[JPRT 111-1-10]
[From the U.S. Government Publishing Office]
JCS-1-10
[JOINT COMMITTEE PRINT]
ESTIMATES OF
FEDERAL TAX EXPENDITURES
FOR FISCAL YEARS 2009-2013
__________
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
JANUARY 11, 2010
JOINT COMMITTEE ON TAXATION
111TH CONGRESS, 2ND SESSION
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SENATE HOUSE
MAX BAUCUS, Montana, CHARLES B. RANGEL, New York,
Chairman Vice Chairman
JOHN D. ROCKFELLER IV, West FORTNEY PETE STARK, California
Virginia SANDER M. LEVIN, Michigan
KENT CONRAD, North Dakota DAVE CAMP, Michigan
CHUCK GRASSLEY, Iowa WALLY HERGER, California
ORRIN G. HATCH, Utah
C O N T E N T S
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Page
Introduction..................................................... 1
I. The Concept of Tax Expenditures...................................3
II. Measurement of Tax Expenditures..................................21
III.Tax Expenditure Estimates........................................26
INTRODUCTION
Tax expenditure analysis can help both policymakers and the
public to understand the actual size of government, the uses to
which government resources are put, and the tax and economic
policy consequences that follow from the implicit or explicit
choices made in fashioning legislation. This report \1\ on tax
expenditures for fiscal years 2009-2013 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 2009-
2013 (JCS-1-10), January 11, 2010.
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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 Department of
the Treasury (``the Treasury''). The Treasury published its
estimates of tax expenditures for fiscal years 2008-2014 in the
Administration's budgetary statement of May 2009.\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), January 12,
2005 (JCS-1-05), April 25, 2006 (JCS-2-06), September 24, 2007 (JCS-3-
07), and October 31, 2008 (JCS-2-08).
\3\ Office of Management and Budget, ``Tax Expenditures,''
Analytical Perspectives, Budget of the United States Government, Fiscal
Year 2010, May 7, 2009, pp. 297-329.
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The Joint Committee staff has made its estimates (as shown
in Table 1) based on the provisions in Federal tax law as
enacted through September 30, 2009.\4\ 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 calculations in this report are based on the August
2009 Congressional Budget Office (``CBO'') revenue baseline and
Joint Committee staff projections of the gross income,
deductions, and expenditures of individuals and corporations
for calendar years 2008-2013.
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\4\ This analysis does not include effects of the Worker,
Homeownership, and Business Assistance Act of 2009 (Pub. L. No. 111-92)
or the Department of Defense Appropriations Act, 2010 (Pub. L. No. 111-
118), which became law after the end of fiscal year 2009. The Worker,
Homeownership, and Business Assistance Act affects the tax expenditures
for the first-time homebuyer tax credit and the exclusion of benefits
and allowances to armed forces personnel under the Homeowners
Assistance Program. The Department of Defense Appropriations Act
extends the premium subsidy for COBRA continuation coverage.
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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 2009-2013 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.'' \5\
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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\5\ Congressional Budget and Impoundment Control Act of 1974 (Pub.
L. No. 93-344), sec. 3(3). The Budget Act requires CBO and the Treasury
to publish annually detailed lists of tax expenditures.
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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.
It is appropriate to evaluate tax expenditures with respect to
cost, distributional consequences, alternative means of
provision, and economic effects and to allow policymakers to
evaluate the tradeoffs among these and other potentially
competing policy goals.
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 less than
$50 million over the five fiscal years 2009-2013. 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.
An alternative approach builds on the work of Seymour
Fiekowsky and others, by defining a ``tax subsidy'' (a tax
expenditure in the narrow sense) as a specific tax provision
that is deliberately inconsistent with an identifiable general
rule of the present tax law (not a hypothetical normal income
tax law), and that collects less revenue than does the general
rule.\6\ In practice, the compilation of general rules comprise
a baseline for identifying tax subsidies that corresponds to
the ``reference tax'' baseline that the Treasury primarily uses
in its tax expenditure analyses and that the Joint Committee
staff used in 2008.\7\ While this definition does not require
the kinds of normative judgments required to construct the
``normal'' tax base, it is not automatic in application. For
example, there may be uncertainty as to whether there is a
clear general rule, and if so, what that general rule may be.
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\6\ Seymour Fiekowsky, ``The Relation of Tax Expenditures to the
Distribution of the `Fiscal Burden,' '' 2 Canadian Taxation, 1980, 211,
215; see also Office of Management and Budget, The Budget of the United
States Government, Fiscal Year 1983--Special Analyses G-5, 1982.
\7\ Joint Committee on Taxation, Estimates of Federal Tax
Expenditures for Fiscal Years 2008-2012 (JCS-2-08), October 31, 2008.
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As a practical matter, either approach can yield a similar
list of tax expenditures. Many of the provisions of normal
income tax law are also general rules of the Internal Revenue
Code of 1986, as amended (``the Code''). Both systems generally
allow as part of the baseline tax system, among other features,
deferral of tax on unrealized gains; existence of a separate
corporate income tax; a standard deduction and personal
exemptions; variation in individual tax rates by income;
variation in rate brackets, standard deductions, and other tax
attributes by marital status; exclusion of gifts between
individuals from gross income; deductibility of the expenses of
earning income; economic depreciation; and credit for foreign
income taxes paid to prevent double taxation of income earned
abroad.\8\ As a result, a provision identified as a tax
expenditure under the general rules of the Code generally is
identified as a tax expenditure under the normal income tax law
baseline; however, the reverse is not always true. The primary
areas of departure relate to accelerated depreciation (of which
expensing is an extreme form), deferral of income of controlled
foreign corporations (``CFCs''), and exclusion of certain cash
transfers from income.\9\
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\8\ The rationales for inclusion of items in this list, and,
indeed, for designation as tax expenditures, vary. For example, while
taxation of accrued but unrealized gains is consistent with the broad
concept of normal income, nontaxation of accrued gains is not treated
as a tax expenditure because of the infeasibility of its
implementation. Other considerations include how much a provision
contributes to compliance and/or systemic equity.
\9\ In its 2008 tax expenditure report, the Joint Committee staff
identifies five major provisions that would be classified as tax
expenditures under the normal income tax law baseline that are not
classified as tax subsidies under the general rules of the Code. Three
of these items relate to accelerated depreciation; two relate to
deferral of income of CFCs. See ibid., Table 4, p. 69. In its 2009 tax
expenditure report, Treasury identifies nine such provisions: five
relate to accelerated depreciation; two relate to exclusion of certain
cash transfers from income; one relates to deferral of income of CFCs;
and one relates to graduated corporation income tax rates. See Office
of Management and Budget, ``Tax Expenditures,'' Analytical
Perspectives, Budget of the United States Government, Fiscal Year 2010,
May 7, 2009, pp. 299-302.
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Given the similarity of the two approaches, the generally
more expansive list of provisions identified relative to the
normal income tax baseline, and continuity with the historical
approach of the Joint Committee staff since 1972, this pamphlet
resumes implementation of the tax expenditure concept under a
normal income tax baseline, adjusted to include additional tax
expenditures (negative and otherwise) presented on the basis of
traditional budget functions.
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.\10\ 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.\11\
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\10\ The Federal income tax on individuals also applies to estates
and trusts, which are subject to a separate income tax rate schedule
(sec. 1(e) of 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.
\11\ 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, 47, 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.
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Some provisions in the 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 and are not related directly to
progressivity are called negative tax expenditures.\12\ Special
provisions of the law the principal purpose for which is to
enforce general tax rules, or to prevent the violation of other
laws, are not treated as negative tax expenditures even though
they may increase the tax burden for certain taxpayers.
Examples of these compliance and enforcement provisions include
(1) the section 382 limitation on net operating loss
carryforwards and certain built-in losses following ownership
changes, (2) the section 1091 wash sale rules, (3) the section
1287 denial of capital gain treatment for gains on certain
obligations not in registered form, and (4) the section 162(f)
disallowance of a deduction for fines and penalties.\13\
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\12\ Although the Budget Act does not require the identification of
negative tax expenditures, the Joint Committee staff has presented a
number of negative tax expenditures for completeness.
\13\ See Joint Committee on Taxation, Estimates of Federal Tax
Expenditures for Fiscal Years 2008-2012 (JCS-2-08), October 31, 2008,
9.
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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 are 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 Code
contains a specific exclusion for the income. Specific
exclusions for employer-provided benefits include: coverage
under accident and health plans,\14\ 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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\14\ Present law contains an exclusion for employer-provided
coverage under accident and health plans (sec. 106) and an exclusion
for benefits received by employees under employer-provided accident and
health plans (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.\15\ Under normal income tax law, retirees
would be entitled to exclude 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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\15\ 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 are 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 Treasury regulations. Table 1 contains tax
expenditure calculations 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.\16\
However, the Joint Committee staff does not classify this
exclusion as a tax expenditure.\17\ The measurement of imputed
income for tax purposes presents administrative problems and
its exclusion from taxable income may be regarded as an
administrative necessity.\18\ 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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\16\ The National Income and Product Accounts include estimates of
this imputed income. The accounts appear in Survey of Current Business,
published monthly by the U.S. Department of Commerce, Bureau of
Economic Analysis. However, a taxpayer-by-taxpayer accounting of
imputed income would be necessary for a tax expenditure estimate.
\17\ The Treasury Department provides a tax expenditure calculation
for the exclusion of net rental income of homeowners that combines the
positive tax expenditure for the failure to impute rental income with
the negative tax expenditure for the failure to allow a deduction for
depreciation and other costs.
\18\ 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. However,
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.
Because of the same concern for administrative feasibility, 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.\19\ 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,
then: (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 (``AMT''); (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. The negative tax
expenditure created by the denial of the deduction for
employers is incorporated in the calculation of the tax
expenditure.
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\19\ 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 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. In one case the
restrictive effects of the AMT are presented separately because
there are no underlying positive tax expenditures reflecting
these effects: the negative tax expenditures for the AMT's
disallowance of personal exemptions and the standard deduction.
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. In
addition, a tax expenditure has been measured for depreciation
in those specific cases where the tax treatment of a certain
type of asset deviates from the overall treatment of other
similar types of assets. For example, the tax treatment of
leasehold improvements of commercial buildings is depreciated
using a recovery period of 15 years, while the general
treatment of improvements to commercial buildings (e.g., owned
commercial buildings) is a 39-year recovery period. In this
case, the difference between depreciation (in this case
straight line) using 15 years and 39 years for the recovery
period represents a tax expenditure. 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
(nor, for that matter, any indexing with respect to expenses
associated with these 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 (except where its
application is deemed infeasible), 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.) As
another example, the deductions for contributions to nuclear
decommissioning trust accounts and certain environmental
settlement trust accounts are not viewed as tax expenditures
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 incomes of these two
types of trust accounts, and these tax rate reductions are
viewed as tax expenditures.
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 directly 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.\20\
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\20\ See discussion of the individual AMT above.
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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, real estate investment trusts,
real estate mortgage investment conduits, and cooperatives) 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
section 501 also generally are exempt from corporate income
tax. The tax exemption for organizations that have a direct
business analogue or compete with for-profit organizations
organized for similar purposes is a tax expenditure.\21\ The
tax exemption for certain nonprofit cooperative business
organizations, such as trade associations, is not treated as a
tax expenditure just as the entity-level exemption given to
for-profit pass-through business entities is not treated as a
tax expenditure. 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. However, there are
numerous exceptions that allow for otherwise unrelated business
income to escape taxation,\22\ and these exceptions are treated
as tax expenditures. 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.
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\21\ These organizations include small insurance companies, mutual
or cooperative electric companies, State credit unions, and Federal
credit unions.
\22\ These exceptions include certain passive income that arguably
may relate to business activities, such as royalties or rents received
from licensing trade names or other assets typically used in a trade or
business, as well as other passive income such as certain dividends and
interest. Other exceptions include income derived from certain research
activities and income from certain trade show and fair activities.
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Recent Legislation
The American Recovery and Reinvestment Act of 2009, enacted
on February 17, 2009 (Pub. L. No. 111-5), created 15 new tax
expenditures, as follows:
--A ``making work pay'' credit of 6.2 percent of earned
income (up to a maximum of $400 for single taxpayers ($800
joint)) was provided for certain taxpayers (the credit is
phased out for single taxpayers with AGI in excess of $75,000
($150,000 joint)), effective for taxable years beginning in
2009 and 2010.
--An exclusion from gross income was provided for up to
$2,400 of unemployment compensation, effective for taxable
years beginning in 2009.
--An above-the-line deduction was provided for any State or
local sales or excise tax imposed on the purchase of a new car,
light truck, motorcycle, or motor home, phased out for
taxpayers with modified AGI in excess of $125,000 ($250,000
joint), effective for purchases on or after February 17, 2009,
and before January 1, 2010.
--An election to receive an investment credit in lieu of a
renewable electricity production credit was provided for
facilities placed in service after December 31, 2008, and
before January 1, 2014 (January 1, 2013, for wind facilities).
--A 10-percent credit (maximum of $2,500) for certain
alternative motor vehicles that do not meet the existing
criteria of a qualified plug-in electric drive motor vehicle,
and a 10-percent credit (maximum of $4,000) for converting a
vehicle into a plug-in electric drive motor vehicle, were
provided for vehicles sold or for conversions made before
December 31, 2011, effective February 17, 2009.
--For purposes of the work opportunity tax credit, a new
targeted group was created, allowing businesses to claim the
credit for hiring unemployed veterans or disconnected youth,
effective for individuals who begin work in 2009 or 2010.
--The inclusion of income arising from business
indebtedness discharged by the reacquisition of a debt
instrument in 2009 or 2010 was deferred until the fifth taxable
year, for reacquisitions occurring in 2009 (or fourth taxable
year for reacquisitions occurring in 2010), following the
taxable year in which the reacquisition occurs. The rule that
partially denies the deduction for original issue discount in
the case of an applicable high-yield discount obligation was
suspended for certain obligations issued in a debt-for-debt
exchange, including an exchange resulting from a significant
modification of a debt instrument, effective for obligations
issued after August 31, 2008, and before January 1, 2010.
--A credit was provided for investment in advanced energy
property (with a maximum overall allocation of $2.3 billion of
such credits), effective for property placed in service after
February 17, 2009.
--The issuance of recovery zone economic development bonds
(with a maximum allocation of $10 billion) and recovery zone
facility bonds (with a maximum allocation of $15 billion) was
authorized, effective for obligations issued after February 17,
2009, and before January 1, 2011.
--The issuance of tribal economic development bonds (with a
maximum allocation of $2 billion) was authorized, effective for
obligations issued after February 17, 2009.
--For private activity bonds issued in 2009 and 2010, and
for bonds issued since January 1, 2004, that are refunded
during 2009 or 2010, the classification of tax-exempt interest
as a tax preference for purposes of the alternative minimum
tax, and the inclusion of tax-exempt interest in the corporate
adjustment based on current earnings, were suspended.
--The issuance of qualified school construction bonds (with
a maximum allocation of $11 billion per calendar year) was
authorized, effective for obligations issued after February 17,
2009, and before January 1, 2011.
--The issuance of build America bonds was authorized,
allowing bondholders a 35-percent credit or, alternatively,
allowing issuers a 35-percent refundable credit, effective for
obligations issued after February 17, 2009, and before January
1, 2011.
--A $250 credit ($500 for a joint return where both spouses
are eligible) against income taxes owed for tax year 2009 was
provided for individuals who receive a government pension or
annuity from work not covered by social security and who were
not otherwise eligible to receive a $250 grant, effective for
taxable years beginning after December 31, 2008.
--A 65-percent premium subsidy (phased out for single
taxpayers with AGI above $125,000 ($250,000 joint)) for COBRA
continuation coverage was provided for unemployed workers and
their families, effective for individuals who are involuntarily
terminated on or after September 1, 2008, and before January 1,
2010, and effective only for a maximum of nine months of
premiums, for months of coverage beginning after February 17,
2009.
The American Recovery and Reinvestment Act of 2009 also
extended or modified several existing tax expenditures, as
follows:
--The earned-income tax credit was increased for certain
taxpayers with three or more qualifying children and for
certain joint taxpayers, effective for taxable years beginning
in 2009 and 2010.
--The earnings threshold for the refundable portion of the
child tax credit was reduced to $3,000, effective for taxable
years beginning in 2009 and 2010.
--The Hope Scholarship Credit was increased to a maximum of
$2,500, was made available for each of the first four years of
a student's post-secondary education, and was made 40-percent
refundable. For purposes of the credit, the definition of
qualified tuition was expanded to include course materials, and
the income phase-out range was increased. The changes are
effective for taxable years beginning in 2009 and 2010.
--The definition of qualified higher education expense for
qualified tuition programs (sec. 529) was expanded to include
computer technology and equipment, effective for expenses paid
or incurred in 2009 or 2010.
--The first-time homebuyer credit, which was scheduled to
expire for homes purchased after June 30, 2009, was extended to
expire for homes purchased after November 30, 2009. The maximum
credit was increased from $7,500 to $8,000 and the repayment
requirement was waived for homes not sold within 36 months of
purchase, effective for homes purchased after December 31,
2008, and before December 1, 2009.
--For purposes of the electricity production credit, the
time period during which qualified facilities (wind, closed-
loop biomass, open-loop biomass, geothermal energy, municipal
solid waste, qualified hydropower, and marine renewables) may
be placed in service was extended by three years (two years for
marine renewables), through December 31, 2013 (December 31,
2012, for wind facilities).
--The credit cap applicable to qualified small wind energy
property and the rule that reduces the credit when the property
has received subsidized energy financing were both eliminated,
effective for periods after December 31, 2008.
--The limitation on issuance of new clean renewable energy
bonds (``CREBs'') was increased by $1.6 billion, effective on
February 17, 2009.
--The limitation on issuance of qualified energy
conservation bonds was increased from $800 million to $3.2
billion, effective on February 17, 2009.
--The credit for nonbusiness energy property, which was
scheduled to expire for expenditures made after December 31,
2009, was extended to expire for expenditures made after
December 31, 2010. The credit rate was increased from 10
percent to 30 percent, the credit cap was increased from $500
to $1,500, and the credit reduction related to subsidized
energy financing was eliminated, effective for taxable years
beginning after December 31, 2008.
--The credit cap for residential wind, geothermal, and
solar thermal property, and the reduction in credits for
property using subsidized energy financing were eliminated,
effective for taxable years beginning after December 31, 2008.
--The credit rate for nonhydrogen alternative fuel vehicle
refueling property was increased from 30 percent to 50 percent,
the maximum credit available for business property was
increased to $200,000 for hydrogen refueling property and
$50,000 for other refueling property, and the maximum credit
for nonbusiness property was increased to $2,000, effective for
taxable years beginning after December 31, 2008, for property
placed in service in 2009 or 2010.
--The plug-in electric drive motor vehicle credit was
modified in several ways. As discussed above, the Act created a
new maximum credit of $2,500 for electric drive low-speed
vehicles, motorcycles, and three-wheeled vehicles and a new
credit for converting a vehicle into a plug-in electric drive
motor vehicle, for vehicles sold and for conversions made
before December 31, 2011. The Act also limited the maximum
plug-in electric drive motor vehicle credit to $7,500,
eliminated the credit for low speed plug-in vehicles and for
plug-in vehicles weighing 14,000 pounds or more, replaced the
total vehicle limitation with a per manufacturer limitation,
for vehicles acquired after December 31, 2009. The credit is a
personal credit allowed against the AMT for taxable years
beginning after December 31, 2008.
--The treatment of the alternative motor vehicle credit as
a personal credit allowed against the AMT was provided,
effective for taxable years beginning after December 31, 2008.
--The exclusion of employer-provided transit and vanpool
benefits was increased from $120 per month to $230 (and indexed
for inflation in 2010), effective for months beginning on or
after February 17, 2009, and scheduled to expire for taxable
years beginning after December 31, 2010.
--The additional first-year depreciation deduction for
certain business property, which was scheduled to expire for
property placed in service after December 31, 2008, was
extended to expire for property placed in service after
December 31, 2009.
--The election to accelerate AMT and research credits in
lieu of bonus depreciation, which was scheduled to expire for
taxable years beginning after December 31, 2008, was extended
to expire for taxable years beginning after December 31, 2009.
--The limitations on expensing certain depreciable business
assets, which were scheduled to expire for taxable years
beginning after December 31, 2008, were extended to expire for
taxable years beginning after December 31, 2009.
--The carryback period for net operating losses was
increased from two years to five years for businesses with
gross receipts of $15 million or less, effective for net
operating losses generated in either a taxable year beginning
in 2008 or a taxable year ending in 2008.
--The percentage exclusion for qualified small business
stock sold by an individual was increased from 50 percent to 75
percent, effective for stock issued after February 17, 2009,
and before January 1, 2011.
--The recognition period for built-in gains of S
corporations was reduced from 10 years to seven years,
effective for any taxable year beginning in 2009 or 2010.
--The limitation on net operating loss carryforwards and
certain built-in losses following an ownership change was
eliminated for certain restructurings, effective for ownership
changes after February 17, 2009.
--The availability of industrial development bonds was
extended to facilities manufacturing intangible property, and
the 25-percent-of-net-proceeds restriction does not apply to
such facilities, effective for obligations issued after
February 17, 2009, and before January 1, 2011.
--The national limitation on the amount of investments
designated for receipt of the new markets tax credit was
increased from $3.5 billion to $5 billion for calendar years
2008 and 2009.
--The requirement that financial institutions allocate
interest expense attributable to tax-exempt interest was
eliminated for certain small issuers in some instances,
effective for tax-exempt obligations issued during 2009 or
2010.
--The high-speed intercity rail vehicle speed requirement
for exempt high-speed rail facility bonds was modified,
effective for obligations issued after February 17, 2009.
--The national limitation on zone academy bonds, which was
scheduled to decrease from $400 million in 2008 to zero
thereafter, was increased to $1.4 billion in 2009 and 2010,
effective for obligations issued after December 31, 2008.
--The amount of the health coverage tax credit was
increased to 80 percent of the taxpayer's premiums for
qualified health insurance of the taxpayer and qualifying
family members, effective for coverage months beginning on or
after May 1, 2009, and before January 1, 2011.
--The general rule that basis of a qualified building must
be reduced by the amount of any federal grant with respect to
such building was modified such that low-income housing grants
received in lieu of credits do not reduce the tax basis of a
qualified low-income building, effective on February 17, 2009.
Expiring Tax Expenditure Provisions
A number of tax expenditure provisions expired, or are
scheduled to expire, in 2009. These determinations reflect
present law as of September 30, 2009:
--The tax credit for Indian coal produced at Indian coal
production facilities expired for facilities placed in service
after December 31, 2008. The tax expenditure estimate in Table
1 reflects the tax credit for facilities placed in service
before January 1, 2009.
--The treatment of mineral royalties as qualified REIT
income for timber REITs is scheduled to expire on the last day
of the taxpayer's first taxable year beginning after May 22,
2008, and before May 23, 2009. This tax expenditure is not
listed in Table 1 because the estimated revenue loss is below
the de minimis amount.
--The treatment of sales by REITs of certain timber
property as sale of property held for investment or used in a
trade or business is scheduled to expire for sales after the
last day of the taxpayer's first taxable year beginning after
May 22, 2008, and before May 23, 2009. This tax expenditure is
not listed in Table 1 because the estimated revenue loss is
below the de minimis amount.
--The temporary reduction in corporate rate for qualified
timber gain is scheduled to expire for taxable years beginning
after May 22, 2009.
--The tax credit for first-time homebuyers is scheduled to
expire for residences purchased after November 30, 2009.\23\
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\23\ This credit was modified and extended (generally through April
30, 2010) by the Worker, Homeownership, and Business Assistance Act of
2009, Pub. L. No. 111-92, secs. 11, 12.
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--The tax credit for qualified hybrid motor vehicles other
than passenger automobiles and light trucks is scheduled to
expire for vehicles purchased after December 31, 2009.
--The tax credit for biodiesel and renewable diesel fuel is
scheduled to expire for fuel sold or used after December 31,
2009.
--The tax credit for research and experimentation expenses
is scheduled to expire for amounts paid or incurred after
December 31, 2009.
--The increase in the State housing credit ceiling under
the low-income housing credit is scheduled to expire after
December 31, 2009.
--The election to substitute grants to States for low-
income housing projects for low-income housing credit
allocation is scheduled to expire after December 31, 2009.
--The tax credit for electricity produced at open-loop
biomass facilities placed in service before October 22, 2004,
is scheduled to expire after December 31, 2009.
--The tax credit for refined coal produced at refined coal
production facilities is scheduled to expire for facilities
placed in service after December 31, 2009.
--The Indian employment tax credit is scheduled to expire
for taxable years beginning after December 31, 2009.
--The new markets tax credit is scheduled to expire after
December 31, 2009.
--The tax credit for certain expenditures on railroad track
maintenance is scheduled to expire for expenditures paid or
incurred after December 31, 2009.
--The period for incurring qualified expenditures for
purposes of credit for production of low sulfur diesel fuel for
small refiners in compliance with EPA sulfur regulations is
scheduled to end on December 31, 2009. This tax expenditure is
not listed in Table 1 because the estimated revenue loss is
below the de minimis amount.
--The tax credit for producing coke or coke gas is
scheduled to expire for facilities placed in service after
December 31, 2009. In Table 1, this is reflected in the tax
expenditure estimate for ``Credit for producing fuels from a
nonconventional source.''
--The tax credit for construction of new energy efficient
homes is scheduled to expire for homes purchased after December
31, 2009.
--The tax credit for training costs of mine rescue team
employees is scheduled to expire for taxable years beginning
after December 31, 2009. This tax expenditure is not listed in
Table 1 because the estimated revenue loss is below the de
minimis amount.
--The tax credit for wages of employees who are active duty
members of the uniformed services is scheduled to expire for
payments made after December 31, 2009. This tax expenditure is
not listed in Table 1 because the estimated revenue loss is
below the de minimis amount.
--The tax credit to holders of clean renewable energy bonds
is scheduled to expire for bonds issued after December 31,
2009.
--The above-the-line deduction for teacher classroom
expenses is scheduled to expire for taxable years beginning
after December 31, 2009.
--The increased standard deduction for State and local real
property taxes is scheduled to expire for taxable years
beginning after December 31, 2009.
--The exclusion of unemployment compensation benefits from
gross income is scheduled to expire for taxable years beginning
after December 31, 2009.
--The suspension of applicable high-yield debt obligation
rules for debt issued in an exchange or as a result of
modification is scheduled to expire for obligations issued
after December 31, 2009.
--The election to deduct State and local general sales
taxes (in lieu of State and local income taxes) is scheduled to
expire for taxable years beginning after December 31, 2009.
--The increased standard deduction and itemized deduction
for State or local sales or excise taxes imposed on the
purchase of a qualified motor vehicle are scheduled to expire
for purchases made after December 31, 2009.
--The classification as five-year property of farming
business machinery and equipment is scheduled to expire for
machinery and equipment placed in service after December 31,
2009. In Table 1, this is reflected in the tax expenditure
estimate for ``Depreciation of equipment in excess of the
alternative depreciation system.''
--Fifteen-year straight-line cost recovery for qualified
leasehold improvements, qualified restaurant property, and
qualified retail improvements is scheduled to expire for
property placed in service after December 31, 2009. In Table 1,
this is reflected in the tax expenditure estimate for
``Depreciation of buildings other than rental housing in excess
of alternative depreciation system.''
--Seven-year cost recovery for certain motorsports
racetrack property is scheduled to expire for property placed
in service after December 31, 2009. In Table 1, this is
reflected in the tax expenditure estimate for ``Depreciation of
buildings other than rental housing in excess of alternative
depreciation system.''
--Accelerated depreciation for business property on Indian
reservations is scheduled to expire for property placed in
service after December 31, 2009.
--Additional first-year depreciation for 50 percent of
basis of qualified property is scheduled to expire for property
acquired after December 31, 2009.
--The election to accelerate AMT and research credits in
lieu of additional first-year depreciation is scheduled to
expire for basis attributable to manufacture, construction, or
production after December 31, 2009.
--The higher deduction limits for charitable contributions
of real property interests made exclusively for conservation
purposes are scheduled to expire for contributions made in
taxable years beginning after December 31, 2009. In Table 1,
this is reflected in the tax expenditure estimate for
``Deduction for charitable contributions, other than for
education and health.''
--The enhanced charitable deduction for contributions of
food inventory is scheduled to expire for contributions made
after December 31, 2009. In Table 1, this is reflected in the
tax expenditure estimate for ``Deduction for charitable
contributions, other than for education and health.''
--The enhanced charitable deduction for contributions of
book inventories to public schools is scheduled to expire for
contributions made after December 31, 2009. In Table 1, this is
reflected in the tax expenditure estimate for ``Deduction for
charitable contributions to educational institutions.''
--The enhanced charitable deduction for corporate
contributions of computer equipment for educational purposes is
scheduled to expire for contributions made in taxable years
beginning after December 31, 2009. In Table 1, this is
reflected in the tax expenditure estimate for ``Deduction for
charitable contributions to educational institutions.''
--The increased dollar limitations for expensing certain
depreciable business assets are scheduled to expire for taxable
years beginning after December 31, 2009. In Table 1, this is
reflected in the tax expenditure estimate for ``Expensing under
section 179 of depreciable business property.''
--The election to expense 50 percent of qualified property
used to refine liquid fuels is scheduled to expire for property
which is placed in service after December 31, 2009 and for
property on which construction begins after December 31, 2009.
--The election to expense advanced mine safety equipment is
scheduled to expire for property placed in service after
December 31, 2009. This tax expenditure is not listed in Table
1 because the estimated revenue loss is below the de minimis
amount.
--The election to expense qualified film and television
productions is scheduled to expire for productions commencing
after December 31, 2009. This tax expenditure is not listed in
Table 1 because the estimated revenue loss is below the de
minimis amount.
--The election to expense environmental remediation
expenditures is scheduled to expire for expenditures paid or
incurred after December 31, 2009.
--The deduction for income attributable to domestic
production activities in Puerto Rico is scheduled to expire for
taxable years beginning after December 31, 2009. In Table 1,
this is reflected in the tax expenditure estimate for
``Deduction for income attributable to domestic production
activities.''
--The allowance of additional qualified retirement
contributions in certain bankruptcy cases is scheduled to
expire for taxable years beginning after December 31, 2009. In
Table 1, this is reflected in the tax expenditure estimate for
``Traditional IRAs.''
--The above-the-line deduction for qualified higher
education expenses is scheduled to expire for taxable years
beginning after December 31, 2009.
--The waiver of minimum required distribution rules for
IRAs and defined contribution plans is scheduled to expire
after December 31, 2009.
--The exclusion of individual retirement plan distributions
for charitable purposes is scheduled to expire for taxable
years beginning after December 31, 2009.
--The deferral of gain from the disposition of electric
transmission property to implement Federal Energy Regulation
Commission restructuring policy is scheduled to expire for
taxable years beginning after December 31, 2009.
--The exclusion of gain or loss on sale or exchange of
certain brownfield sites from unrelated business taxable income
is scheduled to expire for property acquired after December 31,
2009.
--The suspension of the 100-percent-of-net-income
limitation on percentage depletion for oil and gas from
marginal wells is scheduled to expire for taxable years
beginning after December 31, 2009.
--The exemption for certain dividends of regulated
investment companies is scheduled to expire for dividends with
respect to taxable years (of issuing companies) that begin
after December 31, 2009.
--The exemptions under subpart F for active financing
income are scheduled to expire for taxable years beginning
after December 31, 2009.
--The look-through treatment of payments between related
controlled foreign corporations under the foreign personal
holding company rules is scheduled to expire for taxable years
beginning after December 31, 2009.
--The designations and tax incentives for empowerment zones
are scheduled to expire after December 31, 2009.
--The designations and tax incentives for renewal
communities are scheduled to expire after December 31, 2009.
--Various tax incentives for investment in the District of
Columbia are scheduled to expire after December 31, 2009.
--The 65-percent subsidy for payment of COBRA health care
coverage continuation premiums is scheduled to expire for
involuntary terminations that occur after December 31,
2009.\24\
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\24\ The Department of Defense Appropriations Act, 2010 (Pub. L.
No. 111-118, sec. 1010) extended the eligibility period for this
subsidy (for involuntary terminations through February 28, 2010) and
the maximum duration of assistance (to 15 months).
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--The tax credit for corporate income earned in American
Samoa is scheduled to expire for taxable years beginning after
December 31, 2009. This tax expenditure is not listed in Table
1 because the estimated revenue loss is below the de minimis
amount.
--The refundable tax credit for government retirees is
scheduled to expire for taxable years beginning after December
31, 2009.
Comparisons with Treasury
The Joint Committee staff and Treasury lists of tax
expenditures differ in at least six respects. First, the Joint
Committee staff and the Treasury use differing methodologies
for the estimation of tax expenditures. Thus, the estimates in
Table 1 are not necessarily comparable with the estimates
prepared by the Treasury. Under the Joint Committee staff
methodology, each tax expenditure is measured by the difference
between tax liability under present law and the tax liability
that would result if the tax expenditure provision were
repealed and taxpayers were allowed to take advantage of any of
the remaining tax expenditure provisions that apply to the
income or the expenses associated with the repealed tax
expenditure.
For example, the tax expenditure provision for the
exclusion of employer-paid health insurance is measured by the
difference between tax liability under present law and the tax
liability that would result if the exclusion were repealed and
taxpayers were allowed to claim the next best tax treatment for
the previously excluded employer-paid health insurance. This
next best tax treatment could be the inclusion of the employer-
paid health insurance as an itemized medical deduction on
Schedule A.\25\
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\25\ If the exclusion were repealed, the value of the employer-paid
health insurance would be included in income and taxpayers would be
treated as having purchased the insurance themselves. Thus, the
insurance expense would be deductible as an itemized medical expense on
Schedule A, subject to the itemized medical deduction floor (7.5
percent of the taxpayer's adjusted gross income).
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Under the Treasury methodology, each tax expenditure is
measured by the difference between tax liability under present
law and the tax liability that would result if the tax
expenditure provision were repealed and taxpayers were
prohibited from taking advantage of any of the remaining tax
expenditure provisions that apply to the income or the expenses
associated with the repealed tax expenditure. For example, the
tax expenditure provision for the exclusion for employer-paid
health insurance is measured by the difference between tax
liability under present law and the tax liability that would
result if the exclusion were repealed and taxpayers were
required to include all of the employer-paid health insurance
in income, with no offsetting deductions (i.e., no
deductibility on Schedule A).
Second, 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.
Third, the Joint Committee staff and the Treasury estimates
of tax expenditures may also differ as a result of differing
data sources and differences in baseline projections of incomes
and expenses. The Treasury's tax expenditure calculations are
based on the Administration's economic forecast. The Joint
Committee staff calculations are based on the economic forecast
prepared by the CBO.
Fourth, the Joint Committee staff and the 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 2008-2014. The Joint Committee staff estimates
cover a recent fiscal year and the succeeding four fiscal
years, i.e., fiscal years 2009-2013.
Fifth, 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 2009 through 2013. 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 2008 through 2014.
Finally, the Joint Committee staff list formally integrates
negative tax expenditures into its standard presentation.
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.
II. MEASUREMENT OF TAX EXPENDITURES
Tax expenditure calculations 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.\26\ Taxpayer behavior is assumed to
remain unchanged for tax expenditure estimate purposes.\27\
This assumption is made to simplify the calculation and conform
to the presentation of government outlays. This approach to tax
expenditure measurement is in contrast to the approach taken in
revenue estimating; all of our revenue estimates do reflect
anticipated taxpayer behavior.
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\26\ 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. For positive tax expenditures, the major difference
between outlay equivalents and the tax expenditure calculations
presented here is accounting for whether a tax expenditure converted
into an outlay payment would itself be taxable, so that a gross-up
might be needed to deliver the equivalent after-tax benefits.
\27\ An exception to this absence of behavior in tax expenditure
calculations is that a taxpayer is assumed to make simple additions or
deletions in filing tax forms, what the Joint Committee staff refers to
as ``tax form behavior.'' For example, as noted above, if the exclusion
for employer-paid health insurance were repealed, taxpayers would be
allowed to claim the next best tax treatment for the previously
excluded insurance. This next best tax treatment could be the inclusion
of the employer-paid health insurance as an itemized medical deduction
on Schedule A. Similarly, a taxpayer that is eligible for one of two
alternative credits is assumed to file for the second credit if the
first credit is eliminated.
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The tax expenditure calculations in this report are based
on the August 2009 CBO revenue baseline and Joint Committee
staff projections of the gross income, deductions, and
expenditures of individuals and corporations for calendar years
2008-2013. 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 (or that will
be denied in the case of negative tax expenditures) 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
calculations in this report are based on projections of actual
claims under the various tax provisions, not the potential tax
benefits to which taxpayers are entitled.
Some tax expenditure calculations 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 calculated separately, under the
assumption that all other tax expenditures remain in the 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.\28\
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\28\ See Leonard E. Burman, Christopher Geissler, and Eric J.
Toder, ``How Big Are Total Individual Income Tax Expenditures, and Who
Benefits from Them?'' American Economic Review, 98, May 2008, pp. 79-
83.
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Year-to-year differences in the calculations 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 calculations 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 measurement techniques.
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.
Tax expenditures versus revenue estimates
A tax expenditure calculation 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
calculations 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
calculations are concerned with changes in the reported tax
liabilities of taxpayers.\29\ Because tax expenditure analysis
focuses on tax liabilities as opposed to Federal government tax
receipts, there is no concern for the short-term timing of tax
payments. Revenue estimates are concerned with changes in
Federal tax receipts that are affected by the timing of all 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. This FICA
effect would be reflected in revenue estimates, but is not
considered in tax expenditure calculations. There may also be
interactions between income tax provisions and other Federal
taxes such as excise taxes and the estate and gift tax.
---------------------------------------------------------------------------
\29\ Reported tax liabilities may reflect compliance issues, and
thus calculations of tax expenditures reflect existing compliance
issues.
---------------------------------------------------------------------------
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, and very often repeal or modification of a tax
provision includes transition relief that would not be captured
in a tax expenditure calculation.
Quantitatively de minimis tax expenditures
The following tax provisions are viewed as tax expenditures
by the Joint Committee staff but are not listed in Table 1
because the estimated revenue losses for fiscal years 2009
through 2013 are below the de minimis amount ($50 million):
International affairs
Miscellaneous exclusions (e.g., bond income
of residents of the Ryukyu Islands, certain wagering
income, certain communication satellite earnings,
earnings from railroad rolling stock)
Energy
Expensing of tertiary injectants
Credit for production of electricity from
qualifying advanced nuclear power facilities
Credit for producing oil and gas from
marginal wells
Credit for the residential purchase of
qualified photovoltaic and solar water heating property
Credit for the construction of energy-
efficient new homes
Partial expensing of investments in advanced
mine safety equipment
Credit for costs incurred in training
qualified mine rescue team employees
Credit and deduction for small refiners with
capital costs associated with EPA sulfur regulation
compliance
Credits for biodiesel and renewable fuels
Energy research credit
50-percent expensing of cellulosic biofuel
plant property
Seven-year MACRS Alaska natural gas pipeline
Agriculture
Cash accounting for agriculture
Commerce and housing credit
Bad debt reserves of financial institutions
Exclusion of investment income from
structured settlement arrangements
Deferral of gain on sales of property to
comply with conflict-of-interest requirements
Exclusion of income from discharge of
indebtedness incurred in connection with qualified real
property
Reduced rates of tax on gains from the sale
of self-created musical works
Amortization of expenses for the creation or
acquisition of musical compositions
Alaska Native Corporation trusts
Community and regional development
Five-year carryback period for certain net
operating losses of electric utility companies
New York Liberty Zone
Katrina Emergency Act provisions
Kansas disaster relief
Social services
Exclusion of restitution payments received
by victims of the Nazi regime and the victims' heirs
and estates
Health
Archer medical savings accounts
Income security
Credit for the elderly and disabled
Credit for new retirement plan expenses of
small businesses
Veterans' benefits and services
Burial expenses for veterans
General purpose fiscal assistance
American Samoa economic development credit
Tax expenditures for which quantification is not available
The following tax provisions are viewed as tax expenditures
by the Joint Committee staff but are not listed in Table 1
because the projected revenue changes are unavailable (a
provision that is a negative tax expenditure is indicated by an
``*''):
International affairs
Branch profits tax*
Deduction for U.S. employment tax paid under
section 3121(l) agreements for employees of foreign
affiliates
Doubling of tax rates on citizens and
corporations of certain foreign countries*
Energy
Accelerated deductions for nuclear
decommissioning costs
IGCC and advanced coal credit
Natural resources and environment
Exception to partial interest rule for
qualified conservation
Agriculture
Agricultural security credit
Exceptions from dealer disposition
definition
Exception from interest calculation on
installment sales for small dispositions
Single purpose agricultural or horticultural
structures
Commerce and housing credit
Amortization of organizational expenditures
Deferral of prepaid subscription income
Deferral of prepaid dues income of certain
membership organizations
Amortization of partnership organization and
syndication fees
Unrecaptured section 1250 gain rate (section
1(h)), which applies to depreciation taken on real
property
Nonrecognition of in-kind distributions by
regulated investment companies in redemption of their
stock
Special discount rate rule for certain debt
instruments where stated principal amount is $2.8
million or less
Deduction for investment expenses*
Tax treatment of convertible bonds
Treatment of loans under life insurance and
annuity contracts and 401(k) plans
Exemption for cemetery companies
Certain exceptions to the UBTI rules:
Passive income gains
Income from certain research
Trade shows and fairs
Bingo games
Pole rentals
Sponsorship payments
Real estate exception to the debt-
financed income rules
Specific identification of sold equities
Community and regional development
Three-year carryback of small businesses'
and farmers' casualty losses attributable to
Presidentially declared disaster
Education, training, employment, and social services
Allowance of 80-percent deduction for right
to purchase tickets or stadium seating
Disallowance, limitation, and heightened
substantiation for certain business deductions (e.g.,
entertainment, gift, cell phone expenses)
General purpose fiscal assistance
Exclusion of Guam, American Samoa, and
Northern Mariana Islands income
Exclusion of U.S. Virgin Islands income
Exclusion of Puerto Rico income
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
foot-
notes 2 and 5. 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 2009-2013 \1\
[Billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporations Individuals
Budget Function --------------------------------------------------------------------------------------------- Total
2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009-13
--------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense
Exclusion of benefits and allowances to ....... ....... ....... ....... ...... 3.9 4.0 4.3 4.5 4.6 21.2
armed forces personnel.....................
Exclusion of military disability benefits... ....... ....... ....... ....... ...... 0.2 0.2 0.2 0.2 0.2 0.8
Deduction for overnight-travel expenses of ....... ....... ....... ....... ...... 0.1 0.1 0.1 0.1 0.1 0.4
national guard and reserve members.........
Exclusion of combat pay..................... ....... ....... ....... ....... ...... 1.1 0.9 0.8 0.8 0.8 4.5
International Affairs
Exclusion of certain allowances for Federal ....... ....... ....... ....... ...... 1.2 1.3 1.4 1.5 1.5 6.9
employees abroad...........................
Exclusion of foreign earned income:
Housing................................. ....... ....... ....... ....... ...... 0.9 1.0 1.0 1.1 1.1 5.1
Salary.................................. ....... ....... ....... ....... ...... 4.3 4.5 4.7 4.9 5.1 23.5
Inventory property sales source rule ....... ....... ....... ....... ...... 7.0 7.2 7.4 7.6 7.8 37.0
exception..................................
Deduction for foreign taxes instead of a 0.2 0.2 0.2 0.3 0.3 ........ ........ ........ ........ ....... 1.2
credit.....................................
Interest expense allocation:
Unavailability of symmetric worldwide -2.5 -2.7 -2.9 -0.5 (\2\) ........ ........ ........ ........ ....... -8.6
method*................................
Separate grouping of affiliated 1.1 1.2 1.3 1.4 1.5 ........ ........ ........ ........ ....... 6.5
financial companies....................
Apportionment of research and development 0.3 0.3 0.3 0.4 0.4 ........ ........ ........ ........ ....... 1.7
expenses for determination of foreign tax
credits....................................
Special rules for interest-charge domestic 0.5 0.5 0.1 0.1 0.1 ........ ........ ........ ........ ....... 1.3
international sales corporations...........
Taxation of real property gains of foreign (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) -0.1
persons*...................................
Tonnage tax................................. 0.1 0.1 0.1 0.1 0.1 ........ ........ ........ ........ ....... 0.5
Deferral of active income of controlled 10.5 11.3 12.1 12.9 13.5 ........ ........ ........ ........ ....... 60.3
foreign corporations.......................
Deferral of active financing income \3\..... 2.9 1.0 ....... ....... ...... ........ ........ ........ ........ ....... 3.9
General Science, Space, and Technology
Credit for increasing research activities 4.8 3.1 2.5 1.9 1.5 0.1 0.1 0.1 (\5\) (\5\) 14.1
(Code section 41) \4\......................
Expensing of research and experimental 3.0 4.0 4.8 5.8 6.4 0.1 0.1 0.1 0.1 0.1 24.5
expenditures...............................
Energy
Credit for energy efficiency improvements to ....... ....... ....... ....... ...... 0.3 1.7 1.2 ........ ....... 3.2
existing homes.............................
Credits for alternative technology vehicles. 0.1 0.2 0.1 (\5\) (\5\) 0.4 0.5 0.2 (\5\) (\5\) 1.5
Credit for holders of clean renewable energy (\5\) 0.1 0.1 0.1 0.2 (\5\) (\5\) (\5\) (\5\) (\5\) 0.5
bonds......................................
Exclusion of energy conservation subsidies ....... ....... ....... ....... ...... (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
provided by public utilities...............
Credit for holder of qualified energy (\5\) (\5\) (\5\) (\5\) 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
conservation bonds.........................
Energy related credits:
Credit for enhanced oil recovery costs.. (\5\) 0.1 (\5\) (\5\) (\5\) (\5\) 0.1 (\5\) (\5\) (\5\) 0.3
Credit for producing fuels from a non- 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
conventional source....................
Credits for alcohol fuels \6\........... 6.5 10.1 10.4 11.0 3.9 ........ ........ ........ ........ ....... 41.9
Energy credit (section 48):
Solar................................... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\)
Geothermal.............................. (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\)
Fuel cells.............................. (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\)
Microturbines........................... ....... ....... ....... ....... ...... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\)
Credits for electricity production from
renewable resources (section 45):
Wind.................................... 0.7 0.9 1.1 1.4 1.5 (\5\) (\5\) 0.1 0.1 0.1 5.9
Closed-loop biomass..................... (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.2
Geothermal.............................. (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
Qualified hydropower.................... (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
Solar (limited to facilities placed in (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
service before 1/1/06).................
Small irrigation power.................. (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
Municipal solid waste................... (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
Open-loop biomass....................... 0.6 0.4 0.3 0.2 0.2 (\5\) (\5\) (\5\) (\5\) (\5\) 1.3
Credits for investments in clean coal 0.2 0.2 0.2 0.2 0.2 ........ ........ ........ ........ ....... 0.9
facilities.................................
Coal production credits:
Refined coal............................ (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
Indian coal............................. (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
Credit for the production of energy- 0.1 0.2 0.1 ....... ...... ........ ........ ........ ........ ....... 0.4
efficient appliances.......................
Credits for alternative technology vehicles:
Hybrid vehicles......................... (\5\) (\5\) (\5\) (\5\) (\5\) 0.2 0.2 0.1 0.1 (\5\) 1.0
Other alternative fuel vehicles......... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
Credit for clean-fuel vehicle refueling (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
property...................................
Residential energy efficient property credit ....... ....... ....... ....... ...... 0.1 0.2 0.2 0.2 0.2 0.8
New energy efficient home credit............ (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
Credit for certain alternative motor (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
vehicles that do not meet existing criteria
of a qualified plug-in electric drive motor
vehicle....................................
Provide credit for investment in advanced 0.1 0.2 0.2 0.3 0.3 (\5\) 0.1 0.1 0.1 0.1 1.3
energy property............................
Energy-related exclusions from income:
Exclusion of interest on State and local (\5\) (\5\) (\5\) (\5\) (\5\) 0.1 0.1 0.1 0.1 0.1 0.5
government qualified private activity
bonds for energy production facilities.
Energy-related deductions:
Deduction for expenditures on energy- (\5\) 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.9
efficient commercial building property.
Expensing of exploration and development
costs:
Oil and gas............................. 0.3 0.4 0.4 0.7 0.8 (\5\) (\5\) (\5\) (\5\) (\5\) 2.6
Other fuels............................. (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.3
Excess of percentage over cost depletion:
Oil and gas............................. 1.3 1.2 1.3 1.3 1.4 (\5\) (\5\) (\5\) (\5\) (\5\) 6.5
Other fuels............................. 0.2 0.2 0.2 0.2 0.2 (\5\) (\5\) (\5\) (\5\) (\5\) 0.9
Amortization of geological and geophysical (\5\) 0.1 0.1 0.1 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) 0.6
expenditures associated with oil and gas
exploration................................
Amortization of air pollution control 0.1 0.1 0.2 0.2 0.2 ........ ........ ........ ........ ....... 0.7
facilities.................................
Depreciation recovery periods for energy
specific items:
Five-year MACRS for certain energy 0.3 0.3 0.2 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 1.0
property (solar, wind, etc.)...........
Seven-year MACRS for natural gas (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
gathering line.........................
10-year MACRS for smart electric (\5\) (\5\) 0.1 0.1 0.1 ........ ........ ........ ........ ....... 0.4
distribution property..................
15-year MACRS for certain electric 0.1 0.1 0.1 0.2 0.2 ........ ........ ........ ........ ....... 0.6
transmission property..................
15-year MACRS for natural gas 0.1 0.1 0.1 0.1 0.1 ........ ........ ........ ........ ....... 0.5
distribution line......................
Election to expense 50 percent of qualified 0.5 0.7 0.8 0.7 0.6 ........ ........ ........ ........ ....... 3.4
property used to refine liquid fuels.......
Exceptions for publicly traded partnership ....... ....... ....... ....... ...... 0.4 0.5 0.6 0.6 0.7 2.9
with qualified income derived from certain
energy-related activities..................
Natural Resources and Environment
Refund of deemed tax payment for allocation 0.3 ....... ....... ....... ...... ........ ........ ........ ........ ....... 0.3
of qualified forestry conservation bond
limitation \4\.............................
Special depreciation allowance for certain (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
reuse and recycling property...............
Expensing of exploration and development 0.1 0.1 0.1 0.1 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) 0.4
costs, nonfuel minerals....................
Excess of percentage over cost depletion, 0.1 0.1 0.1 0.1 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) 1.0
nonfuel minerals...........................
Expensing of timber-growing costs........... 0.2 0.2 0.2 0.2 0.2 (\5\) (\5\) (\5\) (\5\) (\5\) 1.2
Special rules for mining reclamation (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
reserves...................................
Special tax rate for nuclear decommissioning 0.8 0.9 0.9 1.0 1.1 ........ ........ ........ ........ ....... 4.7
reserve funds..............................
Exclusion of contributions in aid of (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.2
construction for water and sewer utilities.
Exclusion of earnings of certain (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
environmental settlement funds.............
Amortization and expensing of reforestation 0.1 0.1 0.1 0.1 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) 0.6
expenditures...............................
Special tax rate for qualified timber gain.. ....... ....... ....... ....... ...... 0.4 0.4 0.4 0.4 0.4 2.2
Treatment of income from exploration and ....... ....... ....... ....... ...... (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
mining of natural resources as qualifying
income under the publicly-traded
partnership rules..........................
Agriculture
Expensing of soil and water conservation (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
expenditures...............................
Expensing of the costs of raising dairy and (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.6
breeding cattle............................
Expensing of cost-sharing payments.......... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
Exclusion of cancellation of indebtedness ....... ....... ....... ....... ...... 0.1 0.1 0.1 0.1 0.1 0.4
income of farmers..........................
Income averaging for farmers and fishermen.. ....... ....... ....... ....... ...... (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
Five-year carryback period for net operating (\5\) 0.1 0.1 0.1 0.1 (\5\) 0.1 0.1 0.1 0.1 0.6
losses attributable to farming.............
Five-year recovery period for certain (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1 0.1 0.1 (\5\) 0.4
farming business machinery or equipment....
Expensing by farmers for fertilizer and soil (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.4
conditioner costs..........................
Commerce and Housing
Housing:
Deduction for mortgage interest on owner- ....... ....... ....... ....... ...... 86.4 103.7 119.9 128.2 134.7 572.9
occupied residences....................
Deduction for property taxes on real ....... ....... ....... ....... ...... 25.1 16.4 24.9 29.3 30.0 125.7
property...............................
Increased standard deduction for real ....... ....... ....... ....... ...... 1.9 0.5 ........ ........ ....... 2.4
property taxes.........................
Exclusion of capital gains on sales of ....... ....... ....... ....... ...... 15.3 15.3 17.4 18.8 19.8 86.6
principal residences...................
Exclusion of interest on State and local 0.4 0.4 0.4 0.4 0.4 1.0 1.0 1.1 1.1 1.1 7.4
government qualified private activity
bonds for owner-occupied housing.......
Deduction for premiums for qualified ....... ....... ....... ....... ...... 0.1 0.2 0.2 ........ ....... 0.5
mortgage insurance.....................
Exclusion of income attributable to the ....... ....... ....... ....... ...... 0.7 0.6 0.3 0.1 (\5\) 1.7
discharge of principal residence
acquisition indebtedness...............
First-time homebuyer credit \4\......... ....... ....... ....... ....... ...... 8.7 0.9 -1.8 -1.7 -1.0 5.0
Credit for low-income housing \4,7\..... 3.4 ....... ....... ....... ...... ........ ........ ........ ........ ....... 3.4
Credit for rehabilitation of historic 0.3 0.4 0.4 0.4 0.4 0.1 0.1 0.2 0.2 0.2 2.6
structures.............................
Credit for rehabilitation of structures, (\5\) (\5\) 0.1 0.1 0.1 0.1 0.1 0.1 0.2 0.2 1.0
other than historic structures.........
Exclusion of interest on State and local 0.2 0.3 0.3 0.3 0.3 0.6 0.6 0.7 0.7 0.7 4.7
government qualified private activity
bonds for rental housing...............
Depreciation of rental housing in excess 0.4 0.5 0.5 0.5 0.4 4.0 4.5 4.4 4.2 3.9 23.2
of alternative depreciation system.....
Other business and commerce:
Exclusion of interest on State and local 0.1 0.1 0.1 0.1 0.1 0.3 0.3 0.4 0.4 0.4 2.5
government small-issue qualified
private activity bonds.................
Carryover basis of capital gains on ....... ....... ....... ....... ...... 1.8 12.1 14.8 5.3 1.9 35.9
gifts..................................
Investment recovery period for 15-year
property \8\:
Leasehold improvement property...... 2.8 1.4 0.3 0.2 0.2 3.4 1.8 0.3 0.3 0.2 10.9
Restaurant property................. 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 1.1
Retail improvements................. (\5\) (\5\) 0.1 (\5\) (\5\) (\5\) (\5\) 0.1 0.1 0.1 0.4
Retail motor fuels outlets.......... 0.2 0.2 0.1 0.1 0.1 0.3 0.2 0.1 0.1 0.1 1.6
Seven-year recovery period for 0.1 (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
motorsports entertainment complexes....
Deferral of gain on non-dealer -6.1 -4.1 0.1 4.1 5.6 -3.4 -2.5 -1.0 0.8 1.4 -5.1
installment sales \9\ *................
Deferral of gain on like-kind exchanges. 1.4 1.4 1.7 2.0 2.3 0.6 0.7 0.8 1.0 1.1 13.0
Expensing under section 179 of -0.4 0.5 0.4 -0.3 -0.1 -1.6 2.0 1.7 -1.1 -0.2 1.0
depreciable business property..........
Amortization of business startup costs.. (\5\) (\5\) (\5\) (\5\) (\5\) 0.9 0.9 1.0 1.0 1.1 4.9
Reduced rates on first $10,000,000 of 3.3 3.2 3.2 3.2 3.1 ........ ........ ........ ........ ....... 16.1
corporate taxable income...............
Exemptions from imputed interest rules.. (\5\) (\5\) (\5\) (\5\) (\5\) 0.4 0.4 0.5 0.5 0.6 2.4
Expensing of magazine circulation (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
expenditures...........................
Special rules for magazine, paperback (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
book, and record returns...............
Completed contract rules................ 0.5 0.6 0.6 0.7 0.7 (\5\) (\5\) (\5\) (\5\) (\5\) 3.1
Cash accounting, other than agriculture. (\5\) (\5\) (\5\) (\5\) (\5\) 0.9 1.0 1.0 1.1 1.1 5.1
Credit for employer-paid FICA taxes on 0.3 0.3 0.4 0.4 0.4 0.2 0.2 0.3 0.3 0.3 3.1
tips...................................
Deduction for certain film and 0.2 (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) (\2\) 0.1
television production costs............
Deduction for income attributable to 5.0 7.0 8.4 8.8 9.2 1.2 2.4 3.2 3.8 4.4 53.4
domestic production activities.........
Credit for the cost of carrying tax-paid (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
distilled spirits in wholesale
inventories............................
Reduced rates of tax on dividends and ....... ....... ....... ....... ...... 89.5 96.6 71.3 75.7 85.7 418.7
long-term capital gains................
Exclusion of capital gains at death..... ....... ....... ....... ....... ...... 23.7 25.5 31.5 37.9 40.8 159.4
Expensing of costs to remove (\5\) (\5\) (\5\) (\5\) (\5\) 0.1 0.1 0.1 0.1 0.1 0.6
architectural and transportation
barriers to the handicapped and elderly
Small business stock.................... ....... ....... ....... ....... ...... 0.4 0.5 0.3 0.4 0.4 2.0
Distributions in redemption of stock to ....... ....... ....... ....... ...... 0.3 0.2 (\5\) 0.4 0.5 1.4
pay various taxes imposed at death.....
Ordinary gain or loss treatment for sale 2.6 0.4 0.2 0.1 -0.1 0.1 (\5\) (\5\) (\5\) (\5\) 3.3
or exchange of Fannie Mae and Freddie
Mac preferred stock by certain
financial institutions.................
Inventory methods and valuation:
Last in first out................... 3.4 3.6 3.8 4.0 4.2 0.4 0.5 0.5 0.6 0.6 21.6
Lower of cost or market............. 0.4 0.4 0.4 0.4 0.5 0.1 0.1 0.1 0.1 0.1 2.6
Specific identification for (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
homogeneous products...............
Exclusion of gain or loss on sale or (\5\) (\5\) (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.1
exchange of brownfield property........
Income recognition rule for gain or loss (\5\) (\5\) (\5\) (\5\) (\5\) 0.8 0.8 0.8 0.8 0.9 4.2
from section 1256 contracts............
Net alternative minimum tax attributable -0.5 -0.5 -0.5 -0.5 -0.5 -0.1 -0.1 -0.1 -0.1 -0.1 -3.0
to net operating loss limitation*......
Exclusion of interest on State and local (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
qualified private activity bonds for
green buildings and sustainable design
projects...............................
Depreciation of buildings other than 0.1 0.2 0.2 0.2 0.2 0.1 0.1 0.2 0.2 0.2 1.7
rental housing in excess of alternative
depreciation system \10\...............
Depreciation of equipment in excess of 35.0 6.2 -8.3 -2.7 4.2 6.2 1.1 -1.5 -0.5 0.7 40.5
the alternative depreciation system
\11\...................................
R&E credits in lieu of bonus 0.5 0.3 (\2\) (\2\) (\2\) ........ ........ ........ ........ ....... 0.8
depreciation (Code section
168(k)(4))\4\..........................
Five-year carryback period for small 0.2 (\2\) (\2\) (\2\) (\2\) 0.8 -0.1 -0.1 -0.1 -0.1 0.5
business...............................
Inclusion of income arising from 11.2 21.1 6.9 0.5 0.3 0.9 1.7 0.6 (\5\) (\5\) 43.2
business indebtedness discharged by the
reacquisition of a debt instrument.....
Financial institutions:
Exemption of credit union income........ 1.5 1.6 1.7 1.8 1.8 ........ ........ ........ ........ ....... 8.2
Insurance companies:
Exclusion of investment income on life 2.7 2.7 2.8 2.9 3.0 27.5 28.2 28.9 29.7 30.5 158.8
insurance and annuity contracts........
Small life insurance company taxable 0.1 0.1 0.1 0.1 0.1 ........ ........ ........ ........ ....... 0.3
income adjustment......................
Special treatment of life insurance 2.1 2.2 2.3 2.4 2.6 ........ ........ ........ ........ ....... 11.7
company reserves.......................
Special deduction for Blue Cross and 0.4 0.4 0.4 0.4 0.5 ........ ........ ........ ........ ....... 2.1
Blue Shield companies..................
Tax-exempt status and election to be 0.1 0.1 0.1 0.1 0.1 ........ ........ ........ ........ ....... 0.3
taxed only on investment income for
certain small property and casualty
insurance companies....................
Interest rate and discounting period 0.6 0.7 0.7 0.7 0.8 ........ ........ ........ ........ ....... 3.4
assumptions for reserves of property
and casualty insurance companies.......
Proration for property and casualty 0.3 0.3 0.4 0.4 0.4 ........ ........ ........ ........ ....... 1.8
insurance companies....................
Transportation
Exclusion of employer-paid transportation ....... ....... ....... ....... ...... 3.8 3.9 4.4 4.6 4.8 21.5
benefits...................................
Credit for certain expenditures on railroad 0.2 0.1 (\5\) (\5\) (\5\) ........ ........ ........ ........ ....... 0.3
track maintenance..........................
Deferral of tax on capital construction 0.1 0.1 0.1 0.1 0.1 ........ ........ ........ ........ ....... 0.5
funds of shipping companies................
Exclusion of interest on State and local (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
government qualified private activity bonds
for highway projects and rail-truck
transfer facilities........................
Exclusion of employer-provided transit and ....... ....... ....... ....... ...... 0.4 0.5 0.5 0.5 0.5 2.4
vanpool benefits...........................
High-speed intercity rail vehicle speed (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
requirement for exempt high-speed rail
facility bonds.............................
Community and Regional Development
Empowerment zone tax incentives............. 0.3 0.2 0.1 (\5\) (\5\) 0.4 0.3 0.1 (\5\) (\5\) 1.4
Renewal community incentives................ 0.2 0.1 0.1 (\5\) (\5\) 0.3 0.1 0.1 0.1 (\5\) 1.1
New markets tax credit...................... 0.3 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 3.5
District of Columbia tax incentives......... 0.1 (\5\) (\5\) (\5\) (\5\) 0.2 0.1 0.1 0.1 0.1 0.7
Credit for Indian reservation employment.... (\5\) (\5\) (\5\) ....... ...... (\5\) (\5\) (\5\) ........ ....... 0.1
Exclusion of interest on State and local 0.3 0.3 0.3 0.3 0.3 0.7 0.8 0.8 0.8 0.9 5.6
government qualified private activity bonds
for private airports, docks, and mass-
commuting facilities.......................
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 3.2
government qualified private activity bonds
for sewage, water, and hazardous waste
facilities.................................
Issuance of recovery zone economic (\5\) 0.1 0.3 0.5 0.6 (\5\) (\5\) (\5\) (\5\) (\5\) 1.5
development bonds..........................
Issuance of tribal economic development (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.3
bonds......................................
Build America bonds \4\..................... 1.3 2.2 3.0 3.0 3.0 (\5\) (\5\) (\5\) (\5\) (\5\) 12.5
Eliminate requirement that financial (\5\) 0.3 0.3 0.3 0.3 ........ ........ ........ ........ ....... 1.3
institutions allocate interest expense
attributable to tax-exempt interest........
Disaster Relief:
Gulf opportunity zone................... (\5\) 0.1 0.3 (\5\) (\5\) ........ 0.6 0.4 0.3 0.2 1.7
Midwest disaster relief................. 0.3 0.2 0.2 0.3 0.3 ........ 0.9 0.1 0.1 0.1 2.5
National disaster relief................ 0.8 1.1 0.7 0.2 -0.2 ........ 1.2 0.8 0.5 0.1 5.1
Education, Training, Employment, and Social
Services
Education and training:
Deduction for interest on student loans. ....... ....... ....... ....... ...... 0.8 0.9 0.5 0.4 0.4 3.1
Deduction for higher education expenses. ....... ....... ....... ....... ...... 0.7 0.2 ........ ........ ....... 0.9
Exclusion of earnings of Coverdell ....... ....... ....... ....... ...... 0.1 0.1 0.1 0.2 0.2 0.6
education savings accounts.............
Exclusion of interest on educational ....... ....... ....... ....... ...... (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
savings bonds..........................
Exclusion of scholarship and fellowship ....... ....... ....... ....... ...... 1.8 1.9 2.0 2.1 2.2 10.1
income.................................
Exclusion of income attributable to the ....... ....... ....... ....... ...... 0.1 0.1 0.1 0.1 0.1 0.4
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 1.1
reduction benefits.....................
Parental personal exemption for students ....... ....... ....... ....... ...... 1.2 0.4 0.2 0.2 (\5\) 2.0
aged 19 to 23..........................
Exclusion of interest on State and local 0.2 0.2 0.2 0.2 0.2 0.4 0.4 0.4 0.5 0.5 3.1
government qualified private activity
bonds for student loans................
Exclusion of interest on State and local 0.9 0.9 0.9 1.0 1.0 2.2 2.3 2.4 2.5 2.5 16.5
government qualified private activity
bonds for private nonprofit and
qualified public educational facilities
Credit for holders of qualified zone 0.2 0.2 0.3 0.3 0.4 ........ ........ ........ ........ ....... 1.4
academy bonds..........................
Deduction for charitable contributions 0.4 0.4 0.4 0.4 0.5 5.0 5.7 6.3 6.5 6.8 32.4
to educational institutions............
Deduction for teacher classroom expenses ....... ....... ....... ....... ...... 0.2 (\5\) ........ ........ ....... 0.2
Credits for tuition for post-secondary
education:
Hope credit \4\..................... ....... ....... ....... ....... ...... 6.7 9.5 4.7 2.9 2.9 26.7
Lifetime learning credit............ ....... ....... ....... ....... ...... 1.9 2.2 3.0 3.2 3.2 13.4
Exclusion of tax on earnings of
qualified tuition programs:
Prepaid tuition programs............ ....... ....... ....... ....... ...... (\5\) 0.1 0.1 0.1 0.1 0.4
Savings account programs............ ....... ....... ....... ....... ...... 0.3 0.4 0.5 0.7 1.0 2.9
Qualified school construction bonds..... (\5\) 0.1 0.3 0.6 0.9 (\5\) (\5\) (\5\) (\5\) (\5\) 1.9
Employment:
Exclusion of employee meals and lodging ....... ....... ....... ....... ...... 1.0 1.0 1.1 1.1 1.2 5.4
(other than military)..................
Exclusion of benefits provided under ....... ....... ....... ....... ...... 27.8 31.6 34.9 37.7 40.6 172.7
cafeteria plans \12\...................
Exclusion of housing allowances for ....... ....... ....... ....... ...... 0.6 0.7 0.7 0.7 0.8 3.5
ministers..............................
Exclusion of miscellaneous fringe ....... ....... ....... ....... ...... 6.4 6.6 7.5 8.0 8.2 36.7
benefits...............................
Exclusion of employee awards............ ....... ....... ....... ....... ...... 0.2 0.2 0.2 0.2 0.2 0.9
Exclusion of income earned by voluntary ....... ....... ....... ....... ...... 1.8 1.9 2.1 2.3 2.3 9.7
employees' beneficiary associations....
Special tax provisions for employee 1.0 1.1 1.2 1.2 1.3 0.5 0.5 0.5 0.5 0.5 8.3
stock ownership plans (ESOPs)..........
Deferral of taxation on spread on
acquisition of stock under incentive
stock option plans and employee stock
purchase plans:
Deferral of taxation on spread on -0.8 -0.9 -0.9 -0.9 -1.0 0.3 0.3 0.3 0.2 0.2 -3.3
acquisition of stock under
incentive stock option plans*......
Deferral of taxation on spread on -0.2 -0.3 -0.3 -0.3 -0.3 0.1 0.1 0.1 0.1 0.1 -0.6
employee stock purchase plans*.....
Disallowance of deduction for excess -0.1 -0.1 -0.2 -0.2 -0.2 ........ ........ ........ ........ ....... -0.8
parachute payments (applicable if
payments to a disqualified individual
are contingent on a change of control
of a corporation and are equal to or
greater than three times the
individual's annualized includible
compensation) \13\ *...................
One million dollar cap on deductible -0.4 -0.5 -0.5 -0.5 -0.5 ........ ........ ........ ........ ....... -2.4
compensation for covered employees of
publicly held corporations \13\ *......
Work opportunity tax credit............. 0.5 0.5 0.5 0.3 0.1 0.1 0.1 0.1 0.1 (\5\) 2.4
Social services:
Credit for children under age 17 \4\.... ....... ....... ....... ....... ...... 52.6 54.4 24.6 14.4 14.3 160.4
Credit for child and dependent care and ....... ....... ....... ....... ...... 4.3 3.1 2.6 2.5 2.5 15.0
exclusion of employer-provided child
care \14\..............................
Credit for employer-provided dependent (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
care...................................
Exclusion of certain foster care ....... ....... ....... ....... ...... 0.7 0.8 0.8 0.9 0.9 4.2
payments...............................
Adoption credit and employee adoption ....... ....... ....... ....... ...... 0.4 0.4 0.1 (\5\) (\5\) 0.9
benefits exclusion.....................
Deduction for charitable contributions, 2.3 2.4 2.5 2.6 2.6 28.0 32.3 35.7 37.1 38.6 184.1
other than for education and health
\15\...................................
Credit for disabled access expenditures. (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.3
Health
Exclusion of employer contributions for ....... ....... ....... ....... ...... 94.4 106.6 115.2 122.0 130.0 568.3
health care, health insurance premiums, and
long-term care insurance premiums \16\.....
Exclusion of medical care and TRICARE ....... ....... ....... ....... ...... 2.2 2.3 2.5 2.6 2.8 12.4
medical insurance for military dependents,
retirees, and retiree dependents not
enrolled in Medicare.......................
Exclusion of health insurance benefits for ....... ....... ....... ....... ...... 1.3 1.4 1.7 1.9 2.3 8.6
military retirees and retiree dependents
enrolled in Medicare.......................
Deduction for health insurance premiums and ....... ....... ....... ....... ...... 4.3 4.6 5.1 5.4 5.7 25.1
long-term care insurance premiums by the
self-employed..............................
Deduction for medical expenses and long-term ....... ....... ....... ....... ...... 11.6 12.4 15.5 17.9 19.3 76.6
care expenses..............................
Exclusion of workers' compensation benefits ....... ....... ....... ....... ...... 2.8 3.0 3.2 3.5 3.7 16.3
(medical benefits).........................
Health savings accounts..................... ....... ....... ....... ....... ...... 0.7 0.9 1.2 1.6 2.1 6.5
Exclusion of interest on State and local 0.7 0.7 0.7 0.7 0.7 1.7 1.7 1.8 1.9 1.9 12.5
government qualified private activity bonds
for private nonprofit hospital facilities..
Deduction for charitable contributions to 0.3 0.3 0.3 0.3 0.3 3.2 3.7 4.1 4.2 4.4 21.1
health organizations.......................
Credit for purchase of health insurance by ....... ....... ....... ....... ...... 0.2 0.4 0.2 0.2 0.2 1.2
certain displaced persons..................
Credit for orphan drug research............. 0.4 0.5 0.5 0.6 0.6 (\5\) (\5\) (\5\) (\5\) (\5\) 2.6
Premium subsidy for COBRA continuation ....... ....... ....... ....... ...... 8.7 5.7 0.9 ........ ....... 15.5
coverage...................................
Medicare
Exclusion of Medicare benefits:
Hospital insurance (Part A)............. ....... ....... ....... ....... ...... 26.5 28.6 34.1 37.0 39.9 166.1
Supplementary medical insurance (Part B) ....... ....... ....... ....... ...... 20.0 20.5 24.3 25.9 29.0 119.7
Prescription drug insurance (Part D).... ....... ....... ....... ....... ...... 4.7 5.2 6.1 6.0 6.8 28.8
Exclusion of certain subsidies to 0.5 0.5 0.5 0.5 0.6 ........ ........ ........ ........ ....... 2.5
employers who maintain prescription
drug plans for Medicare enrollees......
Income Security
Exclusion of workers' compensation benefits ....... ....... ....... ....... ...... 2.7 2.7 3.0 3.1 3.1 14.6
(disability and survivors payments)........
Exclusion of damages on account of personal ....... ....... ....... ....... ...... 1.5 1.5 1.6 1.6 1.6 7.8
physical injuries or physical sickness.....
Exclusion of special benefits for disabled ....... ....... ....... ....... ...... (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
coal miners................................
Exclusion of cash public assistance benefits ....... ....... ....... ....... ...... 3.0 3.1 3.4 4.4 4.9 18.8
Net exclusion of pension contributions and
earnings \9\:
Plans covering partners and sole ....... ....... ....... ....... ...... 9.2 12.9 16.2 17.3 17.8 73.4
proprietors (sometimes referred to as
``Keogh plans'').......................
Defined benefit plans................... ....... ....... ....... ....... ...... 38.4 37.5 51.5 66.3 82.0 275.7
Defined contribution plans.............. ....... ....... ....... ....... ...... 32.6 29.6 32.6 39.8 49.7 184.3
Individual retirement arrangements: \9\:
Traditional IRAs........................ ....... ....... ....... ....... ...... -28.0 21.5 13.4 14.3 18.5 40.7
Roth IRAs............................... ....... ....... ....... ....... ...... 0.1 3.6 4.1 4.9 5.6 18.3
Credit for certain individuals for ....... ....... ....... ....... ...... 0.9 0.9 0.9 1.0 1.0 4.7
elective deferrals and IRA
contributions..........................
Exclusion of other employee benefits:
Premiums on group term life insurance... ....... ....... ....... ....... ...... 2.4 2.4 2.5 2.5 2.6 12.4
Premiums on accident and disability ....... ....... ....... ....... ...... 3.0 3.1 3.4 3.6 3.8 17.0
insurance..............................
Additional standard deduction for the blind ....... ....... ....... ....... ...... 1.7 1.6 1.9 2.3 2.5 10.0
and the elderly............................
Deduction for casualty and theft losses..... ....... ....... ....... ....... ...... 0.2 0.2 0.3 0.3 0.3 1.3
Earned income credit \4\.................... ....... ....... ....... ....... ...... 52.8 55.1 51.3 50.6 51.4 261.3
Recovery rebate \4\......................... ....... ....... ....... ....... ...... 12.0 1.7 ........ ........ ....... 13.7
Phase out of the personal exemption for ....... ....... ....... ....... ...... -10.6 -32.9 -43.2 -33.3 -36.4 -156.4
regular income tax, and disallowance of the
personal exemption and the standard
deduction for the alternative minimum tax*.
Exclusion of survivor annuities paid to ....... ....... ....... ....... ...... (\5\) (\5\) (\5\) (\5\) (\5\) 0.1
families of public safety officers killed
in the line of duty........................
Exclusion of disaster mitigation payments... (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) (\5\) 0.2
Making work pay credit \4\.................. ....... ....... ....... ....... ...... 42.8 58.0 14.8 ........ ....... 115.6
Exclusion from gross income for up to $2,400 ....... ....... ....... ....... ...... 3.6 1.2 ........ ........ ....... 4.7
of unemployment compensation...............
$250 credit against income taxes owed for ....... ....... ....... ....... ...... 0.2 0.1 ........ ........ ....... 0.2
2009.......................................
Social Security and Railroad Retirement
Exclusion of untaxed social security and ....... ....... ....... ....... ...... 24.0 25.8 32.4 35.3 36.8 154.3
railroad retirement benefits...............
Veterans' Benefits and Services
Exclusion of veterans' disability ....... ....... ....... ....... ...... 4.1 4.2 4.3 4.2 4.2 20.9
compensation...............................
Exclusion of veterans' pensions............. ....... ....... ....... ....... ...... 0.1 0.1 0.1 0.1 0.1 0.6
Exclusion of veterans' readjustment benefits ....... ....... ....... ....... ...... 0.4 0.8 1.0 1.3 1.2 4.8
Exclusion of interest on State and local (\5\) (\5\) (\5\) (\5\) (\5\) 0.1 0.1 0.1 0.1 0.1 0.4
government qualified private activity bonds
for veterans' housing......................
General Purpose Fiscal Assistance
Exclusion of interest on public purpose 7.8 8.1 8.4 8.7 9.0 20.0 20.7 21.5 22.3 23.1 149.4
State and local government bonds...........
Deduction of nonbusiness State and local ....... ....... ....... ....... ...... 46.7 34.0 49.9 58.4 61.1 250.2
government income taxes, sales taxes, and
personal property taxes....................
Above-the-line deduction for State or local ....... ....... ....... ....... ...... 0.9 0.3 (\5\) ........ ....... 1.2
sales or excise tax imposed on the purchase
of a new car...............................
Interest
Deferral of interest on savings bonds....... ....... ....... ....... ....... ...... 1.2 1.2 1.3 1.3 1.3 6.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
Footnotes for Table 1 appear on the following pages.
\1\ Reflects legislation enacted by September 30, 2009.
\2\ Negative tax expenditure of less than $50 million.
\3\ Does not include provision that provides look-through of payments between related controlled
foreign corporations.
\4\ Estimate includes refundability associated with the following outlay effects:
Corporations -------------- Individuals ------------ Total ------
2009 2010 2011 2012 2013 -- 2009 ---- 2010 ---- 2011 ---- 2012 ---- 2013
---- ---- ---- ---- -- ----
Refund of deemed tax payment for 0.3 ....... ....... ....... ...... ........ ........ ........ ........ ....... 0.3
allocation of qualified forestry
conservation bond limitation.............
First-time homebuyer credit............... ....... ....... ....... ....... ...... 2.9 0.8 ........ ........ ....... 3.6
Low-income housing credit grant election.. 3.4 ....... ....... ....... ...... ........ ........ ........ ........ ....... 3.4
R&E credits in lieu of bonus depreciation 0.5 0.3 ....... ....... ...... ........ ........ ........ ........ ....... 0.8
(Code section 168(k)(4), not Code section
41)......................................
Build America bonds....................... 1.3 2.2 3.0 3.0 3.0 (\5\) (\5\) (\5\) (\5\) (\5\) 12.5
Hope credit............................... ....... ....... ....... ....... ...... 2.2 3.0 0.8 ........ ....... 6.0
Credit for children under age 17.......... ....... ....... ....... ....... ...... 28.7 30.8 10.6 3.9 4.0 77.8
Earned income credit...................... ....... ....... ....... ....... ...... 47.2 49.5 44.0 42.6 43.2 226.4
Recovery rebate........................... ....... ....... ....... ....... ...... 3.0 0.4 ........ ........ ....... 3.4
Making work pay credit.................... ....... ....... ....... ....... ...... 14.1 18.6 4.6 ........ ....... 37.2
\5\ Positive tax expenditure of less than $50 million.
\6\ Estimate includes the effect of ``black liquor,'' a byproduct of the kraft paper making process, qualifying for the cellulosic biofuel producer
credit. In addition to the amounts above, the excise tax credit for alcohol fuel mixtures results in a reduction in excise tax receipts, net of
income, of $8.8 billion over the fiscal years 2009 through 2013.
\7\ Estimate includes low-income housing grant election.
\8\ 15-year recovery period and bonus depreciation (when generally applicable) in the case of leasehold improvements and retail motor fuel outlets.
\9\ Pattern differs from tax expenditure calculated in prior pamphlets because of economic conditions in 2008 and 2009.
\10\ Does not include special depreciation rules relating to leasehold and retail improvements, restaurants, and retail motor fuel outlets that are
reported separately.
\11\ Includes bonus depreciation and general acceleration under MACRS.
\12\ 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.
\13\ Estimate does not include effects of changes made by the Emergency Economic Stabilization Act of 2008.
\14\ Estimate includes employer-provided child care purchased through dependent care flexible spending accounts.
\15\ In addition to the general charitable deduction, the tax expenditure accounts for the higher percentage limitation for public charities, the fair
market value deduction for related-use tangible personal property, the enhanced deduction for inventory, the fair market value deduction for publicly
traded stock and exceptions to the partial interest rules.
\16\ Estimate includes employer-provided health insurance purchased through cafeteria plans.
Note.--Details may not add to totals due to rounding. An ``*'' indicates a negative tax expenditure for the 2009-2013 period.
Source: Joint Committee on Taxation.
Table 2.--Distribution by Income Class of All Returns, Taxable Returns, Itemized Returns, and Tax Liability
at 2008 Rates and 2008 Law and 2008 Income Levels \1\
[Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
All Taxable Itemized Tax
Income Class \2\ Returns \3\ Returns Returns Liability
----------------------------------------------------------------------------------------------------------------
Below $10,000............................................... 26,489 98 670 -$7,847
$10,000 to $20,000.......................................... 20,806 4,430 1,187 -17,934
$20,000 to $30,000.......................................... 15,638 6,548 1,990 -10,037
$30,000 to $40,000.......................................... 14,339 8,263 3,080 3,839
$40,000 to $50,000.......................................... 12,889 9,094 4,246 16,504
$50,000 to $75,000.......................................... 23,329 18,947 10,547 69,030
$75,000 to $100,000......................................... 15,454 14,576 9,247 86,568
$100,000 to $200,000........................................ 20,409 20,083 16,506 255,927
$200,000 and over........................................... 5,742 5,713 5,397 582,838
---------------------------------------------------
Total................................................. 155,094 87,751 52,871 $978,889
----------------------------------------------------------------------------------------------------------------
\1\ Tax law as in effect on December 31, 2008, is applied to the 2008 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 non-filing units. Filing units include all taxable and nontaxable returns. Non-filing
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 2008 Rates and 2008 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............................................... 987 $7 3 (\3\)
$10,000 to $20,000.......................................... 1,564 198 151 $17
$20,000 to $30,000.......................................... 1,708 556 604 113
$30,000 to $40,000.......................................... 1,665 847 1,321 276
$40,000 to $50,000.......................................... 1,470 1,006 2,425 602
$50,000 to $75,000.......................................... 2,606 2,612 7,405 2,772
$75,000 to $100,000......................................... 1,340 1,958 7,633 3,485
$100,000 to $200,000........................................ 1,022 2,658 14,611 12,042
$200,000 and over........................................... 93 842 2,949 5,732
---------------------------------------------------
Total................................................. 12,455 $10,684 37,101 $25,040
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.
Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
at 2008 Rates and 2008 Income Levels \1\--Continued
[Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
State and Local Income, Charitable
Sales, and Personal Contributions Deduction
Income Class \2\ Property Tax Deduction -------------------------
--------------------------
Returns Amount Returns Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000............................................... 14 $1 21 $1
$10,000 to $20,000.......................................... 291 14 723 82
$20,000 to $30,000.......................................... 1,011 86 1,987 343
$30,000 to $40,000.......................................... 2,160 270 3,223 702
$40,000 to $50,000.......................................... 3,438 570 3,809 1,043
$50,000 to $75,000.......................................... 9,674 2,918 9,614 3,677
$75,000 to $100,000......................................... 9,195 3,915 7,928 3,811
$100,000 to $200,000........................................ 16,307 15,701 11,433 10,357
$200,000 and over........................................... 4,104 24,649 4,002 21,785
---------------------------------------------------
Total................................................. 46,192 $48,124 42,742 $41,804
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.
Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
at 2008 Rates and 2008 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............................................... ........... ........... 6,821 $7,479
$10,000 to $20,000.......................................... 195 $46 6,335 16,949
$20,000 to $30,000.......................................... 774 420 4,676 12,771
$30,000 to $40,000.......................................... 790 494 3,911 7,384
$40,000 to $50,000.......................................... 579 317 2,168 2,983
$50,000 to $75,000.......................................... 1,275 707 1,002 1,029
$75,000 to $100,000......................................... 1,017 561 27 39
$100,000 to $200,000........................................ 1,268 684 2 2
$200,000 and over........................................... 257 134 ........... ...........
---------------------------------------------------
Total................................................. 6,155 $3,363 24,942 $48,636
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.
Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
at 2008 Rates and 2008 Income Levels \1\--Continued
[Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
Untaxed Social Security Child Tax Credit \4\
and Railroad Retirement -------------------------
Income Class \2\ Benefits
-------------------------- Returns Amount
Returns Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000............................................... 12 (\3\) 522 $313
$10,000 to $20,000.......................................... 5,889 $1,985 4,051 2,970
$20,000 to $30,000.......................................... 2,853 2,469 4,251 5,515
$30,000 to $40,000.......................................... 2,332 2,672 3,985 6,193
$40,000 to $50,000.......................................... 2,604 3,646 3,341 5,518
$50,000 to $75,000.......................................... 5,834 7,380 6,185 10,502
$75,000 to $100,000......................................... 3,748 3,478 4,738 8,240
$100,000 to $200,000........................................ 3,735 1,212 6,142 9,521
$200,000 and over........................................... 979 419 18 11
---------------------------------------------------
Total................................................. 27,985 $23,261 33,233 $48,782
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.
Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
at 2008 Rates and 2008 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............................................... (\5\) (\3\) 15 $1
$10,000 to $20,000.......................................... 494 $101 210 13
$20,000 to $30,000.......................................... 924 395 460 35
$30,000 to $40,000.......................................... 918 490 701 64
$40,000 to $50,000.......................................... 895 505 763 82
$50,000 to $75,000.......................................... 1,562 989 1,608 215
$75,000 to $100,000......................................... 1,400 1,148 1,178 134
$100,000 to $200,000........................................ 1,283 1,038 1,692 290
$200,000 and over........................................... ........... ........... ........... ...........
---------------------------------------------------
Total................................................. 7,477 $4,665 6,628 $834
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.
Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items, at 2008 Rates and 2008
Income Levels \1\--Continued
[Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
Mortgage Interest Phase out of the Personal
Deduction Exemption for Regular Income
Tax, and Denial of Personal
Income Class \2\ -------------------------------- Exemption and the Standard
Deduction for AMT
Returns Amount -------------------------------
Returns Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000................................... 3 (\3\) 1 -$1
$10,000 to $20,000.............................. 247 $75 7 -3
$20,000 to $30,000.............................. 732 358 3 -5
$30,000 to $40,000.............................. 1,478 944 (\5\) (\6\)
$40,000 to $50,000.............................. 2,426 1,836 (\5\) (\6\)
$50,000 to $75,000.............................. 7,033 8,370 26 -19
$75,000 to $100,000............................. 7,044 10,136 91 -75
$100,000 to $200,000............................ 13,622 36,278 856 -911
$200,000 and over............................... 4,082 27,468 4,182 -9,234
---------------------------------------------------------------
Total..................................... 36,668 $85,465 5,167 -$10,249
----------------------------------------------------------------------------------------------------------------
\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\ Positive tax expenditure of less than $500,000.
\4\ Includes the refundable portion.
\5\ Fewer than 500 returns.
\6\ Negative tax expenditure of less than $500,000.
Note.--Details may not add to totals due to rounding.
Source: Joint Committee on Taxation.