[JPRT 111-3-10]
[From the U.S. Government Publishing Office]


                                                               JCS-3-10

                        [JOINT COMMITTEE PRINT]
 
                              ESTIMATES OF
                        FEDERAL TAX EXPENDITURES
                       FOR FISCAL YEARS 2010-2014

                               __________

                            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(S) NOT AVAILABLE IN TIFF FORMAT]


                           DECEMBER 15, 2010

                      U.S. GOVERNMENT PRINTING OFFICE

  63-010                     WASHINGTON : 2010      JCS-3-10





                      JOINT COMMITTEE ON TAXATION
                      111TH CONGRESS, 2ND SESSION

                                 ------                                
               SENATE                               HOUSE
MAX BAUCUS, Montana,                 SANDER M. LEVIN, Michigan
  Chairman                             Vice Chairman
JOHN D. ROCKEFELLER IV, West         CHARLES B. RANGEL, New York,
    Virginia                         FORTNEY PETE STARK, California
KENT CONRAD, North Dakota            DAVE CAMP, Michigan
CHUCK GRASSLEY, Iowa                 WALLY HERGER, California
ORRIN G. HATCH, Utah








                            C O N T E N T S

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                                                                   Page
Introduction.....................................................     1
 I. The Concept of Tax Expenditures...................................3
II. Measurement of Tax Expenditures..................................27
III.Tax Expenditure Estimates........................................33

                              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 2010-2014 is prepared by the 
staff of the Joint Committee on Taxation (``Joint Committee 
staff'') for the House Committee on Ways and Means and the 
Senate Committee on Finance. The report also is submitted to 
the House and Senate Committees on the Budget.
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    \1\ This report may be cited as follows: Joint Committee on 
Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2010-
2014 (JCS-3-10), December 15, 2010.
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    As in the case of earlier reports,\2\ the estimates of tax 
expenditures in this report were prepared in consultation with 
the staff of the Office of Tax Analysis in the Department of 
the Treasury (``the Treasury''). The Treasury published its 
estimates of tax expenditures for fiscal years 2009-2015 in the 
Administration's budgetary statement of February 1, 2010.\3\ 
The lists of tax expenditures in this Joint Committee staff 
report and the Administration's budgetary statement overlap 
considerably; the differences are discussed in Part I of this 
report under the heading ``Comparisons with Treasury.''
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    \2\ Joint Committee on Taxation, Estimates of Federal Tax 
Expenditures, October 4, 1972 (JCS-28-72), June 1, 1973 (JCS-20-73), 
July 8, 1975 (JCS-11-75), March 15, 1976 (JCS-5-76), March 15, 1977 
(JCS-10-77), March 14, 1978 (JCS-9-78), March 15, 1979 (JCS-9-79), 
March 6, 1980 (JCS-8-80), March 16, 1981 (JCS-7-81), March 8, 1982 
(JCS-4-82), March 7, 1983 (JCS-4-83), November 9, 1984 (JCS-39-84), 
April 12, 1985 (JCS-8-85), March 1, 1986 (JCS-7-86), February 27, 1987 
(JCS-3-87), March 8, 1988 (JCS-3-88), February 28, 1989 (JCS-4-89), 
March 9, 1990 (JCS-7-90), March 11, 1991 (JCS-4-91), April 24, 1992 
(JCS-8-92), April 22, 1993 (JCS-6-93), November 9, 1994 (JCS-6-94), 
September 1, 1995 (JCS-21-95), November 26, 1996 (JCS-11-96), December 
15, 1997 (JCS-22-97), December 14, 1998 (JCS-7-98), December 22, 1999 
(JCS-13-99), April 6, 2001 (JCS-1-01), January 17, 2002 (JCS-1-02), 
December 19, 2002 (JCS-5-02), December 22, 2003 (JCS-8-03), January 12, 
2005 (JCS-1-05), April 25, 2006 (JCS-2-06), September 24, 2007 (JCS-3-
07), October 31, 2008 (JCS-2-08), and January 11, 2010 (JCS-1-10).
    \3\ Office of Management and Budget, ``Tax Expenditures,'' 
Analytical Perspectives, Budget of the United States Government, Fiscal 
Year 2011, February 1, 2010, pp. 207-243.
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    The Joint Committee staff has made its estimates (as shown 
in Table 1) based on the provisions in Federal tax law as 
enacted through December 15, 2010. 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 March 
2010 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 2009-2014.
    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 2010-2014 are presented in Table 1 in Part III. Table 2 
shows the distribution of tax returns by income class, and 
Table 3 presents distributions of selected individual tax 
expenditures by income class.

                   I. THE CONCEPT OF TAX EXPENDITURES

Overview
    Tax expenditures are defined under the Congressional Budget 
and Impoundment Control Act of 1974 (the ``Budget Act'') as 
``revenue losses attributable to provisions of the Federal tax 
laws which allow a special exclusion, exemption, or deduction 
from gross income or which provide a special credit, a 
preferential rate of tax, or a deferral of tax liability.'' \4\ 
Thus, tax expenditures include any reductions in income tax 
liabilities that result from special tax provisions or 
regulations that provide tax benefits to particular taxpayers.
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    \4\ Congressional Budget and Impoundment Control Act of 1974 (Pub. 
L. No. 93-344), sec. 3(3). The Budget Act requires CBO and the Treasury 
to publish annually detailed lists of tax expenditures. The JCT staff 
issued reports prior to the statutory obligation placed on the CBO and 
continued to do so thereafter. In light of this precedent and a 
subsequent statutory requirement that the CBO rely exclusively on JCT 
staff estimates when considering the revenue effects of proposed 
legislation, the CBO has always relied on the JCT staff for the 
production of its annual tax expenditure publication. See Pub. L. No. 
99-177, sec. 273, codified at 2 USC 601(f).
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    Special income tax provisions are referred to as tax 
expenditures because they may be considered to be analogous to 
direct outlay programs, and the two can be considered as 
alternative means of accomplishing similar budget policy 
objectives. Tax expenditures are similar to those direct 
spending programs that are available as entitlements to those 
who meet the statutory criteria established for the programs.
    Estimates of tax expenditures are prepared for use in 
budget analysis. They are a measure of the economic benefits 
that are provided through the tax laws to various groups of 
taxpayers and sectors of the economy. The estimates also may be 
useful in determining the relative merits of achieving 
specified public goals through tax benefits or direct outlays. 
It is appropriate to evaluate tax expenditures with respect to 
cost, distributional consequences, alternative means of 
provision, and economic effects and to allow policymakers to 
evaluate the tradeoffs among these and other potentially 
competing policy goals.
    The legislative history of the Budget Act indicates that 
tax expenditures are to be defined with reference to a normal 
income tax structure (referred to here as ``normal income tax 
law''). The determination of whether a provision is a tax 
expenditure is made on the basis of a broad concept of income 
that is larger in scope than ``income'' as defined under 
general U.S. income tax principles. The Joint Committee staff 
has used its judgment in distinguishing between those income 
tax provisions (and regulations) that can be viewed as a part 
of normal income tax law and those special provisions that 
result in tax expenditures. A provision traditionally has been 
listed as a tax expenditure by the Joint Committee staff if 
there is a reasonable basis for such classification and the 
provision results in more than a de minimis revenue loss, which 
solely for this purpose means a total revenue loss of less than 
$50 million over the five fiscal years 2010-2014. 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.
    The Budget Act uses the term tax expenditure to refer to 
the special tax provisions that are contained in the Federal 
income taxes on individuals and corporations.\5\ Other Federal 
taxes such as excise taxes, employment taxes, and estate and 
gift taxes may also have exceptions, exclusions, and credits, 
but those special tax provisions are not included in this 
report because they are not part of the income tax. Thus, for 
example, the income tax exclusion for employer-paid health 
insurance is included, but the Federal Insurance Contributions 
Act (``FICA'') tax exclusion for employer-paid health insurance 
is not treated as a tax expenditure in this report.\6\
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    \5\ The Federal income tax on individuals also applies to estates 
and trusts, which are subject to a separate income tax rate schedule 
(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.
    \6\ Other analysts have explored applying the concept of tax 
expenditures to payroll and excise taxes. See Jonathan Barry Forman, 
``Would a Social Security Tax Expenditure Budget Make Sense?'' Public 
Budgeting and Financial Management, 5, 1993, pp. 311-335, and Bruce F. 
Davie, ``Tax Expenditures in the Federal Excise Tax System,'' National 
Tax Journal, 47, March 1994, pp. 39-62. Prior to 2003, the President's 
budget contained a section that reviewed and tabulated estate and gift 
tax provisions that the Treasury considered tax expenditures.
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    Some provisions in the Code provide for special tax 
treatment that is less favorable than normal income tax law. 
Examples of such provisions include (1) the denial of 
deductions for certain lobbying expenses, (2) the denial of 
deductions for certain executive compensation, and (3) the two-
percent floor on itemized deductions for unreimbursed employee 
expenses. Tax provisions that provide treatment less favorable 
than normal income tax law and are not related directly to 
progressivity are called negative tax expenditures.\7\ Special 
provisions of the law for which the principal purpose 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.\8\
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    \7\ 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.
    \8\ See Joint Committee on Taxation, Estimates of Federal Tax 
Expenditures for Fiscal Years 2008-2012 (JCS-2-08), October 31, 2008, 
9.
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Individual Income Tax
    Under the Joint Committee staff methodology, the normal 
structure of the individual income tax includes the following 
major components: one personal exemption for each taxpayer and 
one for each dependent, the standard deduction, the existing 
tax rate schedule, and deductions for investment and employee 
business expenses. Most other tax benefits to individual 
taxpayers are classified as exceptions to normal income tax 
law.
    The Joint Committee staff views the personal exemptions and 
the standard deduction as defining the zero-rate bracket that 
is a part of normal tax law. An itemized deduction that is not 
necessary for the generation of income is classified as a tax 
expenditure, but only to the extent that it, when added to a 
taxpayer's other itemized deductions, exceeds the standard 
deduction.
    All employee compensation is subject to tax unless the Code 
contains a specific exclusion for the income. Specific 
exclusions for employer-provided benefits include: coverage 
under accident and health plans,\9\ accident and disability 
insurance, group term life insurance, educational assistance, 
tuition reduction benefits, transportation benefits (parking, 
van pools, and transit passes), dependent care assistance, 
adoption assistance, meals and lodging furnished for the 
convenience of the employer, employee awards, and other 
miscellaneous fringe benefits (e.g., employee discounts, 
services provided to employees at no additional cost to 
employers, and de minimis fringe benefits). Each of these 
exclusions is classified as a tax expenditure in this report.
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    \9\ Present law contains an exclusion for employer-provided 
coverage under accident and health plans (sec. 106) and an exclusion 
for benefits received by employees under employer-provided accident and 
health plans (sec. 105(b)). These two exclusions are viewed as a single 
tax expenditure. Under normal income tax law, the value of employer-
provided accident and health coverage would be includable in the income 
of employees, but employees would not be subject to tax on the accident 
and health insurance benefits (reimbursements) that they might receive.
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    Under normal income tax law, employer contributions to 
pension plans and income earned on pension assets generally 
would be taxable to employees as the contributions are made and 
as the income is earned, and employees would not receive any 
deduction or exclusion for their pension contributions. Under 
present law, employer contributions to qualified pension plans 
and employee contributions made at the election of the employee 
through salary reduction are not taxed until distributed to the 
employee, and income earned on pension assets is not taxed 
until distributed. The tax expenditure for ``net exclusion of 
pension contributions and earnings'' is computed as the income 
taxes forgone on current tax-excluded pension contributions and 
earnings less the income taxes paid on current pension 
distributions (including the 10-percent additional tax paid on 
early withdrawals from pension plans).
    Under present law, social security and tier 1 railroad 
retirement benefits are partially excluded or fully excluded 
from gross income.\10\ Under normal income tax law, retirees 
would be entitled to exclude only the portion of the retirement 
benefits that represents a return of the payroll taxes that 
they paid during their working years. Thus, the exclusion of 
social security and railroad retirement benefits in excess of 
payroll tax payments is classified as a tax expenditure.
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    \10\ For taxpayers with modified adjusted gross incomes above 
certain levels, up to 85 percent of social security and tier 1 railroad 
retirement benefits are includable in income.
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    All Medicare benefits are excluded from taxation. The value 
of Medicare Part A insurance generally is greater than the 
Health Insurance (``HI'') tax contributions that enrollees made 
during their working years, the value of Medicare Part B 
insurance generally is greater than the Part B premium that 
enrollees must pay, and the value of Medicare Part D 
(prescription drug) insurance generally is greater than the 
Part D premium that enrollees must pay. The exclusion of the 
value of Medicare Part A insurance in excess of HI tax 
contributions is classified as a tax expenditure, as are the 
exclusion of the value of Medicare Part B insurance in excess 
of Part B premiums and the exclusion of the value of Part D 
insurance in excess of Part D premiums.
    Public assistance benefits are excluded from gross income 
by statute or by Treasury regulations. Table 1 contains tax 
expenditure calculations for workers' compensation benefits, 
special benefits for disabled coal miners, and cash public 
assistance benefits (which include Supplemental Security Income 
benefits and Temporary Assistance for Needy Families benefits).
    The individual income tax does not include in gross income 
the imputed income that individuals receive from the services 
provided by owner-occupied homes and durable goods.\11\ 
However, the Joint Committee staff does not classify this 
exclusion as a tax expenditure.\12\ The measurement of imputed 
income for tax purposes presents administrative problems and 
its exclusion from taxable income may be regarded as an 
administrative necessity.\13\ Under normal income tax law, 
individuals would be allowed to deduct only the interest on 
indebtedness incurred in connection with a trade or business or 
an investment. Thus, the deduction for mortgage interest on a 
principal or second residence is classified as a tax 
expenditure.
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    \11\  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.
    \12\  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.
    \13\  If the imputed income from owner-occupied homes were included 
in adjusted gross income, it would be proper to include all mortgage 
interest deductions and related property tax deductions as part of the 
normal income tax structure, since interest and property tax deductions 
would be allowable as a cost of producing imputed income. It also would 
be appropriate to allow deductions for depreciation and maintenance 
expenses for owner-occupied homes.
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    The Joint Committee staff assumes that, for administrative 
feasibility, normal income tax law would tax capital gains in 
full in the year the gains are realized through sale, exchange, 
gift, or transfer at death. Thus, the deferral of tax until 
realization is not classified as a tax expenditure. However, 
reduced rates of tax, further deferrals of tax (beyond the year 
of sale, exchange, gift, or transfer at death), and exclusions 
of certain capital gains are classified as tax expenditures. 
Because of the same concern for administrative feasibility, it 
also is assumed that normal income tax law would not provide 
for any indexing of the basis of capital assets for changes in 
the general price level. Thus, under normal income tax law (as 
under present law), the income tax would be levied on nominal 
gains as opposed to real gains in asset values.
    There are many types of State and local government bonds 
and private purpose bonds that qualify for tax-exempt status 
for Federal income tax purposes. Table 1 contains a separate 
tax expenditure listing for each type of bond.
    Under the Joint Committee staff view of normal tax law, 
compensatory stock options would be subject to regular income 
tax at the time the options are exercised and employers would 
receive a corresponding tax deduction.\14\ The employee's 
income would be equal to the difference between the purchase 
price of the stock and the market price on the day the option 
is exercised. Present law provides for special tax treatment 
for incentive stock options and options acquired under employee 
stock purchase plans. When certain requirements are satisfied, 
then: (1) the income that is received at the time the option is 
exercised is excluded for purposes of the regular income tax 
but, in the case of an incentive stock option, included for 
purposes of the alternative minimum tax (``AMT''); (2) the gain 
from any subsequent sale of the stock is taxed as a capital 
gain; and (3) the employer does not receive a tax deduction 
with respect to the option. The special tax treatment provided 
to the employee is viewed as a tax expenditure by the Joint 
Committee staff, and an estimate of this tax expenditure is 
contained in Table 1. However, it should be noted that the 
revenue loss from the special tax treatment provided to the 
employee is accompanied by a significant revenue gain from the 
denial of the deduction to the employer. The negative tax 
expenditure created by the denial of the deduction for 
employers is incorporated in the calculation of the tax 
expenditure.
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    \14\ If the option has a readily ascertainable fair market value, 
normal law would tax the option at the time it is granted and the 
employer would be entitled to a deduction at that time.
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    The individual AMT and the passive activity loss rules are 
not viewed by the Joint Committee staff as a part of normal 
income tax law. Instead, they are viewed as provisions that 
reduce the magnitude of the tax expenditures to which they 
apply. For example, the AMT reduces the value of the deduction 
for State and local income taxes (for those taxpayers subject 
to the AMT) by not allowing the deductions to be claimed in the 
calculation of AMT liability. Similarly, the passive loss rules 
defer otherwise allowable deductions and credits from passive 
activities until a time when the taxpayer has passive income or 
disposes of the assets associated with the passive activity. 
Exceptions to the individual AMT and the passive loss rules are 
not classified as tax expenditures by the Joint Committee staff 
because the effects of the exceptions already are incorporated 
in the estimates of related tax expenditures. In one case the 
restrictive effects of the AMT are presented separately because 
there are no underlying positive tax expenditures reflecting 
these effects: the negative tax expenditures for the AMT's 
disallowance of personal exemptions and the standard deduction.

Business Income Taxation

    Regardless of the legal form of organization (sole 
proprietorship, partnership, or S or C corporation), the same 
general principles are used in the computation of taxable 
business income. Thus, most business tax expenditures apply 
equally to unincorporated and incorporated businesses.
    One of the most difficult issues in defining tax 
expenditures for business income relates to the tax treatment 
of capital costs. Under present law, capital costs may be 
recovered under a variety of alternative methods, depending 
upon the nature of the costs and the status of the taxpayer. 
For example, investments in equipment and structures may 
qualify for tax credits, expensing, accelerated depreciation, 
or straight-line depreciation. The Joint Committee staff 
generally classifies as tax expenditures cost recovery 
allowances that are more favorable than those provided under 
the alternative depreciation system (sec. 168(g)), which 
provides for straight-line recovery over tax lives that are 
longer than those permitted under the accelerated system. In 
addition, a tax expenditure has been measured for depreciation 
in those specific cases where the tax treatment of a certain 
type of asset deviates from the overall treatment of other 
similar types of assets. For example, the tax treatment of 
leasehold improvements of commercial buildings is depreciated 
using a recovery period of 15 years, while the general 
treatment of improvements to commercial buildings (e.g., owned 
commercial buildings) is a 39 year recovery period. In this 
case, the difference between depreciation (in this case 
straight line) using 15 years and 39 years for the recovery 
period represents a tax expenditure. As indicated above, the 
Joint Committee staff assumes that normal income tax law would 
not provide for any indexing of the basis of capital assets 
(nor, for that matter, any indexing with respect to expenses 
associated with these assets). Thus, normal income tax law 
would not take into account the effects of inflation on tax 
depreciation.
    The Joint Committee staff uses several accounting standards 
in evaluating the provisions in the Code that govern the 
recognition of business receipts and expenses. Under the Joint 
Committee staff view, normal income tax law is assumed to 
require the accrual method of accounting (except where its 
application is deemed infeasible), the standard of ``economic 
performance'' (used in the Code to test whether liabilities are 
deductible), and the general concept of matching income and 
expenses. In general, tax provisions that do not satisfy all 
three standards are viewed as tax expenditures. For example, 
the deduction for contributions to taxpayer-controlled mining 
reclamation reserve accounts is viewed as a tax expenditure 
because the contributions do not satisfy the economic 
performance standard. (Adherence to the standard would require 
that the taxpayer make an irrevocable contribution toward 
future reclamation, involving a trust fund or similar 
mechanism, as occurs in a number of areas in the Code.) As 
another example, the deductions for contributions to nuclear 
decommissioning trust accounts and certain environmental 
settlement trust accounts are not viewed as tax expenditures 
because the contributions are irrevocable (i.e., they satisfy 
the economic performance standard). However, present law 
provides for a reduced rate of tax on the incomes of these two 
types of trust accounts, and these tax rate reductions are 
viewed as tax expenditures.
    The Joint Committee staff assumes that normal income tax 
law would provide for the carryback and carryforward of net 
operating losses. The staff also assumes that the general 
limits on the number of years that such losses may be carried 
back or forward were chosen for reasons of administrative 
convenience and compliance concerns and may be assumed to 
represent normal income tax law. Exceptions to the general 
limits on carrybacks and carryforwards are viewed as tax 
expenditures.

Corporate Income Tax

    The income of corporations (other than S corporations) 
generally is subject to the corporate income tax. The corporate 
income tax includes a graduated tax rate schedule. The lower 
tax rates in the schedule are classified by the Joint Committee 
staff as a tax expenditure (as opposed to normal income tax 
law) because they are intended to provide tax benefits to small 
businesses 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.\15\
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    \15\ See discussion of the individual AMT above.
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    Certain income of pass-through entities is exempt from the 
corporate income tax. The income of sole proprietorships, S 
corporations, most partnerships, and other entities (such as 
regulated investment companies, real estate investment trusts, 
real estate mortgage investment conduits, and cooperatives) is 
taxed only at the individual level. The special tax rules for 
these pass-through entities are not classified as tax 
expenditures because the tax benefits are available to any 
entity that chooses to organize itself and operate in the 
required manner.
    Nonprofit corporations that satisfy the requirements of 
section 501 also generally are exempt from corporate income 
tax. The tax exemption for organizations that have a direct 
business analogue or compete with for-profit organizations 
organized for similar purposes is a tax expenditure.\16\ 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,\17\ and these exceptions are treated 
as tax expenditures. In general, the imputed income derived 
from nonbusiness activities conducted by individuals or 
collectively by certain nonprofit organizations is outside the 
normal income tax base. However, the ability of donors to such 
nonprofit organizations to claim a charitable contribution 
deduction is a tax expenditure, as is the exclusion of income 
granted to holders of tax-exempt financing issued by charities.
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    \16\ These organizations include small insurance companies, mutual 
or cooperative electric companies, State credit unions, and Federal 
credit unions.
    \17\ These exceptions include certain passive income that arguably 
may relate to business activities, such as royalties or rents received 
from licensing trade names or other assets typically used in a trade or 
business, as well as other passive income such as certain dividends and 
interest. Other exceptions include income derived from certain research 
activities and income from certain trade show and fair activities.
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Recent Legislation

    The Worker, Homeownership, and Business Assistance Act of 
2009, enacted on November 6, 2009 (Pub. L. No. 111-92), 
modified three tax expenditures:
    --Among other changes, the first-time homebuyer tax credit 
was extended for purchases before May 1, 2010 (July 1, 2010 for 
any taxpayer who enters into a written binding contract before 
May 1, 2010, to close on the purchase of a principal residence 
before July 1, 2010). The credit is extended for an additional 
year for individuals on qualified official extended duty 
outside of the United States. A taxpayer who has maintained the 
same principal residence for any five-consecutive year period 
during the eight-year period ending on the date of the purchase 
of a subsequent principal residence is treated as a first-time 
homebuyer. The maximum allowable credit for such taxpayers is 
$6,500 ($3,250 for a married individual filing separately). 
Income, purchase price, age, related party, dependent, and 
documentation limitations apply for purchases after November 6, 
2009. The definition of mathematical or clerical error for 
purposes of administration of the credit by the IRS was 
expanded.
    --The exclusion of benefits and allowances to armed forces 
personnel under the Homeowners Assistance Program was expanded 
to exclude payments authorized under the American Recovery and 
Reinvestment Tax Act of 2009 (Pub. L. No. 111-5).
    --The unavailability of the symmetric worldwide method for 
interest expense allocation was extended for seven years until 
taxable years beginning after December 31, 2017. This is a 
negative tax expenditure.

    The Department of Defense Appropriations Act, 2010, enacted 
on December 19, 2009 (Pub. L. No. 111-118), extended the 
eligibility period for the premium subsidy for COBRA 
continuation coverage for involuntary terminations through 
February 28, 2010 and the maximum duration of assistance to 15 
months.

    An Act to accelerate the income tax benefits for charitable 
cash contributions for the relief of victims of the earthquake 
in Haiti, enacted on January 22, 2010 (Pub. L. No. 111-126), 
permitted cash contributions made after January 11, 2010, and 
before March 1, 2010, for the relief of earthquake victims in 
Haiti as having been made on December 31, 2009 for purposes of 
the tax deduction for charitable contributions. In Table 1, 
this change is reflected in the tax expenditure estimate for 
``Deduction for charitable contributions, other than for 
education and health.''

    The Temporary Extension Act of 2010, enacted on March 2, 
2010 (Pub. L. No. 111-144), extended the eligibility period for 
the premium subsidy for COBRA continuation coverage for 
involuntary terminations through March 31, 2010 and modified 
the applicability of the subsidy to individuals losing coverage 
because of a reduction in hours.

    The Hiring Incentives to Restore Employment Act, enacted on 
March 18, 2010 (Pub. L. No. 111-147), created one new tax 
expenditure:
    --An employer's general business credit is increased by 
$1,000 for each retained worker that satisfies a minimum 
employment period. Generally, a retained worker is an 
individual who is a qualified individual as defined under the 
payroll tax forgiveness provision of new Code sec. 3111(d). 
However, the credit is available only with respect to such an 
individual, if the individual: (1) is employed by the employer 
on any date during the taxable year; (2) continues to be 
employed by the employer for a period of not less than 52 
consecutive weeks; and (3) receives wages for such employment 
during the last 26 weeks of such period that are least 80-
percent of such wages during the first 26 weeks of such period. 
In Table 1, this tax expenditure is listed as ``Credit for 
retention of certain newly hired workers.''
    The Hiring Incentives to Restore Employment Act also 
modified existing tax expenditures as follows:
    --A refundable credit was allowed to issuers of specified 
tax credit bonds in lieu of providing investors with Federal 
tax credits. A ``specified tax credit bond'' is a new clean 
renewable energy bond, a qualified energy conservation bond, a 
qualified zone academy bond, or a qualified school construction 
bond. In Table 1, this change is reflected in the tax 
expenditure estimates for the underlying tax credit bonds.
    --The limitation on expensing certain depreciable business 
assets under section 179 was modified and extended for one year 
to permit expensing of up to $250,000 of the cost of qualifying 
property, reduced by the amount by which the cost of qualifying 
property exceeds $800,000, for property placed in service for 
taxable years beginning before 2011.
    --The unavailability of the symmetric worldwide method for 
interest expense allocation was extended for an additional 
three years until taxable years beginning after December 31, 
2020. This is a negative tax expenditure.

    The Patient Protection and Affordable Care Act, enacted 
March 23, 2010 (Pub. L. No. 111-148), in combination with the 
Health Care and Education Reconciliation Act of 2010, enacted 
March 30, 2010 (Pub. L. No. 111-152), created several new tax 
expenditures as follows:
    --A premium assistance credit is available for eligible 
individuals and families who purchase health insurance through 
an exchange. The credit is refundable and payable in advance 
directly to the insurer. The credit is available for 
individuals with household incomes between 100 and 400 percent 
of the Federal poverty line for the family size involved who do 
not receive health insurance through an employer or a spouse's 
employer. The credit is equal to the cost of the second lowest-
cost silver plan minus the maximum amount of income a household 
is expected to pay for insurance. This maximum amount is a 
percentage of household income that increases with income. The 
premium assistance credit is effective for taxable years ending 
after December 31, 2013. In Table 1, this tax expenditure is 
listed as ``Credits and subsidies for participation in 
exchanges.''
    --An exclusion from gross income is provided for any 
premium assistance credit. In Table 1, this tax expenditure is 
reflected in the tax expenditure estimate for ``Credits and 
subsidies for participation in exchanges.''
    --A tax credit is provided for a qualified small employer 
for nonelective contributions to purchase health insurance for 
its employees. For taxable years beginning in 2010-2013, the 
credit is equal to 35 percent of the employer's contribution to 
the health insurance premium for each covered employee, and 50 
percent for taxable years beginning after 2013. In Table 1, 
this tax expenditure is listed as ``Tax credit for small 
businesses purchasing employer insurance.''
    --Excise taxes imposed on employers whose employees receive 
premium assistance credits are not deductible as ordinary and 
necessary business expenses. The nondeductibility of these 
expenses is a negative tax expenditure. This negative tax 
expenditure is listed below in the text as a tax expenditure 
for which quantification is not available.
    --Excise taxes imposed on insurers if the aggregate value 
of employer-sponsored health insurance coverage for an employee 
exceeds a threshold amount are not deductible as ordinary and 
necessary business expenses. The nondeductibility of these 
expenses is a negative tax expenditure. This negative tax 
expenditure is not listed in Table 1, because the provision is 
not effective until taxable years beginning after December 31, 
2017.
    --The annual fees imposed on any covered entity engaged in 
the business of manufacturing or importing branded prescription 
drugs for sale to any specified government program or pursuant 
to coverage under any such program are not deductible as 
ordinary and necessary business expenses. The nondeductibility 
of these expenses is a negative tax expenditure. This negative 
tax expenditure is listed below in the text as a tax 
expenditure for which quantification is not available.
    --The annual fees imposed on any covered entity engaged in 
the business of providing health insurance with respect to 
United States health risks are not deductible as ordinary and 
necessary business expenses. The nondeductibility of these 
expenses is a negative tax expenditure. This negative tax 
expenditure is listed below in the text as a tax expenditure 
for which quantification is not available.
    --Remuneration in excess of $500,000 attributable to 
services performed by an applicable individual for certain 
health insurance providers is not deductible as an ordinary and 
necessary business expense. The nondeductibility of these 
expenses is a negative tax expenditure. In Table 1, this 
negative tax expenditure is reflected in the tax expenditure 
estimate for ``Limits on deductible compensation.''
    --An exclusion from gross income is provided for the value 
of specified Indian tribe health care benefits and coverage 
provided after the date of enactment (March 23, 2010). In Table 
1, this tax expenditure is reflected in the tax expenditure 
estimate for ``Exclusion of employer contributions for health 
care, health insurance premiums, and long-term care insurance 
premiums.''
    --A 50-percent nonrefundable tax credit is provided for 
qualified investments in qualifying therapeutic discovery 
projects. An investment is a qualified investment only if such 
investment is made in a taxable year beginning in 2009 or 2010 
by an eligible taxpayer. An eligible taxpayer means a taxpayer 
that employs not more than 250 employees. Taxpayers may apply 
for grants in lieu of tax credits under the program. In Table 
1, this tax expenditure is listed as ``Therapeutic research 
credit.''
    --An exclusion from gross income is provided for the amount 
of a free choice voucher provided by an employer to a qualified 
employee to the extent the amount of the voucher does not 
exceed the amount paid for a qualified health plan. The value 
of the voucher is equal to the dollar value of the employer 
contribution to an employer-sponsored health plan. A qualified 
employee is an employee: (1) whose required contribution for an 
employer-sponsored health plan exceeds eight percent and does 
not exceed 9.8 percent of household income for the taxable 
year; (2) whose household income does not exceed 400 percent of 
the Federal poverty line; and (3) who does not participate in 
an employer-sponsored health plan. The percentage of income 
thresholds are indexed for the excess of premium growth over 
income growth for calendar years after 2014. The exclusion 
applies to vouchers provided after December 31, 2013. In Table 
1, this tax expenditure is reflected in the tax expenditure 
estimate for ``Exclusion of employer contributions for health 
care, health insurance premiums, and long-term care insurance 
premiums.''
    --In the case of an individual, a 3.8-percent unearned 
income Medicare contribution tax is imposed on the lesser of 
net investment income or the excess of modified adjusted gross 
income over the threshold amount. The threshold amount is 
$250,000 in the case of a joint return or surviving spouse, 
$125,000 in the case of a married individual filing a separate 
return, and $200,000 in any other case. In the case of an 
estate or trust, the tax is 3.8 percent of the lesser of 
undistributed net investment income or the excess of adjusted 
gross income (as defined in section 67(e)) over the dollar 
amount at which the highest income tax bracket applicable to an 
estate or trust begins. This special rate of tax represents a 
negative tax expenditure. In Table 1, this negative tax 
expenditure is listed as ``Surtax on unearned income.''
    The Patient Protection and Affordable Care Act, enacted 
March 23, 2010 (Pub. L. No. 111-148), in combination with the 
Health Care and Education Reconciliation Act of 2010, enacted 
March 30, 2010 (Pub. L. No. 111-152), also modified several 
existing tax expenditures as follows:
    --The definition of medical expense, with respect to 
medicines, for purposes of employer-provided health coverage 
(including HRAs and Health FSAs), HSAs, and Archer MSAs, is 
conformed to the definition for purposes of the itemized 
deduction for medical expenses, except that prescribed drug is 
determined without regard to whether the drug is available 
without a prescription. Thus, the cost of over-the-counter 
medicines may not be reimbursed with excludible income through 
a Health FSA, HRA, HSA, or Archer MSA, unless the medicine is 
prescribed by a physician. This change is effective for 
expenses incurred after December 31, 2010. In Table 1, this 
change is reflected in the tax expenditure estimates for 
``Exclusion of benefits provided under cafeteria plans,'' 
``Exclusion of employer contributions for health care, health 
insurance premiums, and long-term care insurance premiums,'' 
and ``Health savings accounts.''
    --The maximum amount of salary reduction contributions 
excludable from gross income under a health flexible spending 
arrangement under a cafeteria plan is limited to $2,500 
(indexed for inflation after 2013) for taxable years beginning 
after December 31, 2012. In Table 1, this change is reflected 
in the tax expenditure estimate for ``Exclusion of employer 
contributions for health care, health insurance premiums, and 
long-term care insurance premiums.''
    --The amount otherwise allowable as a deduction for certain 
prescription drug expenses for Medicare retirees not enrolled 
in a Medicare Part D or Medicare Advantage prescription drug 
plan is reduced by the amount of the excludable subsidy 
payments received by the employer. The provision is effective 
for taxable years beginning after December 31, 2012. In Table 
1, this change is reflected in the tax expenditure estimate for 
``Exclusion of certain subsidies to employers who maintain 
prescription drug plans for Medicare enrollees.''
    --The threshold for the itemized deduction for unreimbursed 
medical expenses is increased from 7.5 percent to 10 percent of 
adjusted gross income for taxable years beginning after 
December 31, 2012. For any taxable year beginning after 
December 31, 2012, and ending before January 1, 2017, if either 
the taxpayer or the taxpayer's spouse turns 65 before the end 
of the year, the threshold remains at 7.5 percent. In Table 1, 
this change is reflected in the tax expenditure estimate for 
``Deduction for medical expenses and long-term care expenses.''
    --The employee portion of the HI tax is increased by an 
additional tax of 0.9 percent on wages received in excess of 
$250,000 in the case of a joint return, $125,000 in the case of 
a married individual filing a separate return, and $200,000 in 
any other case. In the case of a joint return, the additional 
tax is on the combined wages of the employee and the employee's 
spouse. The tax applies to remuneration received and taxable 
years beginning after December 31, 2012. Since the exclusion of 
the value of Medicare Part A insurance in excess of HI tax 
contributions is classified as a tax expenditure and this 
provision increases the HI tax, this reduces the tax 
expenditure for this exclusion. In Table 1, this change is 
reflected in the tax expenditure estimate for ``Exclusion of 
Medicare benefits: Hospital insurance (Part A).''
    --The special treatment for Blue Cross and Blue Shield 
companies is limited to organizations with a medical loss ratio 
of not less than 85 percent. In Table 1, this change is 
reflected in the tax expenditure estimate for ``Special 
deduction for Blue Cross and Blue Shield companies.''
    --The gross income exclusion for amounts received under the 
National Health Service Corps loan repayment program or certain 
State loan repayment programs is expanded to include any amount 
received by an individual under any State loan repayment or 
loan forgiveness program that is intended to provide for the 
increased availability of health care services in underserved 
or health professional shortage areas (as determined by the 
State). The provision applies to amounts received by an 
individual in taxable years beginning after December 31, 2008. 
In Table 1, this change is reflected in the tax expenditure 
estimate for ``Exclusion of income attributable to the 
discharge of certain student loan debt and NHSC educational 
loan repayments.''
    --The maximum exclusion for employer-provided adoption 
assistance is increased to $13,170 per eligible child (a $1,000 
increase). The new dollar limit and income limitations of the 
employer-provided adoption assistance exclusion are adjusted 
for inflation in taxable years beginning after December 31, 
2010. The exclusion is extended for one year (i.e., for taxable 
years beginning before January 1, 2012). In Table 1, this 
change is reflected in the tax expenditure estimate for 
``Adoption credit and employee adoption benefits exclusion.''
    --The maximum adoption tax credit is increased to $13,170 
per eligible child (a $1,000 increase). This increase applies 
to both nonspecial needs adoptions and special needs adoptions. 
Also, the adoption credit is made refundable. The new dollar 
limit and phase-out of the adoption credit are adjusted for 
inflation in taxable years beginning after December 31, 2010. 
In Table 1, this change is reflected in the tax expenditure 
estimate for ``Adoption credit and employee adoption benefits 
exclusion.''
    --The exclusion for reimbursements for medical care 
expenses under an employer-provided accident and health plan is 
extended to reimbursements for expenses for the medical care of 
any child (whether or not the child is a dependent) who has not 
attained age 27 as of the end of the taxable year of an 
employee. In Table 1, this change is reflected in the tax 
expenditure estimate for ``Exclusion of employer contributions 
for health care, health insurance premiums, and long-term care 
insurance premiums.''
    --The deduction for health insurance costs of self-employed 
individuals is extended to health insurance for any child who 
has not attained age 27 as of the end of the taxable year of a 
self-employed individual. In Table 1, this change is reflected 
in the tax expenditure estimate for ``Exclusion of employer 
contributions for health care, health insurance premiums, and 
long-term care insurance premiums.''
    --The cellulosic biofuel producer credit is modified to 
exclude fuels with significant water, sediment, or ash content, 
such as black liquor. The provision is effective for fuels sold 
or used on or after January 1, 2010. In Table 1, this change is 
reflected in the tax expenditure estimate for ``Credits for 
alcohol fuels.''

    The Continuing Extension Act of 2010, enacted on April 15, 
2010 (Pub. L. No. 111-157), extended the eligibility period for 
the premium subsidy for COBRA continuation coverage for 
involuntary terminations through May 31, 2010.

    The Homebuyer Assistance and Improvement Act of 2010, 
enacted on July 2, 2010 (Pub. L. No. 111-198), extended the 
time for closing on a principal residence eligible for the 
first-time homebuyer credit through September 30, 2010 for any 
individual who entered into a written binding contract before 
May 1, 2010, to close on the purchase of a principal residence 
before July 1, 2010. The eligibility period for an individual 
who serves on qualified official extended duty outside of the 
United States who enters into a written binding contract before 
May 1, 2011, to close on the purchase of a principal residence 
before July 1, 2011, and who purchases such residence before 
July 1, 2011, is unchanged. In Table 1, this change is 
reflected in the tax expenditure estimate for the ``First-time 
homebuyer credit.''

    The Dodd-Frank Wall Street Reform and Consumer Protection 
Act, enacted on July 21, 2010 (Pub. L. No. 111-203), exempts 
swaps and other derivative contracts from the tax consequences 
of section 1256 of the Code. In Table 1, this change is 
reflected in the tax expenditure estimate for ``Income 
recognition rule for gain or loss from section 1256 
contracts.''
    The __ Act of __, enacted on August 10, 2010 (Pub. L. No. 
111-226), modified two existing tax expenditures as follows:
    --The affiliation rules for purposes of rules allocating 
interest expense are modified to treat a foreign corporation as 
a member of an affiliated group for interest allocation and 
apportionment purposes under certain conditions. In Table 1, 
this change is reflected in the tax expenditure estimate for 
``Interest expense allocation.''
    --The advance refundability of the earned income tax credit 
is eliminated. In Table 1, this change is reflected in the tax 
expenditure estimate for the ``Earned income credit.''

    The Small Business Jobs Act of 2010, enacted on September 
27, 2010 (Pub. L. No. 111-240), created one new tax expenditure 
and modified several tax expenditures as follows:
    --The carryback period for eligible small business credits 
is extended from one to five years. An eligible small business 
is, with respect to any taxable year, a corporation, the stock 
of which is not publicly traded, or a partnership which meets 
the gross receipts test of section 448(c), substituting $50 
million for $5 million each place it appears. In the case of a 
sole proprietorship, the gross receipts test is applied as if 
it were a corporation. This item is listed below in the text as 
a tax expenditure for which quantification is not available.
    --The percentage exclusion for qualified small business 
stock acquired during 2010 is increased to 100 percent and the 
minimum tax preference does not apply. Thus, no regular tax or 
alternative minimum tax is imposed on the sale of this stock 
held at least five years. The provision is effective for stock 
issued after the date of enactment (September 27, 2010) and 
before January 1, 2011. In Table 1, this change is reflected in 
the tax expenditure estimate for ``Exclusion for gain from 
certain small business stock.''
    --The amount a taxpayer may expense under section 179 
increases to $500,000, and the phase-out threshold amount 
increases to $2 million for taxable years beginning in 2010 and 
2011. The definition of property qualifying for section 179 is 
expanded temporarily to include qualified real property, 
subject to a maximum of $250,000. Other special rules for 
qualified real property apply. In Table 1, these changes are 
reflected in the tax expenditure estimate for ``Expensing under 
section 179 of depreciable business property.''
    --The additional first-year depreciation deduction for 50 
percent of the basis of certain qualified property (``bonus 
depreciation'') is extended for one year for property placed in 
service after December 31, 2009 and before January 1, 2011 
(before January 1, 2012 for certain long-lived property and 
transportation property). In Table 1, this change is reflected 
in the tax expenditure estimate for ``Depreciation of equipment 
in excess of the alternative depreciation system.''
    --The amount of start-up expenditures a taxpayer can elect 
to deduct increases from $5,000 to $10,000 for a taxable year 
beginning in 2010. The deduction phase-out threshold increases 
such that the $10,000 is reduced (but not below zero) by the 
amount by which the cumulative cost of start-up expenditures 
exceeds $60,000. In Table 1, these changes are reflected in the 
tax expenditure estimate for ``Amortization of business startup 
costs.''
    --The definition of ``applicable retirement plan'' for 
purposes of a qualified Roth contribution plan is amended to 
include eligible deferred compensation plans (as defined under 
section 457(b)) maintained by a State, a political subdivision 
of a State, an agency or instrumentality of a State, or an 
agency or instrumentality of a political subdivision of a State 
(collectively, ``governmental 457(b) plans''). The definition 
of ``elective deferral'' in section 402A is also amended to 
include amounts deferred under governmental 457(b) plans. Thus, 
participants in governmental 457(b) plans are allowed to treat 
elective deferrals as Roth contributions. In Table 1, these 
changes are reflected in the tax expenditure estimate for ``Net 
exclusion of pension contributions and earnings: Defined 
contribution plans.''
    --If a section 401(k) plan, section 403(b) plan, or 
governmental section 457(b) plan has a qualified designated 
Roth contribution program, a distribution to an employee (or a 
surviving spouse) from an account under the plan that is not a 
designated Roth account is permitted to be rolled over into a 
designated Roth account under the plan for the individual. In 
the case of a permitted rollover contribution to a designated 
Roth account under this provision, the individual must include 
the distribution in gross income (subject to basis recovery) in 
the same manner as if the distribution were rolled over into a 
Roth IRA. In Table 1, this change is reflected in the tax 
expenditure estimate for ``Net exclusion of pension 
contributions and earnings: Defined contribution plans.''
    --The cellulosic biofuel producer credit is modified to 
exclude from the definition of cellulosic biofuel fuels with an 
acid number of greater than 25, including crude tall oil. In 
Table 1, this change is reflected in the tax expenditure 
estimate for ``Credits for alcohol fuels.''

Expiring Tax Expenditure Provisions

    A number of tax expenditure provisions expired in 2009 or 
are scheduled to expire in 2010. Some provisions expired prior 
to 2009, but have continuing revenue effects that are 
associated with ongoing taxpayer activity. These determinations 
reflect present law as of December 15, 2010.
    --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 expired 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 expired 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 expired for taxable years beginning after May 22, 
2009.
    --The tax credit for qualified hybrid motor vehicles other 
than passenger automobiles and light trucks expired for 
vehicles purchased after December 31, 2009.
    --The tax credit for biodiesel and renewable diesel fuel 
expired for fuel sold or used after December 31, 2009.
    --The tax credit for research and experimentation expenses 
expired for amounts paid or incurred after December 31, 2009.
    --The increase in the State housing credit ceiling under 
the low-income housing credit expired December 31, 2009.
    --The election to substitute grants to States for low-
income housing projects for low-income housing credit 
allocation expired December 31, 2009.
    --The tax credit for electricity produced at open-loop 
biomass facilities placed in service before October 22, 2004, 
expired December 31, 2009.
    --The tax credit for refined coal produced at refined coal 
production facilities expired for facilities placed in service 
after December 31, 2009.
    --The Indian employment tax credit expired for taxable 
years beginning after December 31, 2009.
    --The new markets tax credit expired December 31, 2009.
    --The tax credit for certain expenditures on railroad track 
maintenance expired 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 expired 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 expired for homes purchased after December 31, 2009.
    --The tax credit for training costs of mine rescue team 
employees expired 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 expired 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 
under section 54 expired for bonds issued after December 31, 
2009. Table 1 reflects the tax expenditure estimate for clean 
renewable energy bonds and new clean renewable energy bonds 
under section 54C.
    --The above-the-line deduction for teacher classroom 
expenses expired for taxable years beginning after December 31, 
2009.
    --The increased standard deduction for State and local real 
property taxes expired for taxable years beginning after 
December 31, 2009.
    --The exclusion of unemployment compensation benefits from 
gross income expired 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 expired 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) expired 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 expired for purchases 
made after December 31, 2009.
    --The classification as five-year property of farming 
business machinery and equipment expired 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 expired 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 expired 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 expired for property placed in service after 
December 31, 2009.
    --Additional first-year depreciation for 50 percent of 
basis of qualified property expired for property acquired after 
December 31, 2009.
    --The election to accelerate AMT and research credits in 
lieu of additional first-year depreciation expired 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 expired 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 expired 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 expired 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 
expired 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 election to expense 50 percent of qualified property 
used to refine liquid fuels expired 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 
expired 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 expired 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 expired for expenditures paid or incurred after 
December 31, 2009.
    --The deduction for income attributable to domestic 
production activities in Puerto Rico expired 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 expired 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 expired for taxable years beginning after 
December 31, 2009.
    --The waiver of minimum required distribution rules for 
IRAs and defined contribution plans expired after December 31, 
2009.
    --The exclusion of individual retirement plan distributions 
for charitable purposes expired 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 expired 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 
expired 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 expired for taxable years beginning after 
December 31, 2009.
    --The exemption for certain dividends of regulated 
investment companies expired 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 expired 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 expired for taxable years beginning after 
December 31, 2009.
    --The designations and tax incentives for empowerment zones 
expired after December 31, 2009.
    --Various tax incentives for investment in the District of 
Columbia expired after December 31, 2009.
    --The designations and tax incentives for renewal 
communities expired after December 31, 2009.
    --The tax credit for corporate income earned in American 
Samoa expired 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 expired 
for taxable years beginning after December 31, 2009.
    --The tax credit for first-time homebuyers is generally 
scheduled to expire for residences purchased after April 30, 
2010.
    --The 65-percent subsidy for payment of COBRA health care 
coverage continuation premiums expired for involuntary 
terminations that occur after May 31, 2010.
    --The reduced capital gains rates for individuals are 
scheduled to expire for taxable years beginning after December 
31, 2010.
    --The taxation of dividends at capital gains rates for 
individuals is scheduled to expire for taxable years beginning 
after December 31, 2010.
    --The following modifications to the dependent care credit 
are scheduled to expire for taxable years beginning after 
December 31, 2010: increase of the dollar limit on creditable 
expenses from $2,400 to $3,000 ($4,800 to $6,000 for two or 
more children); increase of the applicable credit percentage 
from 30 to 35 percent; increase of the beginning point of the 
phase-out range from $10,000 to $15,000.
    --The following modifications to the tax credit for 
children under age 17 are scheduled to expire for taxable years 
beginning after December 31, 2010: increase from $500 to 
$1,000; expanded eligibility for the refundable portion of the 
credit; AMT relief; provision that the tax credit not be 
treated as income or resources for purposes of benefit or 
assistance programs financed in whole or in part with Federal 
funds; refundable child credit floor amount.
    --The modifications to the Hope credit, known as the 
American Opportunity Tax credit, are scheduled to expire for 
taxable years beginning after December 31, 2010.
    --The credit for certain nonbusiness energy property is 
scheduled to expire for expenditures made after December 31, 
2010.
    --The credit for alternative motor vehicles, for advanced 
lean burn technology motor vehicles, and qualified hybrid motor 
vehicles that are passenger automobiles or light trucks, is 
scheduled to expire for property purchased after December 31, 
2010.
    --The credit for alternative motor vehicles for qualified 
alternative fuel vehicles is scheduled to expire for property 
purchased after December 31, 2010.
    --The increase in the credit rate and credit cap for the 
credit for alternative fuel vehicle refueling property is 
scheduled to expire for property placed in service in taxable 
years beginning after December 31, 2010.
    --The credit for alternative fuel vehicle refueling 
property is scheduled to expire for property placed in service 
after December 31, 2010.
    --The following modifications to the earned income tax 
credit are scheduled to expire for taxable years beginning 
after December 31, 2010: increase in the beginning point of the 
phase-out range for joint returns; credit percentage of 45 
percent for three or more qualifying children; phaseout 
threshold for marriage penalty relief; modification of 
treatment of amounts not includible in income; repeal of 
reduction for AMT liability; expansion of math error authority.
    --The enhanced (80-percent in lieu of 65-percent) credit 
for health insurance costs of eligible individuals is scheduled 
to expire for eligible coverage months beginning after December 
31, 2010.
    --The ``making work pay'' credit is scheduled to expire for 
taxable years beginning after December 31, 2010.
    --The credits for alcohol fuels, including the alcohol 
mixture credit, alcohol credit, and small ethanol producer 
credit, are scheduled to expire for the sale or use of fuels 
after December 31, 2010.
    --The credit for employer-provided child care is scheduled 
to expire for taxable years beginning after December 31, 2010.
    --The credit for energy efficient appliances is scheduled 
to expire for certain dishwashers, clothes washers, and 
refrigerators manufactured after December 31, 2010.
    --The grant for specified energy property in lieu of energy 
tax credits is scheduled to expire for property placed in 
service after December 31, 2010, or property placed in service 
after December 31, 2010 of which construction began after 
December 31, 2010.
    --The work opportunity tax credit is scheduled to expire 
for unemployed veterans and disconnected youth hired after 
December 31, 2010.
    --The allocation of new bond authority for the credit for 
holders of qualified zone academy bonds is scheduled to expire 
for bonds issued after December 31, 2010.
    --The allocation of new bond authority for the credit for 
holders of qualified school construction bonds is scheduled to 
expire for bonds issued after December 31, 2010.
    --The authority to issue Build America bonds is scheduled 
to expire for obligations issued after December 31, 2010.
    --The deferral and ratable inclusion of income from 
business indebtedness discharged by the reacquisition of a debt 
instrument is scheduled to expire for reacquisitions occurring 
after December 31, 2010.
    --The exclusion from gross income of awards under the 
National Health Service Corps Scholarship Program or the Armed 
Forces Health Professions Scholarship and Financial Assistance 
program is scheduled to expire for taxable years beginning 
after December 31, 2010.
    --The exclusion from gross income of employer-provided 
educational assistance, including the expansion to graduate 
level courses, is scheduled to expire for expenses relating to 
courses beginning after December 31, 2010 and taxable years 
beginning after December 31, 2010.
    --The increase in the exclusion of employer-provided 
transit and vanpool benefits from $120 per month to $230 (and 
indexed for inflation in 2010) is scheduled to expire for 
taxable years beginning after December 31, 2010.
    --The exclusion from gross income for benefits provided to 
volunteer firefighters and emergency medical responders is 
scheduled to expire for taxable years beginning after December 
31, 2010.
    --The increase in the amount of bonds qualifying for the 
small-issuer arbitrage rebate exception and expansion of tax-
exempt treatment to bonds issued to provide qualified public 
educational facilities are scheduled to expire for taxable 
years beginning after December 31, 2010.
    --The exclusion from gross income for interest on qualified 
mortgage bonds the proceeds of which are used to refinance a 
mortgage on a residence which was originally financed through a 
qualified subprime loan is scheduled to expire for bonds issued 
after December 31, 2010.
    --The exclusion from gross income for industrial 
development bonds the proceeds of which are used to finance 
facilities manufacturing intangible property is scheduled to 
expire for bonds issued after December 31, 2010.
    --The carryforward of any 2008 increase in the volume cap 
and set-aside for private activity bonds for housing, the 
interest on which is excludable from gross income, is scheduled 
to expire for bonds issued after December 31, 2010.
    --The exclusion from gross income for bonds guaranteed by a 
Federal Home Loan Bank is scheduled to expire for bonds issued 
after December 31, 2010.
    --The deduction for premiums for qualified mortgage 
insurance is scheduled to expire for amounts paid, accrued, or 
properly allocable to any period after December 31, 2010.
    --The election to amortize any expense paid or incurred in 
creating or acquiring certain musical works and copyrights 
ratably over five years is scheduled to expire for taxable 
years beginning after December 31, 2010.
    --Fifteen-year cost recovery for natural gas distribution 
lines is scheduled to expire for property placed in service 
after December 31, 2010.
    --The following modifications to the deduction for interest 
on student loans are scheduled to expire for taxable years 
beginning after December 31, 2010: increase and indexation for 
inflation of the income phase-out ranges; repeal of the limit 
on the number of months that interest payments are deductible; 
repeal of the rule that voluntary payments of interest are not 
deductible.
    --The modification of the small issuer exception to the 
tax-exempt interest allocation rules for financial institutions 
is scheduled to expire for obligations issued after December 
31, 2010.
    --The de minimis safe harbor exception for tax-exempt 
interest expense of financial institutions is scheduled to 
expire for tax-exempt obligations issued after December 31, 
2010.
    --The allowance as qualified higher education expenses for 
expenses for the purchase of computer technology or equipment 
to qualify for the exclusion of earnings of a qualified tuition 
program is scheduled to expire for expenses paid or incurred 
after December 31, 2010.
    --The following modifications to the exclusion of earnings 
of Coverdell education savings accounts are scheduled to expire 
for taxable years beginning after December 31, 2010: increase 
in maximum annual contribution from $500 to $2,000; expansion 
of definition of qualified education expenses; increase in 
phase-out range for married filers to double that of unmarried 
filers; provision of special needs beneficiary rules; allowance 
of contributions by corporations and other entities; and 
allowance of contributions until April 15th, the time 
prescribed by law for filing the return for the taxable year 
(not including extensions thereof).
    --The modified tax treatment of electing Alaska Native 
Settlement Trusts, including a special rate of tax, is 
scheduled to expire for taxable years beginning after December 
31, 2010.
    --The modified carryover basis rules for property acquired 
from a decedent who dies during 2010 are scheduled to expire 
for taxable years beginning after December 31, 2010.
    --The authority to issue recovery zone economic development 
bonds and recovery zone facility bonds is scheduled to expire 
after December 31, 2010.

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.\18\
---------------------------------------------------------------------------
    \18\ 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 2009-2015. The Joint Committee staff estimates 
cover a recent fiscal year and the succeeding four fiscal 
years, i.e., fiscal years 2010-2014.
    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 2010 through 2014. 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 2009 through 2015.
    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.\19\ Taxpayer behavior is assumed to 
remain unchanged for tax expenditure estimate purposes.\20\ 
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.
---------------------------------------------------------------------------
    \19\ 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.
    \20\ 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 March 2010 CBO revenue baseline and Joint Committee 
staff projections of the gross income, deductions, and 
expenditures of individuals and corporations for calendar years 
2009-2014. 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.\21\
---------------------------------------------------------------------------
    \21\ 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.\22\ 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 taxes.
---------------------------------------------------------------------------
    \22\ 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 2010 
through 2014 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

           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

Education, training, employment, and 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 contributions

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

           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
           Five-year carryback period for small 
        business
           Nondeductibility of excise taxes imposed on 
        employers whose employees receive premium assistance 
        credits*
           Nondeductibility of annual fees imposed on 
        certain drug manufacturers or importers*
           Nondeductibility of annual fees imposed on 
        health insurers*

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 
footnotes 3 and 8. 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 2010-2014 \1\
                                                                  (Billions of Dollars)
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Corporations                                    Individuals
                   Function                    -----------------------------------------------------------------------------------------------   Total
                                                  2010     2011     2012     2013      2014     2010      2011      2012      2013      2014    2010-14
--------------------------------------------------------------------------------------------------------------------------------------------------------
National Defense
    Exclusion of benefits and allowances to     .......  .......  .......  ........  .......      4.3       4.7       4.9       5.1       5.7       24.7
     armed forces personnel...................
    Exclusion of military disability benefits.  .......  .......  .......  ........  .......      0.2       0.2       0.2       0.2       0.2        1.1
    Deduction for overnight-travel expenses of  .......  .......  .......  ........  .......      0.1       0.1       0.1       0.1       0.1        0.3
     national guard and reserve members.......
    Exclusion of combat pay...................  .......  .......  .......  ........  .......      1.2       1.0       0.9       0.9       1.0        4.9
International Affairs
    Exclusion of certain allowances for         .......  .......  .......  ........  .......      1.6       1.7       1.8       1.9       2.0        9.0
     Federal employees abroad.................
    Exclusion of foreign earned income:
        Housing...............................  .......  .......  .......  ........  .......      1.1       1.1       1.2       1.2       1.3        5.9
        Salary................................  .......  .......  .......  ........  .......      5.1       5.2       5.4       5.6       5.8       27.1
    Inventory property sales source rule           7.2      7.4      7.6       7.8       8.0  ........  ........  ........  ........  .......       38.0
     exception................................
    Deduction for foreign taxes instead of a       0.2      0.2      0.3       0.3       0.3  ........  ........  ........  ........  .......        1.3
     credit...................................
    Interest expense allocation:
        Unavailability of symmetric worldwide     -2.7     -2.9     -3.1      -3.3      -3.5  ........  ........  ........  ........  .......      -15.5
         method*..............................
        Separate grouping of affiliated            1.2      1.3      1.4       1.5       1.6  ........  ........  ........  ........  .......        7.0
         financial companies..................
    Apportionment of research and development      0.3      0.3      0.4       0.4       0.4  ........  ........  ........  ........  .......        1.8
     expenses for determination of foreign tax
     credits..................................
    Special rules for interest-charge domestic     0.5      0.1      0.1       0.1       0.1  ........  ........  ........  ........  .......        0.9
     international sales corporations.........
    Tonnage tax...............................     0.1      0.1      0.1       0.1       0.1  ........  ........  ........  ........  .......        0.5
    Deferral of active income of controlled       12.5     13.3     14.1      14.9      15.8  ........  ........  ........  ........  .......       70.6
     foreign corporations.....................
    Deferral of active financing income \2\...     1.0   .......  .......  ........  .......  ........  ........  ........  ........  .......        1.0
General Science, Space, and Technology
    Credit for increasing research activities      4.0      3.0      2.3       1.8       0.9      0.1       0.1     (\3\)     (\3\)     (\3\)       12.6
     (section 41).............................
    Expensing of research and experimental         4.3      4.2      4.4       5.8       6.9      0.1       0.1       0.1       0.1       0.1       26.3
     expenditures.............................
    Therapeutic research credit...............     0.1      0.1      0.1       0.1       0.1      0.1       0.1       0.1       0.1       0.1        0.8
Energy
    Credit for energy efficiency improvements   .......  .......  .......  ........  .......      1.7       1.2   ........  ........  .......        2.8
     to existing homes........................
    Credits for alternative technology             0.2      0.1    (\3\)     (\3\)     (\3\)      0.6       0.3   ........  ........  .......        1.3
     vehicles.................................
    Credit for holders of clean renewable        (\3\)    (\3\)    (\3\)     (\3\)     (\3\)      0.1       0.1       0.1       0.1       0.1        0.6
     energy bonds (sections 54 and 54C).......
    Exclusion of energy conservation subsidies  .......  .......  .......  ........  .......    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
     provided by public utilities.............
    Credit for holder of qualified energy        (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)       0.1       0.1       0.1        0.4
     conservation bonds.......................
    Credit for enhanced oil recovery costs....   (\3\)    (\3\)   .......  ........  .......    (\3\)     (\3\)   ........  ........  .......        0.1
    Credit for producing fuels from a non-       (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)       (3)        0.1
     conventional source......................
    Credits for alcohol fuels \4\.............     0.1    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
    Energy credit (section 48):
        Solar.................................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)      (\3\)
        Geothermal............................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)      (\3\)
        Fuel cells............................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)      (\3\)
        Microturbines.........................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)      (\3\)
    Credits for electricity production from
     renewable resources (section 45):
        Wind..................................     1.0      1.1      1.3       1.4       1.5    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        6.2
        Closed-loop biomass...................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.2
        Geothermal............................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
        Qualified hydropower..................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
        Solar (limited to facilities placed in   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
         service before1/1/06)................
        Small irrigation power................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
        Municipal solid waste.................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
        Open-loop biomass.....................     0.4      0.3      0.3       0.3       0.2    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        1.6
    Credits for investments in clean coal          0.2      0.2      0.2       0.2       0.2  ........  ........  ........  ........  .......        0.9
     facilities...............................
    Coal production credits:
        Refined coal..........................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
        Indian coal...........................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
    Credit for the production of energy-           0.2      0.1   .......  ........  .......  ........  ........  ........  ........  .......        0.3
     efficient appliances.....................
    Credits for alternative technology
     vehicles:
        Hybrid vehicles.......................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        1.0
        Other alternative fuel vehicles.......   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
    Credit for clean-fuel vehicle refueling      (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
     property.................................
    Residential energy efficient property       .......  .......  .......  ........  .......      0.2       0.2       0.2       0.2       0.2        0.9
     credit...................................
    New energy efficient home credit..........   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
    Credit for certain alternative motor         (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
     vehicles that do not meet existing
     criteria of a qualified plug-in electric
     drive motor vehicle......................
    Credit for investment in advanced energy       0.4      0.3      0.2       0.1       0.1      0.1       0.1     (\3\)     (\3\)     (\3\)        1.5
     property.................................
    Exclusion of interest on State and local     (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.3
     government qualified private activity
     bonds for energy production facilities...
    Deduction for expenditures on energy-          0.1      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, fuels:
        Oil and gas...........................     0.7      0.7      0.9       1.0       1.0    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        4.2
        Other fuels...........................   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.4
    Excess of percentage over cost depletion,
     fuels:
        Oil and gas...........................     0.5      0.8      0.9       0.9       1.0    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        4.1
        Other fuels...........................     0.2      0.2      0.2       0.2       0.2    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.7
    Amortization of geological and geophysical     0.1      0.1      0.1       0.1       0.1    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.6
     expenditures associated with oil and gas
     exploration..............................
    Amortization of air pollution control          0.1      0.2      0.2       0.2       0.1  ........  ........  ........  ........  .......        0.7
     facilities...............................
    Depreciation recovery periods for energy
     specific items:
        Five-year MACRS for certain energy         0.3      0.3      0.2       0.2       0.1    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        1.1
         property (solar, wind, etc.).........
        10-year MACRS for smart electric         (\3\)      0.1      0.1       0.1       0.2  ........  ........  ........  ........  .......        0.5
         distribution property................
        15-year MACRS for certain electric         0.1      0.1      0.2       0.2       0.2  ........  ........  ........  ........  .......        0.8
         transmission property................
        15-year MACRS for natural gas              0.1      0.1      0.1       0.1       0.1  ........  ........  ........  ........  .......        0.6
         distribution line....................
    Election to expense 50 percent of              0.7      0.8      0.7       0.6       0.2  ........  ........  ........  ........  .......        2.7
     qualified property used to refine liquid
     fuels....................................
    Exceptions for publicly traded partnership  .......  .......  .......  ........  .......      0.5       0.5       0.6       0.6       0.7        2.8
     with qualified income derived from
     certain energy-related activities........
Natural Resources and Environment
    Special depreciation allowance for certain   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
     reuse and recycling property.............
    Expensing of exploration and development       0.1      0.1      0.1       0.1       0.1    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.3
     costs, nonfuel minerals..................
    Excess of percentage over cost depletion,      0.1      0.1      0.1       0.1       0.1    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.5
     nonfuel minerals.........................
    Expensing of timber-growing costs.........     0.7      0.2      0.2       0.2       0.2    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        1.2
    Special rules for mining reclamation         (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
     reserves.................................
    Special tax rate for nuclear                   0.9      0.9      1.0       1.1       1.1  ........  ........  ........  ........  .......        5.0
     decommissioning reserve funds............
    Exclusion of contributions in aid of         (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.2
     construction for water and sewer
     utilities................................
    Exclusion of earnings of certain             (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
     environmental settlement funds...........
    Amortization and expensing of                  0.1      0.1      0.1       0.1       0.1      0.1       0.1       0.1       0.1       0.1        1.2
     reforestation expenditures...............
    Special tax rate for qualified timber gain  .......  .......  .......  ........  .......      0.4       0.4       0.4       0.4       0.5        2.2
    Treatment of income from exploration and    .......  .......  .......  ........  .......    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
     mining of natural resources as qualifying
     income under the publicly-traded
     partnership rules........................
Agriculture
    Expensing of soil and water conservation     (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
     expenditures.............................
    Expensing of the costs of raising dairy      (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.6
     and breeding cattle......................
    Exclusion of cost-sharing payments........   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
    Exclusion of cancellation of indebtedness   .......  .......  .......  ........  .......      0.1       0.1       0.1       0.1       0.1        0.5
     income of farmers........................
    Income averaging for farmers and fishermen  .......  .......  .......  ........  .......    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
    Five-year carryback period for net             0.1      0.1      0.1       0.1       0.1      0.1       0.1       0.1       0.1       0.1        0.7
     operating losses attributable to farming.
    Expensing by farmers for fertilizer and      (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.3
     soil conditioner costs...................
Commerce and Housing
    Housing:
        Deduction for mortgage interest on      .......  .......  .......  ........  .......     90.8      93.8      94.1      98.5     106.8      484.1
         owner-occupied residences............
        Deduction for property taxes on real    .......  .......  .......  ........  .......     15.0      22.8      26.5      27.6      29.1      120.9
         property.............................
        Increased standard deduction for real   .......  .......  .......  ........  .......      0.5   ........  ........  ........  .......        0.5
         property taxes.......................
        Exclusion of capital gains on sales of  .......  .......  .......  ........  .......     15.0      16.5      17.5      18.2      19.0       86.3
         principal residences.................
        Exclusion of interest on State and         0.3      0.3      0.3       0.4       0.4      0.7       0.8       0.8       0.9       1.0        5.9
         local government qualified private
         activity bonds for owner-occupied
         housing..............................
        Deduction for premiums for qualified    .......  .......  .......  ........  .......      0.3       0.1   ........  ........  .......        0.4
         mortgage insurance...................
        Exclusion of income attributable to     .......  .......  .......  ........  .......      0.8       0.7       0.5     (\3\)   .......        2.1
         the discharge of principal residence
         acquisition indebtedness.............
        First-time homebuyer credit \5\.......  .......  .......  .......  ........  .......      8.7      -2.4      -2.5      -1.6      -0.8        1.5
        Credit for low-income housing.........     4.9      5.1      5.3       5.6       6.1      0.2       0.3       0.3       0.3       0.3       28.5
        Credit for rehabilitation of historic      0.4      0.4      0.4       0.4       0.4      0.1       0.1       0.2       0.2       0.2        2.7
         structures...........................
        Credit for rehabilitation of             (\3\)      0.1      0.1       0.1       0.1      0.1       0.1       0.2       0.2       0.2        1.1
         structures, other than historic
         structures...........................
        Exclusion of interest on State and         0.2      0.2      0.3       0.3       0.3      0.6       0.6       0.7       0.7       0.7        4.7
         local government qualified private
         activity bonds for rental housing....
        Depreciation of rental housing in          0.5      0.5      0.5       0.4       0.4      4.5       4.4       4.2       3.9       4.0       23.3
         excess of alternative depreciation
         system...............................
    Other business and commerce:
        Exclusion of interest on State and         0.1      0.1      0.1       0.1       0.1      0.2       0.2       0.2       0.2       0.2        1.8
         local government small-issue
         qualified private activity bonds.....
        Carryover basis of capital gains on     .......  .......  .......  ........  .......      7.7       9.4       3.6       4.2       7.2       32.1
         gifts................................
        15-year recovery period for retail         0.2      0.1      0.1       0.1       0.1      0.2       0.1       0.1       0.1       0.2        1.9
         motor fuels outlets..................
        Deferral of gain on non-dealer            -4.1      0.1      4.1       5.6       5.8     -1.4      -2.3       2.0       2.4       1.9       14.1
         installment sales \6\................
        Deferral of gain on like-kind              1.4      1.7      2.0       2.3       2.6      0.7       0.8       1.2       1.4       1.5       15.6
         exchanges............................
        Expensing under section 179 of             0.2      1.3      0.7      -0.5      -0.2      0.7       5.7       3.1      -1.9      -0.9        8.2
         depreciable business property........
        Amortization of business start-up          0.1      0.1    (\3\)     (\3\)     (\3\)      1.3       1.3       1.1       1.0       0.9        5.8
         costs................................
        Reduced rates on first $10,000,000 of      3.2      3.2      3.2       3.1       3.1  ........  ........  ........  ........  .......       15.9
         corporate taxable income.............
        Exemptions from imputed interest rules   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)      0.4       0.5       0.5       0.6       0.6        2.6
        Expensing of magazine circulation        (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
         expenditures.........................
        Special rules for magazine, paperback    (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
         book, and record returns.............
        Completed contract rules..............     0.6      0.6      0.7       0.7       0.8    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        3.4
        Cash accounting, other than              (\3\)    (\3\)    (\3\)     (\3\)     (\3\)      1.0       1.0       1.1       1.1       1.2        5.4
         agriculture..........................
        Credit for employer-paid FICA taxes on     0.3      0.4      0.4       0.4       0.4      0.2       0.3       0.3       0.3       0.3        3.3
         tips.................................
        Deduction for income attributable to       7.0      8.4      8.8       9.2       9.8      2.4       3.2       3.8       4.4       5.1       62.1
         domestic production activities.......
        Credit for the cost of carrying tax-     (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
         paid distilled spirits in wholesale
         inventories..........................
        Reduced rates of tax on dividends and   .......  .......  .......  ........  .......     77.7      84.2      65.9      90.3      84.9      402.9
         long-term capital gains..............
        Surtax on unearned income*............  .......  .......  .......    -18.3     -26.3  ........  ........  ........  ........  .......      -44.7
        Exclusion of capital gains at death...  .......  .......  .......  ........  .......     25.4      31.7      39.0      45.6      52.3      194.0
        Expensing of costs to remove             (\3\)    (\3\)    (\3\)     (\3\)     (\3\)      0.1       0.1       0.1       0.1       0.1        0.6
         architectural and transportation
         barriers to the handicapped and
         elderly..............................
        Exclusion for gain from certain small   .......  .......  .......  ........  .......      0.5       0.3       0.4       0.5       0.7        2.5
         business stock.......................
        Distributions in redemption of stock    .......  .......  .......  ........  .......      0.2     (\3\)       0.3       0.4       0.4        1.3
         to pay various taxes imposed at death
        Ordinary gain or loss treatment for        0.4      0.2      0.1      -0.1      -0.1    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.5
         sale or exchange of Fannie Mae and
         Freddie Mac preferred stock by
         certain financial institutions.......
        Inventory methods and valuation:
            Last in first out.................     3.6      3.8      4.0       4.2       4.4      0.5       0.5       0.6       0.6       0.7       22.9
            Lower of cost or market...........     0.4      0.4      0.4       0.5       0.5      0.1       0.1       0.1       0.1       0.1        2.7
            Specific identification for          (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
             homogeneous products.............
        Exclusion of gain or loss on sale or     (\3\)    (\3\)    (\3\)     (\3\)     (\3\)  ........  ........  ........  ........  .......        0.1
         exchange of brownfield property......
        Income recognition rule for gain or      (\3\)    (\3\)    (\3\)     (\3\)     (\3\)      0.8       0.8       0.8       0.8       0.9        4.4
         loss from section 1256 contracts.....
        Net alternative minimum tax               -0.5     -0.5     -0.5      -0.5      -0.5     -0.1      -0.1      -0.1      -0.1      -0.1       -3.0
         attributable to net operating loss
         limitation*..........................
        Exclusion of interest on State and       (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
         local qualified private activity
         bonds for green buildings and
         sustainable design projects..........
        Depreciation of buildings other than       0.2      0.2      0.2       0.2       0.2      0.1       0.2       0.2       0.2       0.2        1.9
         rental housing in excess of
         alternative depreciation system......
        Depreciation of equipment in excess of    24.1      6.5     -5.0       0.8      10.7      4.3       1.2      -0.9       0.1       1.9       43.7
         the alternative depreciation system
         \7\..................................
        Inclusion of income arising from          21.1      6.9      0.5       0.3     (\3\)      1.7       0.5     (\3\)     (\3\)     (\3\)       31.0
         business indebtedness discharged by
         the reacquisition of a debt
         instrument...........................
        5-year carryback of general business       1.3     -0.1     -0.1      -0.1      -0.1      0.3     (\8\)     (\8\)     (\8\)     (\8\)        0.9
         credits..............................
    Financial institutions:
        Exemption of credit union income......     0.4      0.3      0.5       0.5       0.7  ........  ........  ........  ........  .......        2.3
    Insurance companies:
        Exclusion of investment income on life     2.5      2.5      2.6       2.6       2.7     25.4      25.7      26.3      27.0      27.7      149.5
         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        2.2      2.3      2.4       2.6       2.7  ........  ........  ........  ........  .......       12.2
         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       0.7      0.7      0.7       0.8       0.7  ........  ........  ........  ........  .......        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       4.2       4.4       4.6       4.8       21.8
     benefits.................................
    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     (\3\)    (\3\)    (\3\)     (\3\)       0.1      0.1       0.1       0.1       0.1       0.1        0.4
     government qualified private activity
     bonds for highway projects and rail-truck
     transfer facilities......................
    Exclusion of employer-provided transit and  .......  .......  .......  ........  .......      0.7       0.8       0.8       0.9       0.9        4.0
     vanpool benefits.........................
    High-speed intercity rail vehicle speed      (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
     requirement for exempt high-speed rail
     facility bonds...........................
    Exclusion of interest on State and local       0.2      0.2      0.2       0.3       0.3      0.5       0.6       0.6       0.7       0.7        4.2
     government qualified private activity
     bonds for private airports, docks, and
     mass-commuting facilities................
Community and Regional Development
    Empowerment zone tax incentives...........     0.2      0.2      0.1     (\3\)     (\3\)      0.3       0.2       0.1     (\3\)     (\3\)        1.3
    Renewal community incentives..............   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)      0.2       0.1       0.1       0.1       0.1        1.0
    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    (\3\)    (\3\)     (\3\)     (\3\)      0.2       0.1       0.1       0.1       0.1        0.7
    Credit for Indian reservation employment..   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
    Exclusion of interest on State and local       0.1      0.1      0.1       0.1       0.1      0.2       0.3       0.3       0.3       0.3        1.9
     government qualified private activity
     bonds for sewage, water, and hazardous
     waste facilities.........................
    Issuance of recovery zone economic           (\3\)      0.1      0.1       0.1       0.1    (\3\)       0.1       0.1       0.1       0.1        0.7
     development bonds........................
    Issuance of tribal economic development      (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
     bonds....................................
    Build America bonds \5\...................     0.2      0.5      0.8       0.8       0.8      0.7       1.5       2.3       2.3       2.3       12.0
    Eliminate requirement that financial           0.2      0.3      0.3       0.3       0.3  ........  ........  ........  ........  .......        1.6
     institutions allocate interest expense
     attributable to tax-exempt interest......
    Disaster Relief:
        Gulf opportunity zone.................     0.1    (\3\)    (\3\)     (\3\)     (\3\)      0.6       0.4       0.3       0.2       0.2        1.9
        Midwest disaster relief...............     0.2      0.2      0.3       0.3       0.3      0.9       0.1       0.1       0.1       0.2        2.7
        National disaster relief..............     0.2      0.1    (\3\)     (\3\)     (\3\)      0.2       0.2       0.1     (\3\)     (\3\)        0.8
Education, Training, Employment, and Social
 Services
    Education and training:
        Deduction for interest on student       .......  .......  .......  ........  .......      0.9       0.5       0.4       0.5       0.5        2.8
         loans................................
        Deduction for higher education          .......  .......  .......  ........  .......      0.1   ........  ........  ........  .......        0.1
         expenses.............................
        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    .......  .......  .......  ........  .......    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
         savings bonds........................
        Exclusion of scholarship and            .......  .......  .......  ........  .......      2.1       2.2       2.4       2.5       2.7       11.9
         fellowship income....................
        Exclusion of income attributable to     .......  .......  .......  ........  .......      0.1       0.1       0.1       0.1       0.1        0.5
         the discharge of certain student loan
         debt and NHSC and certain state
         educational loan repayments..........
        Exclusion of employer-provided          .......  .......  .......  ........  .......      0.9       0.9       0.9       0.9       1.0        4.5
         education 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         .......  .......  .......  ........  .......      1.3       2.3       2.4       2.2       2.1       10.4
         students aged 19 to 23...............
        Exclusion of interest on State and         0.1      0.1      0.1       0.2       0.2      0.3       0.4       0.4       0.4       0.4        2.6
         local government qualified private
         activity bonds for student loans.....
        Exclusion of interest on State and         0.7      0.8      0.9       1.0       1.0      1.9       2.2       2.3       2.5       2.6       16.0
         local government qualified private
         activity bonds for private nonprofit
         and qualified public educational
         facilities...........................
        Credit for holders of qualified zone       0.2      0.3      0.3       0.3       0.3  ........  ........  ........  ........  .......        1.4
         academy bonds........................
        Deduction for charitable contributions     0.4      0.4      0.4       0.4       0.4      5.1       6.0       6.5       6.8       7.1       33.3
         to educational institutions..........
        Deduction for teacher classroom         .......  .......  .......  ........  .......    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
         expenses.............................
        Credits for tuition for post-secondary
         education:
            Hope credit \5\...................  .......  .......  .......  ........  .......      9.6       4.7       3.0       3.0       2.9       23.1
            Lifetime learning credit..........  .......  .......  .......  ........  .......      2.3       3.0       3.2       3.2       3.1       14.7
        Exclusion of tax on earnings of
         qualified tuition programs:
            Prepaid tuition programs..........  .......  .......  .......  ........  .......    (\3\)       0.1       0.1       0.1       0.1        0.4
            Savings account programs..........  .......  .......  .......  ........  .......      0.4       0.5       0.6       0.7       0.8        2.9
        Qualified school construction bonds...   (\3\)      0.1      0.2       0.3       0.4      0.1       0.3       0.5       0.6       0.7        3.3
    Employment:
        Exclusion of employee meals and         .......  .......  .......  ........  .......      1.0       1.1       1.1       1.2       1.2        5.6
         lodging (other than military)........
        Exclusion of benefits provided under    .......  .......  .......  ........  .......     26.4      29.3      32.3      36.1      39.0      163.1
         cafeteria plans \9\..................
        Exclusion of housing allowances for     .......  .......  .......  ........  .......      0.6       0.7       0.7       0.7       0.7        3.4
         ministers............................
        Exclusion of miscellaneous fringe       .......  .......  .......  ........  .......      6.6       7.5       8.0       8.2       8.5       38.7
         benefits.............................
        Exclusion of employee awards..........  .......  .......  .......  ........  .......      0.3       0.4       0.4       0.4       0.4        1.8
        Exclusion of income earned by           .......  .......  .......  ........  .......      3.2       3.8       4.2       4.4       4.6       20.2
         voluntary employees' beneficiary
         associations.........................
        Special tax provisions for employee        0.9      1.0      1.1       1.2       1.3      0.5       0.5       0.5       0.5       2.5        8.0
         stock ownership plans (ESOPs)........
        Deferral of taxation on spread on         -1.0     -1.0     -1.1      -1.2      -1.2      0.4       0.3       0.3       0.3       0.3       -4.9
         acquisition of stock under incentive
         stock option plans*..................
        Deferral of taxation on spread on         -0.1     -0.1     -0.1      -0.2      -0.2    (\3\)     (\3\)     (\3\)       0.1       0.1       -0.5
         employee stock purchase plans*.......
        Disallowance of deduction for excess      -0.2     -0.2     -0.2      -0.2      -0.2  ........  ........  ........  ........  .......       -1.0
         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) \10\*..................
        Limits on deductible compensation         -0.6     -0.6     -0.6      -0.7      -0.8  ........  ........  ........  ........  .......       -3.3
         \11\*................................
        Work opportunity tax credit...........     0.5      0.5      0.3       0.1       0.1      0.1       0.1       0.1     (\3\)   .......        1.8
        Credit for retention of certain newly   .......     1.7      0.9       0.3       0.2  ........      1.5       0.6   ........  .......        5.3
         hired workers........................
    Social services:
        Credit for children under age 17 \5\..  .......  .......  .......  ........  .......     55.1      24.7      14.2      14.0      13.9      121.9
        Credit for child and dependent care     .......  .......  .......  ........  .......      3.1       2.5       2.5       2.5       2.5       13.1
         and exclusion of employer-provided
         child care \12\......................
        Credit for employer-provided dependent   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
         care.................................
        Exclusion of certain foster care        .......  .......  .......  ........  .......      0.4       0.4       0.4       0.4       0.4        2.1
         payments.............................
        Adoption credit and employee adoption   .......  .......  .......  ........  .......      0.5       1.0     (\3\)     (\3\)     (\3\)        1.6
         benefits exclusion...................
        Deduction for charitable                   1.0      1.0      1.0       1.1       1.1     29.2      34.5      37.8      39.6      41.3      187.5
         contributions, other than for
         education and health \13\............
        Credit for disabled access               (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.4
         expenditures.........................
Health
    Exclusion of employer contributions for     .......  .......  .......  ........  .......    105.7     117.3     128.0     147.4     161.0      659.4
     health care, health insurance premiums,
     and long-term care insurance premiums
     \14\.....................................
    Exclusion of medical care and TRICARE       .......  .......  .......  ........  .......      2.3       2.5       2.6       2.8       2.9       13.1
     medical insurance for military
     dependents, retirees, and retiree
     dependents not enrolled in Medicare......
    Exclusion of health insurance benefits for  .......  .......  .......  ........  .......      1.4       1.7       1.9       2.1       2.3        9.5
     military retirees and retiree dependents
     enrolled in Medicare.....................
    Deduction for health insurance premiums     .......  .......  .......  ........  .......      4.6       5.1       5.5       6.1       6.6       27.9
     and long-term care insurance premiums by
     the self-employed........................
    Deduction for medical expenses and long-    .......  .......  .......  ........  .......     10.8      13.5      16.1      17.5      19.6       77.6
     term care expenses.......................
    Exclusion of workers' compensation          .......  .......  .......  ........  .......      3.0       3.2       3.5       3.7       4.0       17.4
     benefits (medical benefits)..............
    Health savings accounts...................  .......  .......  .......  ........  .......      0.9       1.2       1.6       2.1       2.1        8.0
    Exclusion of interest on State and local       0.5      0.6      0.6       0.7       0.7      1.3       1.5       1.6       1.7       1.8       10.8
     government qualified private activity
     bonds for private nonprofit hospital
     facilities...............................
    Deduction for charitable contributions to      1.8      1.8      1.9       1.9       2.0      2.5       3.0       3.3       3.5       3.6       25.3
     health organizations.....................
    Credit for purchase of health insurance by  .......  .......  .......  ........  .......      0.2       0.2       0.1       0.1       0.1        0.8
     certain displaced persons \5\............
    Credit for orphan drug research...........     0.5      0.5      0.6       0.6       0.6    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        2.8
    Premium subsidy for COBRA continuation      .......  .......  .......  ........  .......      4.9       1.2     (\3\)   ........  .......        6.2
     coverage \5\.............................
    Tax credit for small businesses purchasing     0.3      0.6      0.8       0.9       0.7      1.6       3.6       4.4       5.1       4.5       22.6
     employer insurance.......................
    Credits and subsidies for participation in  .......  .......  .......  ........  .......  ........  ........  ........  ........     22.4       22.4
     exchanges \5\............................
Medicare
    Exclusion of Medicare benefits:...........
        Hospital insurance (Part A)...........  .......  .......  .......  ........  .......     28.6      33.6      35.9      37.8      39.9      175.8
        Supplementary medical insurance (Part   .......  .......  .......  ........  .......     20.5      23.4      24.4      27.2      29.0      124.5
         B)...................................
        Prescription drug insurance (Part D)..  .......  .......  .......  ........  .......      5.5       6.6       6.7       7.7       8.7       35.1
        Exclusion of certain subsidies to          0.4      0.5      0.5       0.3   .......  ........  ........  ........  ........  .......        1.7
         employers who maintain prescription
         drug plans for Medicare enrollees....
Income Security
    Exclusion of workers' compensation          .......  .......  .......  ........  .......      3.4       3.7       3.9       4.1       4.4       19.5
     benefits (disability and survivors
     payments)................................
    Exclusion of damages on account of          .......  .......  .......  ........  .......      1.5       1.6       1.6       1.6       1.6        7.9
     personal physical injuries or physical
     sickness.................................
    Exclusion of special benefits for disabled  .......  .......  .......  ........  .......    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
     coal miners..............................
    Exclusion of cash public assistance         .......  .......  .......  ........  .......      3.1       3.4       4.4       4.9       5.0       20.8
     benefits.................................
    Net exclusion of pension contributions and
     earnings \6\:
        Plans covering partners and sole        .......  .......  .......  ........  .......     12.4      15.7      17.0      17.7      18.2       81.1
         proprietors (sometimes referred to as
         ``Keogh plans'').....................
        Defined benefit plans.................  .......  .......  .......  ........  .......     38.9      51.9      62.0      75.8      74.6      303.2
        Defined contribution plans............  .......  .......  .......  ........  .......     32.5      38.2      44.1      49.1      48.3      212.2
    Individual retirement arrangements:
        Traditional IRAs......................  .......  .......  .......  ........  .......     20.1      12.3      13.2      18.4      21.6       85.6
        Roth IRAs.............................  .......  .......  .......  ........  .......      3.4       4.0       4.8       5.4       6.3       23.9
        Credit for certain individuals for      .......  .......  .......  ........  .......      0.9       1.0       1.1       1.0       1.0        5.0
         elective deferrals and IRA
         contributions........................
    Exclusion of other employee benefits:
        Premiums on group term life insurance   .......  .......  .......  ........  .......      1.5       1.6       1.7       1.8       1.9        8.5
         (excludes payroll taxes).............
        Premiums on accident and disability     .......  .......  .......  ........  .......      3.2       3.4       3.6       3.7       3.8       17.8
         insurance............................
    Additional standard deduction for the       .......  .......  .......  ........  .......      1.8       2.2       2.7       2.8       3.0       12.4
     blind and the elderly....................
    Deduction for casualty and theft losses...  .......  .......  .......  ........  .......      0.2       0.3       0.3       0.3       0.3        1.4
    Earned income credit \5\..................  .......  .......  .......  ........  .......     56.2      52.4      52.5      53.6      54.0      268.8
    Phase out of the personal exemption for     .......  .......  .......  ........  .......    -30.6     -41.1     -33.5     -38.6     -42.7     -186.5
     the regular income tax, and disallowance
     of the personal exemption and the
     standard deduction against the
     alternative minimum tax*.................
    Exclusion of survivor annuities paid to     .......  .......  .......  ........  .......    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.1
     families of public safety officers killed
     in the line of duty......................
    Exclusion of disaster mitigation payments.   (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)     (\3\)     (\3\)        0.2
    Making work pay credit \5\................  .......  .......  .......  ........  .......     59.7      15.5   ........  ........  .......       75.3
Social Security and Railroad Retirement
    Exclusion of untaxed Social Security and    .......  .......  .......  ........  .......     26.8      33.4      36.0      37.4      39.7      173.0
     railroad retirement benefits.............
Veterans' Benefits and Services
    Exclusion of veterans' disability           .......  .......  .......  ........  .......      4.5       5.9       5.4       5.6       5.7       27.0
     compensation.............................
    Exclusion of veterans' pensions...........  .......  .......  .......  ........  .......      0.1       0.1       0.1       0.1       0.1        0.7
    Exclusion of veterans' readjustment         .......  .......  .......  ........  .......      0.9       1.0       1.3       1.3       1.4        5.8
     benefits.................................
    Exclusion of interest on State and local     (\3\)    (\3\)    (\3\)     (\3\)     (\3\)    (\3\)     (\3\)     (\3\)       0.1       0.1        0.3
     government qualified private activity
     bonds for veterans' housing..............
General Purpose Fiscal Assistance
    Exclusion of interest on public purpose        7.5      8.5      9.0       9.9      10.4     19.3      21.9      23.1      25.3      26.7      161.6
     State and local government bonds.........
    Deduction of nonbusiness State and local    .......  .......  .......  ........  .......     30.7      43.6      50.6      54.1      58.3      237.3
     government income taxes, sales taxes, and
     personal property taxes..................
Interest
    Deferral of interest on savings bonds.....  .......  .......  .......  ........  .......      1.3       1.4       1.4       1.5       1.5        7.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
Footnotes for Table 1 appear on the following pages.

   \1\ Reflects legislation enacted by December 15, 2010.
  \2\ Does not include provision that permits look-through of payments between related foreign corporations.
  \3\ Positive tax expenditure of less than $50 million.
  \4\ 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
 $5.1 billion over the fiscal years 2010 through 2014.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Corporations                                   Individuals
 \5\ Estimate includes refundability associated  ---------------------------------------------------------------------------------------------   Total
       with the following outlay effects:           2010     2011     2012     2013    2014     2010      2011      2012      2013      2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
First-time homebuyer credit.....................  .......  .......  .......  .......  ......      3.4   ........  ........  ........  .......        3.4
Build America bonds.............................     0.2      0.5      0.8      0.8      0.8      0.7       1.5       2.3       2.3       2.3       12.0
Recovery zone bonds.............................   (\3\)      0.1      0.1      0.1      0.1    (\3\)       0.1       0.1       0.1       0.1        0.7
Hope credit.....................................  .......  .......  .......  .......  ......      3.1       0.8   ........  ........  .......        3.9
Credit for children under age 17................  .......  .......  .......  .......  ......     32.7      11.1       4.1       4.2       4.7       56.7
Earned income credit............................  .......  .......  .......  .......  ......     50.9      45.5      44.8      45.5      45.6      232.2
Making work pay credit..........................  .......  .......  .......  .......  ......     19.7       4.7   ........  ........  .......       24.4
Premium subsidy for COBRA continuation coverage.  .......  .......  .......  .......  ......      0.1       0.1     (\3\)   ........  .......        0.3
Credit for health insurance by certain displaced  .......  .......  .......  .......  ......      0.2       0.1       0.1       0.1       0.1        0.6
 persons........................................
Credits and subsidies for participation in        .......  .......  .......  .......  ......  ........  ........  ........  ........     12.6      12.6
 exchanges......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\6\ Pattern differs from tax expenditure calculated in prior pamphlets because of economic conditions in 2008 and 2009.
\7\ Includes bonus depreciation and general acceleration under MACRS.
\8\ Negative tax expenditure of less than $50 million.
\9\ 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.
\10\ Estimate does not include effects of changes made by the Emergency Economic Stabilization Act of 2008.
\11\ Estimate does not include effects of changes made by the Emergency Economic Stabilization Act of 2008. Estimate includes effects of changes made by
  Patient Protection and Affordable Care Act enacted in 2010.
\12\ Estimate includes employer-provided child care purchased through dependent care flexible spending accounts.\13\ 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.
\14\ 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 2010-2014 period.
Source: Joint Committee on Taxation.


   Table 2.--Distribution by Income Class of All Returns, Taxable Returns, Itemized Returns, and Tax Liability
                              at 2009 Rates and 2009 Law and 2009 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...............................................       28,755           23          714     -$13,673
$10,000 to $20,000..........................................       23,161        3,292        1,332      -32,919
$20,000 to $30,000..........................................       18,175        6,756        2,383      -20,347
$30,000 to $40,000..........................................       15,405        8,151        3,565           89
$40,000 to $50,000..........................................       12,770        8,498        4,501       13,512
$50,000 to $75,000..........................................       23,017       16,983       10,711       58,057
$75,000 to $100,000.........................................       14,349       12,334        8,941       71,065
$100,000 to $200,000........................................       16,546       14,802       13,511      197,660
$200,000 and over...........................................        4,700        4,578        4,355      493,551
                                                             ---------------------------------------------------
    Total...................................................      156,877       75,416       50,014     $766,995
----------------------------------------------------------------------------------------------------------------
\1\ Tax law as in effect on December 31, 2009, is applied to the 2009 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 2009 Rates and 2009 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...............................................          225  ...........            1  ...........
$10,000 to $20,000..........................................          525          $32          175          $20
$20,000 to $30,000..........................................          999          165          787          145
$30,000 to $40,000..........................................        1,343          330        1,753          367
$40,000 to $50,000..........................................        1,556          617        2,769          707
$50,000 to $75,000..........................................        3,125        2,129        7,768        2,932
$75,000 to $100,000.........................................        1,807        1,942        7,100        3,318
$100,000 to $200,000........................................        1,504        3,062       11,041        9,583
$200,000 and over...........................................          128        1,057        2,130        4,181
                                                             ---------------------------------------------------
    Total...................................................       11,212       $9,335       33,525      $21,253
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2009 Rates and 2009 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...............................................            7  ...........            3        (\3\)
$10,000 to $20,000..........................................          302          $14          183          $17
$20,000 to $30,000..........................................        1,257           99          885          137
$30,000 to $40,000..........................................        2,441          300        1,820          347
$40,000 to $50,000..........................................        3,630          610        2,851          627
$50,000 to $75,000..........................................        9,439        2,854        7,801        2,616
$75,000 to $100,000.........................................        8,255        3,575        7,071        2,895
$100,000 to $200,000........................................       12,326       12,492       11,427        9,106
$200,000 and over...........................................        3,066       20,101        4,039       19,138
                                                             ---------------------------------------------------
    Total...................................................       40,722      $40,045       36,081      $34,885
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2009 Rates and 2009 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...............................................  ...........  ...........        6,804       $8,138
$10,000 to $20,000..........................................          186          $40        7,484       22,007
$20,000 to $30,000..........................................          743          380        5,578       16,126
$30,000 to $40,000..........................................          752          450        3,922        6,669
$40,000 to $50,000..........................................          567          307        1,599        1,667
$50,000 to $75,000..........................................        1,232          659          299          352
$75,000 to $100,000.........................................          924          513           11           17
$100,000 to $200,000........................................        1,106          584            3            1
$200,000 and over...........................................          226          120  ...........  ...........
                                                             ---------------------------------------------------
    Total...................................................        5,735       $3,052       25,700      $54,977
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2009 Rates and 2009 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...............................................            6        (\3\)        2,807       $1,950
$10,000 to $20,000..........................................        5,709       $1,911        5,556        6,958
$20,000 to $30,000..........................................        3,015        2,512        5,431        8,503
$30,000 to $40,000..........................................        2,757        3,153        4,326        7,479
$40,000 to $50,000..........................................        2,786        3,983        3,255        5,704
$50,000 to $75,000..........................................        6,031        7,641        6,174       10,757
$75,000 to $100,000.........................................        3,443        3,503        4,285        7,395
$100,000 to $200,000........................................        3,339        1,154        3,852        5,581
$200,000 and over...........................................          884          446            5            4
                                                             ---------------------------------------------------
    Total...................................................       27,970      $24,303       35,694      $54,331
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.


              Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items,
                               at 2009 Rates and 2009 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...............................................          590         $471           22           $2
$10,000 to $20,000..........................................          965          614          275           17
$20,000 to $30,000..........................................        1,134          910          635           51
$30,000 to $40,000..........................................        1,031          947          843           83
$40,000 to $50,000..........................................          993          937          771           94
$50,000 to $75,000..........................................        1,800        2,001        1,616          215
$75,000 to $100,000.........................................        1,542        1,839        1,161          136
$100,000 to $200,000........................................        1,317        1,811        1,129          203
$200,000 and over...........................................  ...........  ...........  ...........  ...........
                                                             ---------------------------------------------------
    Total...................................................        9,371       $9,530        6,452         $801
----------------------------------------------------------------------------------------------------------------
Footnotes appear at the end of the table.


   Table 3.--Distribution by Income Class of Selected Individual Tax Expenditure Items, at 2009 Rates and 2009
                                          Income Levels \1\--Continued
                          [Money amounts in millions of dollars, returns in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                 Mortgage  Interest       Phase out of Personal
                                                                      Deduction           Exemption for Regular
                                                             --------------------------   Income Tax; Denial of
                                                                                         Personal Exemption and
                      Income Class \2\                                                   Standard Deduction for
                                                                Returns       Amount               AMT
                                                                                       -------------------------
                                                                                          Returns       Amount
----------------------------------------------------------------------------------------------------------------
Below $10,000...............................................        (\5\)        (\3\)        (\5\)        (\6\)
$10,000 to $20,000..........................................          311          $88            7          -$5
$20,000 to $30,000..........................................        1,000          521        (\5\)        (\6\)
$30,000 to $40,000..........................................        2,023        1,292        (\5\)           -1
$40,000 to $50,000..........................................        2,923        2,329            2           -2
$50,000 to $75,000..........................................        7,603        9,332           34          -30
$75,000 to $100,000.........................................        6,754       10,066           82          -81
$100,000 to $200,000........................................       10,594       30,261          859       -1,024
$200,000 and over...........................................        3,424       22,768        3,543       -8,404
                                                             ---------------------------------------------------
    Total...................................................       34,632      $76,656        4,527      -$9,547
----------------------------------------------------------------------------------------------------------------
\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.

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