewal community tax incentives.................      0.2      0.2      0.2      0.2      0.2      0.3      0.4      0.4      0.4      0.3        2.9
  New markets tax credit...........................      0.2      0.3      0.4      0.3      0.3      0.3      0.4      0.5      0.5      0.4        3.7
  Exclusion of interest on State and local             (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
   qualified private activity bonds for green
   buildings and sustainable design projects.......
  Exclusion of interest on State and local               0.3      0.3      0.3      0.3      0.4      0.7      0.8      0.8      0.9      0.9        5.8
   government qualified private activity bonds for
   private airports, docks, and mass-commuting
   facilities......................................
Education, Training, Employment, and Social
 Services
  Education and training:
    Tax credits for tuition for post-secondary       .......  .......  .......  .......  .......      4.9      5.2      5.1      5.0      5.0       25.2
     education.....................................
    Deduction for interest on student loans........  .......  .......  .......  .......  .......      0.8      0.9      0.9      0.9      1.0        4.5
    Exclusion of tax on earnings of Coverdell        .......  .......  .......  .......  .......      0.1      0.1      0.1      0.2      0.2        0.7
     education savings accounts....................
    Exclusion of interest on educational savings     .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
     bonds.........................................
    Exclusion of tax on earnings of qualified        .......  .......  .......  .......  .......      0.7      0.8      0.9      1.0      1.0        4.3
     tuition programs..............................
    Exclusion of scholarship and fellowship income.  .......  .......  .......  .......  .......      1.5      1.6      1.7      1.8      1.9        8.5
    Exclusion of income attributable to the          .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
     discharge of certain student loan debt and
     NHSC Educational Loan repayments..............
    Exclusion of employer-provided education         .......  .......  .......  .......  .......      0.8      0.9      0.9      0.9      0.9        4.4
     assistance benefits...........................
    Exclusion of employer-provided tuition           .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2        1.0
     reduction benefits............................
    Parental personal exemption for students age 19  .......  .......  .......  .......  .......      0.5      0.2      0.2      0.1    (\1\)        1.0
     to 23.........................................
    Exclusion of interest on State and local             0.1      0.1      0.1      0.1      0.1      0.3      0.3      0.3      0.4      0.4        2.3
     government qualified private activity bonds
     for student loans.............................
    Exclusion of interest on State and local             0.4      0.5      0.5      0.5      0.5      1.1      1.2      1.2      1.3      1.3        8.4
     government qualified private activity bonds
     for private nonprofit and qualified public
     educational facilities........................
    Tax credit for holders of qualified zone             0.1      0.1      0.1      0.1      0.1  .......  .......  .......  .......  .......        0.5
     academy bonds.................................
    Deduction for charitable contributions to            0.7      0.7      0.7      0.8      0.8      5.3      5.9      6.3      6.8      7.1       35.1
     educational institutions......................
  Employment:
    Exclusion of employee meals and lodging (other   .......  .......  .......  .......  .......      0.9      0.9      0.9      1.0      1.0        4.9
     than military)................................
    Exclusion of benefits provided under cafeteria   .......  .......  .......  .......  .......     27.9     30.6     33.4     36.6     40.0      168.5
     plans \5\.....................................
    Exclusion of housing allowances for ministers..  .......  .......  .......  .......  .......      0.5      0.5      0.5      0.6      0.6        2.7
    Exclusion of miscellaneous fringe benefits.....  .......  .......  .......  .......  .......      6.6      6.8      7.0      7.2      7.7       35.2
    Exclusion of employee awards...................  .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.2        0.9
    Exclusion of income earned by voluntary          .......  .......  .......  .......  .......      3.3      3.4      3.5      3.7      3.8       17.6
     employees' beneficiary associations...........
    Special tax provisions for employee stock            0.8      0.9      0.9      1.0      1.1      0.3      0.3      0.3      0.3      0.3        6.2
     ownership plans (ESOPs).......................
    Work opportunity tax credit....................      0.2      0.1      0.1    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.8
    Welfare-to-work tax credit.....................    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)  .......        0.2
    Deferral of taxation and capital gains           .......  .......  .......  .......  .......      0.4      0.4      0.4      0.2      0.1        1.5
     treatment on spread on acquisition of stock
     under incentive stock option plans and
     employee stock purchase plans \6\.............
  Social services:
    Tax credit for children under age 17 \7\.......  .......  .......  .......  .......  .......     46.0     45.9     46.1     46.0     46.0      230.0
    Tax credit for child and dependent care and      .......  .......  .......  .......  .......      3.1      2.7      2.7      2.6      2.5       13.5
     exclusion of employer-provided child care
     (\8\).........................................
    Tax credit for employer-provided dependent care    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.2
    Exclusion of certain foster care payments......  .......  .......  .......  .......  .......      0.6      0.6      0.7      0.7      0.8        3.4
    Adoption credit and employee adoption benefits   .......  .......  .......  .......  .......      0.4      0.5      0.5      0.5      0.5        2.4
     exclusion.....................................
    Deduction for charitable contributions, other        1.7      1.7      1.7      1.8      1.8     29.1     31.9     34.2     36.8     38.4      179.1
     than for education and health.................
    Tax credit for disabled access expenditures....    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)      0.1      0.1      0.1      0.1      0.1        0.4
Health
  Exclusion of employer contributions for health     .......  .......  .......  .......  .......     90.6     99.7    107.0    114.5    122.2      534.0
   care, health insurance premiums, and long-term
   care insurance premiums \9\.....................
  Exclusion of medical care and TRICARE medical      .......  .......  .......  .......  .......      1.9      2.0      2.1      2.3      2.5       10.9
   insurance for military dependents, retirees, and
   retiree dependents..............................
  Deduction for health insurance premiums and long-  .......  .......  .......  .......  .......      3.8      4.2      4.5      4.9      5.2       22.6
   term care insurance premiums by the self-
   employed........................................
  Deduction for medical expenses and long-term care  .......  .......  .......  .......  .......      7.3      8.2      9.5     10.7     12.1       47.8
   expenses........................................
  Exclusion of workers' compensation benefits        .......  .......  .......  .......  .......      6.5      6.9      7.4      8.0      8.5       37.3
   (medical benefits)..............................
  Health savings accounts..........................  .......  .......  .......  .......  .......      0.1      0.3      0.6      0.9      1.2        3.2
  Exclusion of interest on State and local               0.6      0.7      0.7      0.8      0.8      1.7      1.8      1.9      2.0      2.1       13.1
   government qualified private activity bonds for
   private nonprofit hospital facilities...........
  Deduction for charitable contributions to health       0.8      0.8      0.9      0.9      0.9      3.7      4.0      4.3      4.7      4.8       25.8
   organizations...................................
  Tax credit for orphan drug research..............      0.2      0.3      0.3      0.3      0.3  .......  .......  .......  .......  .......        1.4
  Tax credit for purchase of health insurance by     .......  .......  .......  .......  .......      0.2      0.2      0.2      0.2      0.3        1.2
   certain displaced persons.......................
Medicare
  Exclusion of Medicare benefits:
    Hospital insurance (Part A)....................  .......  .......  .......  .......  .......     18.5     20.7     22.5     24.5     26.7      112.9
    Supplementary medical insurance (Part B).......  .......  .......  .......  .......  .......     12.5     14.2     15.4     16.7     18.1       76.9
    Prescription drug insurance (Part D)...........  .......  .......  .......  .......  .......      3.4      6.2      7.5      8.3      9.5       34.9
  Exclusion of certain subsidies to employers who        0.7      1.2      1.4      1.5      1.6  .......  .......  .......  .......  .......        6.3
   maintain prescription drug plans for Medicare
   enrollees.......................................
Income Security
  Exclusion of workers' compensation benefits        .......  .......  .......  .......  .......      2.5      2.6      2.7      2.7      2.8       13.2
   (disability and survivors payments).............
  Exclusion of damages on account of personal        .......  .......  .......  .......  .......      1.4      1.5      1.5      1.5      1.5        7.4
   physical injuries or physical sickness..........
  Exclusion of special benefits for disabled coal    .......  .......  .......  .......  .......      0.1      0.1    (\1\)    (\1\)    (\1\)        0.2
   miners..........................................
  Exclusion of cash public assistance benefits.....  .......  .......  .......  .......  .......      3.4      3.6      3.7      3.9      4.0       18.6
  Net exclusion of pension contributions and
   earnings:
    Employer plans.................................  .......  .......  .......  .......  .......    104.1    110.2    115.2    120.8    126.7      577.1
    Individual retirement plans....................  .......  .......  .......  .......  .......     11.2     14.0     15.5     16.9     18.4       76.0
    Plans covering partners and sole proprietors     .......  .......  .......  .......  .......      9.4     10.3     10.8     11.3     11.6       53.4
     (sometimes referred to as ``Keogh plans'')....
  Tax credit for certain individuals for elective    .......  .......  .......  .......  .......      0.9      0.6    (\1\)  .......  .......        1.5
   deferrals and IRA contributions.................
  Tax credit for new retirement plan expenses of       (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
   small businesses................................
  Exclusion of other employee benefits:
    Premiums on group term life insurance..........  .......  .......  .......  .......  .......      2.5      2.6      2.6      2.7      2.7       13.1
    Premiums on accident and disability insurance..  .......  .......  .......  .......  .......      2.6      2.8      2.9      3.0      3.1       14.4
  Additional standard deduction for the blind and    .......  .......  .......  .......  .......      1.6      1.6      1.7      1.7      1.8        8.4
   the elderly.....................................
  Tax credit for the elderly and disabled..........  .......  .......  .......  .......  .......    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.1
  Deduction for casualty and theft losses..........  .......  .......  .......  .......  .......      0.7      0.8      0.3      0.3      0.3        2.4
  Earned income credit (EIC).......................  .......  .......  .......  .......  .......     42.1     42.8     43.5     44.5     45.4      218.3
  Exclusion of cancellation of indebtedness income   .......  .......  .......  .......  .......      0.2      0.1  .......  .......  .......        0.3
   of Hurricane Katrina victims....................
Social Security and Railroad Retirement
  Exclusion of untaxed social security and railroad  .......  .......  .......  .......  .......     23.1     24.1     24.8     25.9     27.2      125.1
   retirement benefits.............................
Veterans' Benefits and Services
  Exclusion of veterans' disability compensation...  .......  .......  .......  .......  .......      3.6      3.8      3.9      4.0      4.0       19.2
  Exclusion of veterans' pensions..................  .......  .......  .......  .......  .......      0.1      0.1      0.1      0.1      0.1        0.6
  Exclusion of veterans' readjustment benefits.....  .......  .......  .......  .......  .......      0.2      0.3      0.3      0.3      0.3        1.3
  Exclusion of interest on State and local             (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)    (\1\)        0.3
   government qualified private activity bonds for
   veterans' housing...............................
General Purpose Fiscal Assistance
  Exclusion of interest on public purpose State and      7.3      7.8      8.2      8.6      9.0     18.7     20.1     21.1     22.1     23.1      146.0
   local government bonds..........................
  Deduction of nonbusiness State and local           .......  .......  .......  .......  .......     36.8     27.3     27.3     28.1     28.9      148.5
   government income, sales, and personal property
   taxes (\10\)....................................
  Tax credit for Puerto Rico and possession income,      0.3  .......  .......  .......  .......  .......  .......  .......  .......  .......        0.3
   and Puerto Rico economic activity...............
Interest
  Deferral of interest on savings bonds............  .......  .......  .......  .......  .......      1.1      1.1      1.2      1.2      1.2        5.8

--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Positive tax expenditure of less than $50 million.
\2\ In addition, the credit from excise tax for alcohol fuels results in a reduction in excise tax receipts, net of income tax effect, of $11.1 billion
  over the fiscal years 2006 through 2010.
\3\ In addition, the credit from excise tax for biodiesel results in a reduction in excise tax receipts, net of income tax effect, of less than $50
  million in each of the fiscal years 2006 through 2010.
\4\ Negative tax expenditure of less than $50 million.
\5\ Estimate  includes  amounts of employer-provided  health insurance purchased  through cafeteria  plans and  employer-provided child care purchased
  through dependent care flexible spending accounts. These amounts are also included in other line items in this table.
\6\ Tax expenditure estimate does not include offsetting denial of corporate deduction for qualified stock option compensation.
\7\ Tax expenditure estimate includes refundable amounts, amounts used to offset income taxes, and amounts used to offset other taxes. The amount of
  refundable child tax credit and earned income tax credit used to offset taxes other than income tax or paid out as refunds is: $50.1 billion in 2006,
  $51.5 billion in 2007, $51.4 billion in 2008, $52.2 billion in 2009, and $53.2 in 2010.
\8\ Estimate includes employer-provided child care purchased through dependent care flexible spending accounts.
\9\ Estimate includes employer-provided health insurance purchased through cafeteria plans.
\10\ Deduction for state and local sales taxes expires after December 31, 2005.

Note.--Details may not add to totals due to rounding.

Source: Joint Committee on Taxation.


            Table 2.--Distribution by Income Class of All Returns, Taxable Returns, Itemized Returns,
                     and Tax Liability at 2005 Rates and 2005 Law and 2005 Income Levels\1\
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                                    Itemized
              Income Class \2\                All returns \3\  Taxable returns      returns       Tax liability
----------------------------------------------------------------------------------------------------------------
Below $10,000...............................           21,665              409              558          -$6,385
$10,000 to $20,000..........................           20,100            5,912            1,254          -14,505
$20,000 to $30,000..........................           17,742            7,961            2,297           -5,406
$30,000 to $40,000..........................           15,541            9,195            3,369            8,330
$40,000 to $50,000..........................           13,129            9,750            4,312           22,253
$50,000 to $75,000..........................           22,469           19,550           10,244           78,638
$75,000 to $100,000.........................           13,690           13,362            8,691           87,524
$100,000 to $200,000........................           16,322           16,241           13,446          231,480
$200,000 and over...........................            4,227            4,219            3,906          458,779
                                             -------------------------------------------------------------------
      Total.................................          144,885           86,599           48,077         $860,708
----------------------------------------------------------------------------------------------------------------
\1\ Tax law as in effect on December 31, 2005, is applied to the 2005 level and sources of income and their
  distribution among taxpayers.
\2\ The  income  concept used  to place tax  returns  into  classes  is adjusted gross  income (AGI)  plus: (a)
  tax-exempt interest, (b) employer contributions for health plans and life insurance, (c) employer share of
  FICA tax, (d) workers' compensation, (e) nontaxable Social Security benefits, (f) insurance value of Medicare
  benefits, (g) alternative minimum tax preference items, and (h) excluded income of U.S. citizens living
  abroad.
\3\ Includes filing  and  nonfiling  units. Filing  units  include  all taxable  and nontaxable  returns.
  Nonfiling  units  include  individuals  with income that is exempt from Federal income taxation (e.g.,
  transfer payments, interest from tax-exempt bonds, etc.). Excludes individuals who are dependents of other
  taxpayers and taxpayers with negative income.

Note.--Details may not add to totals due to rounding.

Source: Joint Committee on Taxation.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                                    at 2005 Rates and 2005 Income Levels \1\
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                                      Medical deduction             Real estate tax deduction
              Income Class \2\               -------------------------------------------------------------------
                                                  Returns           Amount          Returns           Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000...............................                5            (\3\)              372            (\3\)
$10,000 to $20,000..........................              180              $35              864              $30
$20,000 to $30,000..........................              526              174            1,618              162
$30,000 to $40,000..........................              880              320            2,414              350
$40,000 to $50,000..........................            1,161              552            3,340              732
$50,000 to $75,000..........................            2,490            1,716            8,534            2,929
$75,000 to $100,000.........................            1,647            1,488            7,689            3,478
$100,000 to $200,000........................            1,290            2,395           12,356            9,646
$200,000 and over...........................               90              617            3,679            4,630
                                             -------------------------------------------------------------------
      Total.................................            8,269           $7,297           40,866          $21,957
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2005 Rates and 2005 Income Levels \1\--Continued
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                               State and local income, sales,        Charitable contribution
                                                  and personal property tax                 deduction
              Income Class \2\                            deduction            ---------------------------------
                                             ----------------------------------
                                                  Returns           Amount          Returns           Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000...............................               20               $1                1            (\3\)
$10,000 to $20,000..........................              447               25              289              $29
$20,000 to $30,000..........................            1,479              141            1,114              165
$30,000 to $40,000..........................            2,696              378            2,098              410
$40,000 to $50,000..........................            3,885              777            3,115              711
$50,000 to $75,000..........................           10,113            3,300            8,440            3,000
$75,000 to $100,000.........................            8,946            4,081            7,801            3,462
$100,000 to $200,000........................           13,401           13,387           12,598           10,301
$200,000 and over...........................            3,192           17,881            3,747           17,851
                                             -------------------------------------------------------------------
      Total.................................           44,178          $39,969           39,209          $35,930
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2005 Rates and 2005 Income Levels \1\--Continued
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                                      Child care credit             Earned income credit \4\
              Income Class \2\               -------------------------------------------------------------------
                                                  Returns           Amount          Returns           Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000...............................                1            (\3\)            5,410           $6,161
$10,000 to $20,000..........................               60              $18            6,302           15,659
$20,000 to $30,000..........................              331              160            5,011           11,496
$30,000 to $40,000..........................              624              362            3,833            5,493
$40,000 to $50,000..........................              586              347            1,547            1,293
$50,000 to $75,000..........................            1,270              649              181              202
$75,000 to $100,000.........................            1,076              552                9                9
$100,000 to $200,000........................            1,627              841                3                2
$200,000 and over...........................              313              161  ...............  ...............
                                             -------------------------------------------------------------------
      Total.................................            5,888           $3,090           22,296          $40,315
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2005 Rates and 2005 Income Levels \1\--Continued
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                                 Untaxed Social Security and          Child Tax  Credit \4\
                                                Railroad Retirement benefits   ---------------------------------
              Income Class \2\               ----------------------------------
                                                  Returns           Amount          Returns           Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000...............................               14               $2              188             $211
$10,000 to $20,000..........................            4,396            1,875            3,252            1,846
$20,000 to $30,000..........................            3,469            2,389            4,509            5,300
$30,000 to $40,000..........................            3,334            3,652            4,248            6,433
$40,000 to $50,000..........................            2,809            3,572            3,506            5,821
$50,000 to $75,000..........................            5,482            7,201            6,363           10,938
$75,000 to $100,000.........................            2,918            2,095            4,554            7,912
$100,000 to $200,000........................            2,744              764            5,001            7,619
$200,000 and over...........................              679              263               10                8
                                             -------------------------------------------------------------------
      Total.................................           25,845          $21,813           31,631          $46,088
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2005 Rates and 2005 Income Levels \1\--Continued
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                                      Education credits          Student loan interest deduction
              Income Class \2\               -------------------------------------------------------------------
                                                  Returns           Amount          Returns           Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000...............................                6            (\3\)               33               $2
$10,000 to $20,000..........................              754             $165              316               17
$20,000 to $30,000..........................              994              438              526               41
$30,000 to $40,000..........................            1,069              529              749               71
$40,000 to $50,000..........................            1,013              538              823              108
$50,000 to $75,000..........................            1,517              878            1,590              188
$75,000 to $100,000.........................            1,466              969            1,054              129
$100,000 to $200,000........................              635              357            1,241              210
$200,000 and over...........................            (\5\)            (\3\)  ...............  ...............
                                             -------------------------------------------------------------------
      Total.................................            7,453           $3,875            6,332             $766
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2005 Rates and 2005 Income Levels \1\--Continued
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                                   Mortgage interest deduction
                               Income Class \2\                                ---------------------------------
                                                                                    Returns           Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000.................................................................              342               $4
$10,000 to $20,000............................................................              754               83
$20,000 to $30,000............................................................            1,459              426
$30,000 to $40,000............................................................            2,262              982
$40,000 to $50,000............................................................            3,112            1,914
$50,000 to $75,000............................................................            8,073            7,545
$75,000 to $100,000...........................................................            7,326            8,587
$100,000 to $200,000..........................................................           11,656           25,081
$200,000 and over.............................................................            3,188           17,475
                                                                               ---------------------------------
      Total...................................................................           38,171          $62,097
----------------------------------------------------------------------------------------------------------------
Footnotes for Table 3:
\1\ Excludes individuals who are dependents of other taxpayers and taxpayers with negative income.
\2\ The  income  concept used  to  place tax  returns  into  classes  is  adjusted gross  income (AGI) plus: (a)
  tax-exempt interest, (b) employer contributions for health plans and life insurance, (c) employer share of
  FICA tax, (d) workers' compensation, (e) nontaxable Social Security benefits, (f) insurance value of Medicare
  benefits, (g) alternative minimum tax preference items, and (h) excluded income of U.S. citizens living
  abroad.
\3\ Less than $500,000.
\4\ Includes the refundable portion.
\5\ Less than 500 returns.

Note.--Details may not add to totals due to rounding.

Source: Joint Committee on Taxation.

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