[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

                                 ------                                
               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

                              ----------                              
                                                                   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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.''
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \20\ See discussion of the individual AMT above.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    --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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    --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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.

