TAX EXPENDITURES 

The Congressional Budget Act of 1974 (Public Law 93–344) requires that a list of “tax expenditures’’ be included in the budget. 

Tax expenditures are defined in the law 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.’’ These exceptions may be viewed as alternatives to other policy instruments, such as spending or regulatory programs.

Identification and measurement of tax expenditures depends crucially on the baseline tax system against which the actual tax 

system is compared. The tax expenditure estimates presented in this document are patterned on a comprehensive income tax, which 

defines income as the sum of consumption and the change in net wealth in a given period of time. 

An important assumption underlying each tax expenditure estimate reported below is that other parts of the Tax Code remain 

unchanged. The estimates would be different if tax expenditures were changed simultaneously because of potential interactions among 

provisions. For that reason, this document does not present a grand total for the estimated tax expenditures.

Tax expenditures relating to the individual and corporate income taxes are estimated for fiscal years 2015–2025 using two methods 

of accounting: current revenue effects and present value effects. The present value approach provides estimates of the revenue effects 

for tax expenditures that generally involve deferrals of tax payments into the future.

TAX EXPENDITURES IN THE INCOME TAX

Tax Expenditure Estimates

All tax expenditure estimates presented here are based upon current tax law enacted as of July 1, 2015. In some cases, expired or 

repealed provisions are listed if their revenue effects occur in fiscal year 2015 or later. The estimates are based on the economic 

assumptions from the Mid-Session Review of the 2016 Budget. 

The total revenue effects for tax expenditures for fiscal years 2015–2025 are displayed according to the Budget’s functional 

categories in Table 1. Descriptions of the specific tax expenditure provisions follow the discussion of general features of the tax 

expenditure concept.

Two baseline concepts—the normal tax baseline and the reference tax law baseline—are used to identify and estimate tax 

expenditures.1 For the most part, the two concepts coincide. However, items treated as tax expenditures under the normal tax baseline, 

but not the reference tax law baseline, are indicated by the designation “normal tax method’’ in the tables. The revenue effects for 

these items are zero using the reference tax rules. The alternative baseline concepts are discussed in detail below. 

Tables 2A and 2B report separately the respective portions of the total revenue effects that arise under the individual and corporate 

income taxes. The location of the estimates under the individual and corporate headings does not imply that these categories of filers 

benefit from the special tax provisions in proportion to the respective tax expenditure amounts shown. Rather, these breakdowns show 

the form of tax liability that the various provisions affect. The ultimate beneficiaries of corporate tax expenditures could be 

shareholders, employees, customers, or other providers of capital, depending on economic forces.

Table 3 ranks the major tax expenditures by the size of their 2016–2025 revenue effect. The first column provides the number of 

the provision in order to cross reference this table to Tables 1, 2A, and 2B, as well as to the descriptions below. 

Interpreting Tax Expenditure Estimates

The estimates shown for individual tax expenditures in Tables 1 through 3 do not necessarily equal the increase in Federal revenues 

(or the change in the budget balance) that would result from repealing these special provisions, for the following reasons.

First, eliminating a tax expenditure may have incentive effects that alter economic behavior. These incentives can affect the

resulting magnitudes of the activity or of other tax provisions or Government programs. For example, if capital gains were taxed at 

ordinary rates, capital gain realizations would be expected to decline, resulting in lower tax receipts. Such behavioral effects are not 

reflected in the estimates.

Second, tax expenditures are interdependent even without incentive effects. Repeal of a tax expenditure provision can increase or 

decrease the tax revenues associated with other provisions. For example, even if behavior does not change, repeal of an itemized 

deduction could increase the revenue costs from other deductions because some taxpayers would be moved into higher tax brackets. 

 

1 These baseline concepts are thoroughly discussed in Special Analysis G of the 1985 Budget, where the former is referred to as the pre-1983 method and the latter 

the post-1982 method.

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Alternatively, repeal of an itemized deduction could lower the revenue cost from other deductions if taxpayers are led to claim the 

standard deduction instead of itemizing. Similarly, if two provisions were repealed simultaneously, the increase in tax liability could 

be greater or less than the sum of the two separate tax expenditures, because each is estimated assuming that the other remains in 

force. In addition, the estimates reported in Table 1 are the totals of individual and corporate income tax revenue effects reported in 

Tables 2A and 2B, and do not reflect any possible interactions between individual and corporate income tax receipts. For this reason, 

the estimates in Table 1 should be regarded as approximations.

Present-Value Estimates

The annual value of tax expenditures for tax deferrals is reported on a cash basis in all tables except Table 4. Cash-based estimates 

reflect the difference between taxes deferred in the current year and incoming revenues that are received due to deferrals of taxes from 

prior years. Although such estimates are useful as a measure of cash flows into the Government, they do not accurately reflect the true 

economic cost of these provisions. For example, for a provision where activity levels have changed over time, so that incoming tax 

receipts from past deferrals are greater than deferred receipts from new activity, the cash-basis tax expenditure estimate can be 

negative, despite the fact that in present-value terms current deferrals have a real cost to the Government. Alternatively, in the case of 

a newly enacted deferral provision, a cash-based estimate can overstate the real effect on receipts to the Government because the 

newly deferred taxes will ultimately be received. 

Discounted present-value estimates of revenue effects are presented in Table 4 for certain provisions that involve tax deferrals or 

other long-term revenue effects. These estimates complement the cash-based tax expenditure estimates presented in the other tables.

The present-value estimates represent the revenue effects, net of future tax payments, that follow from activities undertaken during 

calendar year 2015 which cause the deferrals or other long-term revenue effects. For instance, a pension contribution in 2015 would 

cause a deferral of tax payments on wages in 2015 and on pension fund earnings on this contribution (e.g., interest) in later years. In 

some future year, however, the 2015 pension contribution and accrued earnings will be paid out and taxes will be due; these receipts 

are included in the present-value estimate. In general, this conceptual approach is similar to the one used for reporting the budgetary 

effects of credit programs, where direct loans and guarantees in a given year affect future cash flows.

Tax Expenditure Baselines

A tax expenditure is an exception to baseline provisions of the tax structure that usually results in a reduction in the amount of tax 

owed. The 1974 Congressional Budget Act, which mandated the tax expenditure budget, did not specify the baseline provisions of the 

tax law. As noted previously, deciding whether provisions are exceptions, therefore, is a matter of judgment. As in prior years, most of 

this year’s tax expenditure estimates are presented using two baselines: the normal tax baseline and the reference tax law baseline. Tax 

expenditures may take the form of credits, deductions, special exceptions and allowances.

The normal tax baseline is patterned on a practical variant of a comprehensive income tax, which defines income as the sum of

consumption and the change in net wealth in a given period of time. The normal tax baseline allows personal exemptions, a standard 

deduction, and deduction of expenses incurred in earning income. It is not limited to a particular structure of tax rates, or by a specific 

definition of the taxpaying unit.

The reference tax law baseline is also patterned on a comprehensive income tax, but it is closer to existing law. Reference law tax 

expenditures are limited to special exceptions from a generally provided tax rule that serve programmatic functions in a way that is 

analogous to spending programs. Provisions under the reference law baseline are generally tax expenditures under the normal tax 

baseline, but the reverse is not always true.

Both the normal and reference tax baselines allow several major departures from a pure comprehensive income tax. For example,

under the normal and reference tax baselines:

• Income is taxable only when it is realized in exchange. Thus, the deferral of tax on unrealized capital gains is not regarded as 

a tax expenditure. Accrued income would be taxed under a comprehensive income tax.

•There is a separate corporate income tax. 

•Tax rates on noncorporate business income vary by level of income. 

• Individual tax rates, including brackets, standard deduction, and personal exemptions, are allowed to vary with marital status.

•Values of assets and debt are not generally adjusted for inflation. A comprehensive income tax would adjust the cost basis of 

capital assets and debt for changes in the general price level. Thus, under a comprehensive income tax baseline, the failure to 

take account of inflation in measuring depreciation, capital gains, and interest income would be regarded as a negative tax 

expenditure (i.e., a tax penalty), and failure to take account of inflation in measuring interest costs would be regarded as a 

positive tax expenditure (i.e., a tax subsidy).

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Although the reference law and normal tax baselines are generally similar, areas of difference include:

Tax rates. The separate schedules applying to the various taxpaying units are included in the reference law baseline. Thus, 

corporate tax rates below the maximum statutory rate do not give rise to a tax expenditure. The normal tax baseline is similar, except 

that, by convention, it specifies the current maximum rate as the baseline for the corporate income tax. The lower tax rates applied to 

the first $10 million of corporate income are thus regarded as a tax expenditure under the normal tax. By convention, the Alternative 

Minimum Tax is treated as part of the baseline rate structure under both the reference and normal tax methods.

Income subject to the tax. Income subject to tax is defined as gross income less the costs of earning that income. Under the 

reference tax rules, gross income does not include gifts defined as receipts of money or property that are not consideration in an 

exchange nor does gross income include most transfer payments from the Government.2 The normal tax baseline also excludes gifts 

between individuals from gross income. Under the normal tax baseline, however, all cash transfer payments from the Government to 

private individuals are counted in gross income, and exemptions of such transfers from tax are identified as tax expenditures. The 

costs of earning income are generally deductible in determining taxable income under both the reference and normal tax baselines.3

 

Capital recovery. Under the reference tax law baseline no tax expenditures arise from accelerated depreciation. Under the normal 

tax baseline, the depreciation allowance for property is computed using estimates of economic depreciation. 

Treatment of foreign income. Both the normal and reference tax baselines allow a tax credit for foreign income taxes paid (up to the 

amount of U.S. income taxes that would otherwise be due), which prevents double taxation of income earned abroad. Under the 

normal tax method, however, controlled foreign corporations (CFCs) are not regarded as entities separate from their controlling U.S. 

shareholders. Thus, the deferral of tax on income received by CFCs is regarded as a tax expenditure under this method. In contrast, 

except for tax haven activities, the reference law baseline follows current law in treating CFCs as separate taxable entities whose 

income is not subject to U.S. tax until distributed to U.S. taxpayers. Under this baseline, deferral of tax on CFC income is not a tax 

expenditure because U.S. taxpayers generally are not taxed on accrued, but unrealized, income.

Descriptions of Income Tax Provisions

Descriptions of the individual and corporate income tax expenditures reported on in this document follow. These descriptions relate 

to current law as of July 1, 2015. 

National Defense

1. Exclusion of benefits and allowances to armed forces personnel.—Under the baseline tax system, all compensation, 

including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth 

that do not materially differ from cash wages. As an example, a rental voucher of $100 is (approximately) equal in value to $100 of 

cash income. In contrast to this treatment, certain housing and meals, in addition to other benefits provided military personnel, either 

in cash or in kind, as well as certain amounts of pay related to combat service, are excluded from income subject to tax. 

International Affairs

2. Exclusion of income earned abroad by U.S. citizens.—Under the baseline tax system, all compensation received by U.S. 

citizens and residents is properly included in their taxable income. It makes no difference whether the compensation is a result of 

working abroad or whether it is labeled as a housing allowance. In contrast to this treatment, U.S. tax law allows U.S. citizens and 

residents who live abroad, work in the private sector, and satisfy a foreign residency requirement to exclude up to $80,000, plus 

adjustments for inflation since 2004, in foreign earned income from U.S. taxes. In addition, if these taxpayers are provided housing by 

their employers, then they may also exclude the cost of such housing from their income to the extent that it exceeds 16 percent of the 

earned income exclusion limit. This housing exclusion is capped at 30 percent of the earned income exclusion limit, with 

geographical adjustments. If taxpayers do not receive a specific allowance for housing expenses, they may deduct housing expenses 

up to the amount by which foreign earned income exceeds their foreign earned income exclusion.

3. Exclusion of certain allowances for Federal employees abroad.—In general, all compensation received by U.S. citizens and 

residents is properly included in their taxable income. It makes no difference whether the compensation is a result of working abroad 

or whether it is labeled as an allowance for the high cost of living abroad. In contrast to this treatment, U.S. Federal civilian employees 

and Peace Corps members who work outside the continental United States are allowed to exclude from U.S. taxable income certain 

 

2 Gross income does, however, include transfer payments associated with past employment, such as Social Security benefits.

3 In the case of individuals who hold “passive’’ equity interests in businesses, the pro-rata shares of sales and expense deductions reportable in a year are limited. A 

passive business activity is defined generally to be one in which the holder of the interest, usually a partnership interest, does not actively perform managerial or other 

participatory functions. The taxpayer may generally report no larger deductions for a year than will reduce taxable income from such activities to zero. Deductions in 

excess of the limitation may be taken in subsequent years, or when the interest is liquidated. In addition, costs of earning income may be limited under the Alternative 

Minimum Tax.

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special allowances they receive to compensate them for the relatively high costs associated with living overseas. The allowances 

supplement wage income and cover expenses such as rent, education, and the cost of travel to and from the United States.

4. Inventory property sales source rules exception.—The United States generally taxes the worldwide income of U.S. persons 

and business entities. Under the baseline tax system, taxpayers receive a credit for foreign taxes paid which is limited to the pre-credit 

U.S. tax on the foreign source income. In contrast, the sales source rules for inventory property under current law allow U.S. exporters 

to use more foreign tax credits by allowing the exporters to attribute a larger portion of their earnings to foreign sources than would be 

the case if the allocation of earnings was based on actual economic activity.

5. Deferral of income from controlled foreign corporations (normal tax method).—Under the baseline tax system, the United 

States generally taxes the worldwide income of U.S. persons and business entities. In contrast, certain active income of foreign 

corporations controlled by U.S. shareholders is not subject to U.S. taxation when it is earned. The income becomes taxable only when 

the controlling U.S. shareholders receive dividends or other distributions from their foreign stockholding. The reference law tax 

baseline reflects this tax treatment where only realized income is taxed. Under the normal tax method, however, the currently

attributable foreign source pre-tax income from such a controlling interest is considered to be subject to U.S. taxation, whether or not 

distributed. Thus, the normal tax method considers the amount of controlled foreign corporation income not yet distributed to a U.S. 

shareholder as tax-deferred income.

6. Deferred taxes for financial firms on certain income earned overseas.—The United States generally taxes the worldwide 

income of U.S. persons and business entities. The baseline tax system would not allow the deferral of tax or other relief targeted at 

particular industries or activities. In contrast, the Tax Code allowed financial firms to defer taxes on income earned overseas in an 

active business. This provision expired at the end of 2014. 

General Science, Space, and Technology

7. Expensing of research and experimentation expenditures (normal tax method).—The baseline tax system allows a 

deduction for the cost of producing income. It requires taxpayers to capitalize the costs associated with investments over time to better 

match the streams of income and associated costs. Research and experimentation (R&E) projects can be viewed as investments 

because, if successful, their benefits accrue for several years. It is often difficult, however, to identify whether a specific R&E project 

is successful and, if successful, what its expected life will be. Because of this ambiguity, the reference law baseline tax system would 

allow expensing of R&E expenditures. In contrast, under the normal tax method, the expensing of R&E expenditures is viewed as a 

tax expenditure. The baseline assumed for the normal tax method is that all R&E expenditures are successful and have an expected life 

of five years.

8. Credit for increasing research activities.—The baseline tax system would uniformly tax all returns to investments and not 

allow credits for particular activities, investments, or industries. In contrast, the Tax Code allowed an R&E credit of up to 20 percent 

of qualified research expenditures in excess of a base amount. The base amount of the credit was generally determined by multiplying 

a “fixed-base percentage” by the average amount of the company’s gross receipts for the prior four years. The taxpayer’s fixed base 

percentage generally was the ratio of its research expenses to gross receipts for 1984 through 1988. Taxpayers could elect the 

alternative simplified credit regime, which equaled 14 percent of qualified research expenses that exceeded 50 percent of the average 

qualified research expenses for the three preceding taxable years. The credit does not apply to expenses paid or incurred after 

December 31, 2014. 

Energy

9. Expensing of exploration and development costs.—Under the baseline tax system, the costs of exploring and developing oil 

and gas wells would be capitalized and then amortized (or depreciated) over an estimate of the economic life of the well. This insures 

that the net income from the well is measured appropriately each year. 

In contrast to this treatment, current law allows intangible drilling costs for successful investments in domestic oil and gas wells 

(such as wages, the cost of using machinery for grading and drilling, and the cost of unsalvageable materials used in constructing 

wells) to be deducted immediately, i.e., expensed. Because it allows recovery of costs sooner, expensing is more generous for the 

taxpayer than would be amortization. Integrated oil companies may deduct only 70 percent of such costs and must amortize the 

remaining 30 percent over five years. Non-integrated oil companies may expense all such costs. The same rule applies to the 

exploration and development costs of surface stripping and the construction of shafts and tunnels for other fuel minerals.

10. Excess of percentage over cost depletion.—The baseline tax system would allow recovery of the costs of developing certain 

oil and mineral properties using cost depletion. Cost depletion is similar in concept to depreciation, in that the costs of developing or 

acquiring the asset are capitalized and then gradually reduced over an estimate of the asset’s economic life, as is appropriate for 

measuring net income.

In contrast, the Tax Code generally allows independent fuel and mineral producers and royalty owners to take percentage depletion 

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deductions rather than cost depletion on limited quantities of output. Under percentage depletion, taxpayers deduct a percentage of 

gross income from mineral production. In certain cases the deduction is limited to a fraction of the asset’s net income. Over the life of 

an investment, percentage depletion deductions can exceed the cost of the investment. Consequently, percentage depletion offers more 

generous tax treatment than would cost depletion, which would limit deductions to an investment’s cost. 

11. Exception from passive loss limitation for working interests in oil and gas properties.—The baseline tax system accepts 

current law’s general rule limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., wages, 

interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate, and 

there are numerous additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. 

Losses are limited in an attempt to limit tax sheltering activities. Passive losses that are unused may be carried forward and applied 

against future passive income. 

An exception from the passive loss limitation is provided for a working interest in an oil or gas property that the taxpayer holds 

directly or through an entity that does not limit the liability of the taxpayer with respect to the interest. Thus, taxpayers can deduct 

losses from such working interests against nonpassive income without regard to whether they materially participate in the activity. 

12. Capital gains treatment of royalties on coal.—The baseline tax system generally would tax all income under the regular tax 

rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. For individuals, tax rates 

on regular income vary from 10 percent to 39.6 percent (plus a 3.8-percent surtax on high income taxpayers), depending on the 

taxpayer’s income. In contrast, current law allows capital gains realized by individuals to be taxed at a preferentially low rate that is no 

higher than 20 percent (plus the 3.8-percent surtax). Certain sales of coal under royalty contracts qualify for taxation as capital gains 

rather than ordinary income, and so benefit from the preferentially low 20 percent maximum tax rate on capital gains. 

13. Exclusion of interest on energy facility bonds.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, 

the Tax Code allows interest earned on State and local bonds used to finance construction of certain energy facilities to be exempt 

from tax. These bonds are generally subject to the State private-activity-bond annual volume cap.

14. Energy production credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code 

provides a credit for certain electricity produced from wind energy, biomass, geothermal energy, solar energy, small irrigation power, 

municipal solid waste, or qualified hydropower and sold to an unrelated party. Qualified facilities must have begun construction 

before January 1, 2015. In addition to the electricity production credit, an income tax credit is allowed for the production of refined 

coal for facilities placed in service before January 1, 2012. The Tax Code also provided an income tax credit for Indian coal facilities 

placed in service before January 1, 2009. The Indian coal facilities credit expired on December 31, 2014. 

15. Energy investment credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. However, the Tax Code 

provides credits for investments in solar and geothermal energy property, qualified fuel cell power plants, stationary microturbine 

power plants, geothermal heat pumps, small wind property and combined heat and power property. A temporary credit of up to 30 

percent is available for qualified property placed in service before January 1, 2017. A permanent 10 percent credit is available for 

qualified solar and geothermal property placed in service after this date. Owners of renewable power facilities that qualify for the 

energy production credit may instead elect to take an energy investment credit.

16. Alcohol fuel credits.—The baseline tax system would not allow credits for particular activities, investments, or industries. 

Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provided an 

income tax credit for qualified cellulosic biofuel production which was renamed the Second generation biofuel producer credit. This 

provision expired on December 31, 2014. 

17. Bio-diesel and small agri-biodiesel producer tax credits.—The baseline tax system would not allow credits for particular 

activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. 

However, the Tax Code allowed an income tax credit for Bio-diesel and for Bio-diesel derived from virgin sources. In lieu of the Biodiesel credit, the taxpayer could claim a refundable excise tax credit. In addition, small agri-biodiesel producers were eligible for a 

separate income tax credit for biodiesel production and a separate credit was available for qualified renewable diesel fuel mixtures. 

This provision expired on December 31, 2014. 

18. Tax credits for clean-fuel burning vehicles and refueling property.—The baseline tax system would not allow credits for 

particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like 

activities. In contrast, the Tax Code allows a credit for plug-in electric-drive motor vehicles. Credits for alternative fuel vehicle 

refueling property and fuel cell vehicles expired on December 31, 2014. 

19. Exclusion of utility conservation subsidies.—The baseline tax system generally takes a comprehensive view of taxable 

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income that includes a wide variety of (measurable) accretions to wealth. In certain circumstances, public utilities offer rate subsidies 

to non-business customers who invest in energy conservation measures. These rate subsidies are equivalent to payments from the 

utility to its customer, and so represent accretions to wealth, income that would be taxable to the customer under the baseline tax 

system. In contrast, the Tax Code exempts these subsidies from the non-business customer’s gross income.

20. Credit for holding clean renewable energy bonds.—The baseline tax system would uniformly tax all returns to investments 

and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides for the issuance of Clean 

Renewable Energy Bonds which entitles the bond holder to a Federal income tax credit in lieu of interest. As of March 2010, issuers 

of the unused authorization of such bonds could opt to receive direct payment with the yield becoming fully taxable.

21. Deferral of gain from dispositions of transmission property to implement FERC restructuring policy.—The baseline tax 

system generally would tax gains from sale of property when realized. It would not allow an exception for particular activities or 

individuals. However, the Tax Code allowed electric utilities to defer gains from the sale of their transmission assets to a FERCapproved independent transmission company. The sale of property must have been made prior to January 1, 2015. 

22. Credit for investment in clean coal facilities.—The baseline tax system would uniformly tax all returns to investments and 

not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides investment tax credits for clean 

coal facilities producing electricity and for industrial gasification combined cycle projects. 

23. Temporary 50 percent expensing for equipment used in the refining of liquid fuels.—The baseline tax system allows the

taxpayer to deduct the decline in the economic value of an investment over its economic life. However, the Tax Code provided for an 

accelerated recovery of the cost of certain investments in refineries by allowing partial expensing of the cost, thereby giving such 

investments a tax advantage. Qualified refinery property must have been placed in service before January 1, 2014.

24. Natural gas distribution pipelines treated as 15-year property.—The baseline tax system allows taxpayers to deduct the 

decline in the economic value of an investment over its economic life. However, the Tax Code allows depreciation of natural gas 

distribution pipelines (placed in service between 2005 and 2011) over a 15 year period. These deductions are accelerated relative to 

deductions based on economic depreciation.

25. Amortize all geological and geophysical expenditures over two years.—The baseline tax system allows taxpayers to deduct 

the decline in the economic value of an investment over its economic life. However, the Tax Code allows geological and geophysical 

expenditures incurred in connection with oil and gas exploration in the United States to be amortized over two years for non-integrated 

oil companies, a span of time that is generally shorter than the economic life of the assets.

26. Allowance of deduction for certain energy efficient commercial building property.—The baseline tax system would not 

allow deductions in addition to normal depreciation allowances for particular investments in particular industries. Instead, it generally 

would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code allowed a deduction, per square foot, 

for certain energy efficient commercial buildings. This provision expired on December 31, 2014. 

27. Credit for construction of new energy efficient homes.—The baseline tax system would not allow credits for particular 

activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. 

However, the Tax Code allowed contractors a tax credit of $2,000 for the construction of a qualified new energy-efficient home that 

had an annual level of heating and cooling energy consumption at least 50 percent below the annual consumption under the 2006

International Energy Conservation Code. The credit equaled $1,000 in the case of a new manufactured home that met a 30 percent 

standard or requirements for EPA's Energy Star homes. This provision expired on December 31, 2014. 

28. Credit for energy efficiency improvements to existing homes.—The baseline tax system would not allow credits for 

particular activities, investments, or industries. However, the Tax Code provided an investment tax credit for expenditures made on 

insulation, exterior windows, and doors that improved the energy efficiency of homes and met certain standards. The Tax Code also 

provided a credit for purchases of advanced main air circulating fans, natural gas, propane, or oil furnaces or hot water boilers, and 

other qualified energy efficient property. This provision expired on December 31, 2014. 

29. Credit for residential energy efficient property.—The baseline tax system would uniformly tax all returns to investments and 

not allow credits for particular activities, investments, or industries. However, the Tax Code provides a credit for the purchase of a 

qualified photovoltaic property and solar water heating property, as well as for fuel cell power plants, geothermal heat pumps and 

small wind property.

30. Credit for qualified energy conservation bonds.—The baseline tax system would uniformly tax all returns to investments 

and not allow credits for particular activities, investments, or industries. However, the Tax Code provides for the issuance of energy 

conservation bonds which entitle the bond holder to a Federal income tax credit in lieu of interest. As of March 2010, issuers of the 

unused authorization of such bonds could opt to receive direct payment with the yield becoming fully taxable.

31. Advanced energy property credit.—The baseline tax system would not allow credits for particular activities, investments, or 

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industries. However, the Tax Code provides a 30 percent investment credit for property used in a qualified advanced energy 

manufacturing project. The Treasury Department may award up to $2.3 billion in tax credits for qualified investments. 

32. Advanced nuclear power facilities production credit.—The baseline tax system would not allow credits or deductions for 

particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like 

activities. In contrast, the Tax Code allows a tax credit equal to 1.8 cents times the number of kilowatt hours of electricity produced at 

a qualifying advanced nuclear power facility. A taxpayer may claim no more than $125 million per 1,000 megawatts of capacity. The 

Treasury Department may allocate up to 6,000 megawatts of credit-eligible capacity.

33. Reduced tax rate for nuclear decommissioning funds.—The baseline tax system would uniformly tax all returns to 

investments and not allow special rates for particular activities, investments, or industries. In contrast, the Tax Code provides a special 

20% tax rate for investments made by Nuclear Decommissioning Reserve Funds.

Natural Resources and Environment

34. Expensing of exploration and development costs.—The baseline tax system allows the taxpayer to deduct the depreciation 

of an asset according to the decline in its economic value over time. However, certain capital outlays associated with exploration and 

development of nonfuel minerals may be expensed rather than depreciated over the life of the asset.

35. Excess of percentage over cost depletion.—The baseline tax system allows the taxpayer to deduct the decline in the 

economic value of an investment over time. Under current law, however, most nonfuel mineral extractors may use percentage 

depletion (whereby the deduction is fixed as a percentage of revenue) rather than cost depletion, with percentage depletion rates 

ranging from 22 percent for sulfur to 5 percent for sand and gravel. Over the life of an investment, percentage depletion deductions 

can exceed the cost of the investment. Consequently, percentage depletion offers more generous tax treatment than would cost 

depletion, which would limit deductions to an investment’s cost.

36. Exclusion of interest on bonds for water, sewage, and hazardous waste facilities.—The baseline tax system generally 

would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain 

types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance construction of 

sewage, water, or hazardous waste facilities to be exempt from tax. These bonds are generally subject to the State private-activitybond annual volume cap.

37. Capital gains treatment of certain timber.—The baseline tax system generally would tax all income under the regular tax 

rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. However, under current 

law certain timber sales can be treated as a capital gain rather than ordinary income and therefore subject to the lower capital-gains tax 

rate. For individuals, tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8-percent surtax on high income 

taxpayers), depending on the taxpayer’s income. In contrast, current law allows capital gains to be taxed at a preferentially low rate 

that is no higher than 20 percent (plus the 3.8-percent surtax). 

38. Expensing of multi-period timber growing costs.—The baseline tax system requires the taxpayer to capitalize costs 

associated with investment property. However, most of the production costs of growing timber may be expensed under current law 

rather than capitalized and deducted when the timber is sold, thereby accelerating cost recovery.

39. Tax incentives for preservation of historic structures.—The baseline tax system would not allow credits for particular 

activities, investments, or industries. However, expenditures to preserve and restore certified historic structures qualify for an 

investment tax credit of 20 percent under current law for certified rehabilitation activities. The taxpayer’s recoverable basis must be 

reduced by the amount of the credit. 

40. Industrial CO2 capture and sequestration tax credit.—The baseline tax system would uniformly tax all returns to 

investments and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code allows a credit for 

qualified carbon dioxide captured at a qualified facility and disposed of in secure geological storage. In addition, the provision allows 

a credit for qualified carbon dioxide that is captured at a qualified facility and used as a tertiary injectant in a qualified enhanced oil or 

natural gas recovery project.

41. Deduction for endangered species recovery expenditures.—The baseline tax system would not allow deductions in addition 

to normal depreciation allowances for particular investments in particular industries. Instead, it generally would seek to tax uniformly 

all returns from investment-like activities. In contrast, under current law farmers can deduct up to 25 percent of their gross income for 

expenses incurred as a result of site and habitat improvement activities that will benefit endangered species on their farm land, in 

accordance with site specific management actions included in species recovery plans approved pursuant to the Endangered Species 

Act of 1973.

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Agriculture

42. Expensing of certain capital outlays.—The baseline tax system requires the taxpayer to capitalize costs associated with 

investment property. However, farmers may expense certain expenditures for feed and fertilizer, for soil and water conservation 

measures and certain other capital improvements under current law.

43. Expensing of certain multiperiod production costs.—The baseline tax system requires the taxpayer to capitalize costs 

associated with an investment over time. However, the production of livestock and crops with a production period greater than two 

years (e.g., establishing orchards or constructing barns) is exempt from the uniform cost capitalization rules, thereby accelerating cost 

recovery.

44. Treatment of loans forgiven for solvent farmers.—Because loan forgiveness increases a debtors net worth the baseline tax 

system requires debtors to include the amount of loan forgiveness as income or else reduce their recoverable basis in the property 

related to the loan. If the amount of forgiveness exceeds the basis, the excess forgiveness is taxable if the taxpayer is not insolvent. For 

bankrupt debtors, the amount of loan forgiveness reduces carryover losses, unused credits, and then basis, with the remainder of the 

forgiven debt excluded from taxation. Qualified farm debt that is forgiven, however, is excluded from income even when the taxpayer 

is solvent.

45. Capital gains treatment of certain income.—For individuals, tax rates on regular income vary from 10 percent to 39.6 

percent (plus a 3.8-percent surtax on high income taxpayers), depending on the taxpayer’s income. The baseline tax system generally 

would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or 

sources of income. In contrast, current law allows capital gains to be taxed at a preferentially low rate that is no higher than 20 percent

(plus the 3.8-percent surtax). Certain agricultural income, such as unharvested crops, qualify for taxation as capital gains rather than 

ordinary income, and so benefit from the preferentially low 20 percent maximum tax rate on capital gains. 

46. Income averaging for farmers.—The baseline tax system generally taxes all earned income each year at the rate determined 

by the income tax. However, taxpayers may average their taxable income from farming and fishing over the previous three years.

47. Deferral of gain on sales of farm refiners.—The baseline tax system generally subjects capital gains to taxes the year that 

they are realized. However, the Tax Code allows a taxpayer who sells stock in a farm refiner to a farmers’ cooperative to defer 

recognition of the gain if the proceeds are re-invested in a qualified replacement property.

48. Expensing of reforestation expenditures.—The baseline tax system requires the taxpayer to capitalize costs associated with 

an investment over time. In contrast, the Tax Code provides for the expensing of the first $10,000 in reforestation expenditures with 7-

year amortization of the remaining expenses.

Commerce and Housing

This category includes a number of tax expenditure provisions that also affect economic activity in other functional categories. For 

example, provisions related to investment, such as accelerated depreciation, could be classified under the energy, natural resources and 

environment, agriculture, or transportation categories. 

49. Exemption of credit union income.—Under the baseline tax system, corporations pay taxes on their profits under the regular 

tax rate schedule. However, in the Tax Code the earnings of credit unions not distributed to members as interest or dividends are 

exempt from the income tax.

50. Exclusion of interest on life insurance savings.— Under the baseline tax system, individuals and corporations generally pay 

taxes on their income when it is (actually or constructively) received or accrued, depending on their method of accounting. 

Nevertheless, the Tax Code provides favorable tax treatment for investment income earned within qualified life insurance and annuity 

contracts. In general, investment income earned on qualified life insurance contracts held until death is permanently exempt from 

income tax. Investment income distributed prior to the death of the insured is tax-exempt to the extent that investment in the contract 

is overstated (because premiums paid for the cost of life insurance protection are credited to investment in the contract).The remaining 

distributed amounts are tax-deferred because income is not taxed on a current basis, but is recognized only when distributed from the 

contract. Investment income earned on annuities benefits from tax deferral.

51. Special alternative tax on small property and casualty insurance companies.—Under the baseline tax system, corporations 

pay taxes on their profits under the regular tax rate schedule. The baseline tax system would not allow preferentially low (or zero) tax 

rates to apply to certain types or sources of income. Under current law, however, stock non-life insurance companies are generally 

exempt from tax if their gross receipts for the taxable year do not exceed $600,000 and more than 50 percent of such gross receipts 

consist of premiums. Mutual non-life insurance companies are generally tax-exempt if their annual gross receipts do not exceed 

$150,000 and more than 35 percent of gross receipts consist of premiums. Also, non-life insurance companies with no more than $1.2 

million of annual net premiums may elect to pay tax only on their taxable investment income.

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52. Tax exemption of certain insurance companies owned by tax-exempt organizations.—Under the baseline tax system, 

corporations pay taxes on their profits under the regular tax rate schedule. The baseline tax system would not allow preferentially low 

(or zero) tax rates to apply to certain types or sources of income. Generally the income generated by life and property and casualty 

insurance companies is subject to tax, albeit by special rules. Insurance operations conducted by such exempt organizations as 

fraternal societies, voluntary employee benefit associations, and others, however, are exempt from tax.

53. Small life insurance company deduction.— Under the baseline tax system, corporations pay taxes on their profits under the 

regular tax rate schedule. The baseline tax system would not allow preferentially low (or zero) tax rates to apply to certain types or 

sources of income. However, under current law, small life insurance companies (with gross assets of less than $500 million) can 

deduct 60 percent of the first $3 million of otherwise taxable income. The deduction phases out for otherwise taxable income between 

$3 million and $15 million.

54. Exclusion of interest spread of financial institutions.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. 

Consumers and non-profit organizations pay for some deposit-linked services, such as check cashing, by accepting a below-market 

interest rate on their demand deposits. If they received a market rate of interest on those deposits and paid explicit fees for the 

associated services, they would pay taxes on the full market rate and (unlike businesses) could not deduct the fees. The Government 

thus foregoes tax on the difference between the risk-free market interest rate and below-market interest rates on demand deposits, 

which under competitive conditions should equal the value added of deposit services.

55. Exclusion of interest on owner-occupied mortgage subsidy bonds.—The baseline tax system generally would tax all income 

under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of 

income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance homes purchased by first-time, lowto-moderate-income buyers to be exempt from tax. These bonds are generally subject to the State private-activity-bond annual volume 

cap.

56. Exclusion of interest on rental housing bonds.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, 

the Tax Code allows interest earned on State and local government bonds used to finance multifamily rental housing projects to be 

tax-exempt.

57. Mortgage interest expense on owner-occupied residences.—Under the baseline tax system, expenses incurred in earning 

income would be deductible. However, such expenses would not be deductible when the income or the return on an investment is not 

taxed. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for the value of owner-occupied housing 

services and also allows the owner-occupant to deduct mortgage interest paid on his or her primary residence and one secondary 

residence as an itemized non-business deduction. In general, the mortgage interest deduction is limited to interest on debt no greater 

than the owner’s basis in the residence, and is also limited to interest on debt of no more than $1 million. Interest on up to $100,000 of 

other debt secured by a lien on a principal or second residence is also deductible, irrespective of the purpose of borrowing, provided 

the total debt does not exceed the fair market value of the residence. As an alternative to the deduction, holders of qualified Mortgage 

Credit Certificates issued by State or local governmental units or agencies may claim a tax credit equal to a proportion of their interest 

expense.

58. Deduction for property taxes on real property.—Under the baseline tax system, expenses incurred in earning income would 

be deductible. However, such expenses would not be deductible when the income or the return on an investment is not taxed. In

contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for the value of owner-occupied housing services and 

also allows the owner-occupant to deduct property taxes paid on real property.

59. Deferral of income from installment sales.—The baseline tax system generally would tax all income under the regular tax 

rate schedule. It would not allow preferentially low (or zero) tax rates, or deferral of tax, to apply to certain types or sources of 

income. Dealers in real and personal property (i.e., sellers who regularly hold property for sale or resale) cannot defer taxable income 

from installment sales until the receipt of the loan repayment. Nondealers (i.e., sellers of real property used in their business) are 

required to pay interest on deferred taxes attributable to their total installment obligations in excess of $5 million. Only properties with 

sales prices exceeding $150,000 are includable in the total. The payment of a market rate of interest eliminates the benefit of the tax 

deferral. The tax exemption for nondealers with total installment obligations of less than $5 million is, therefore, a tax expenditure.

60. Capital gains exclusion on home sales.—The baseline tax system would not allow deductions and exemptions for certain 

types of income. In contrast, the Tax Code allows homeowners to exclude from gross income up to $250,000 ($500,000 in the case of 

a married couple filing a joint return) of the capital gains from the sale of a principal residence. To qualify, the taxpayer must have 

owned and used the property as the taxpayer’s principal residence for a total of at least two of the five years preceding the date of sale. 

In addition, the exclusion may not be used more than once every two years.

61. Exclusion of net imputed rental income.—Under the baseline tax system, the taxable income of a taxpayer who is an owner9

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occupant would include the implicit value of gross rental income on housing services earned on the investment in owner-occupied 

housing and would allow a deduction for expenses, such as interest, depreciation, property taxes, and other costs, associated with 

earning such rental income. In contrast, the Tax Code allows an exclusion from taxable income for the implicit gross rental income on 

housing services, while in certain circumstances allows a deduction for some costs associated with such income, such as for mortgage 

interest and property taxes.

62. Exception from passive loss rules for $25,000 of rental loss.—The baseline tax system accepts current law’s general rule 

limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., wages, interest, and dividends). 

Passive activities generally are defined as those in which the taxpayer does not materially participate and there are numerous 

additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. Losses are limited 

in an attempt to limit tax sheltering activities. Passive losses that are unused may be carried forward and applied against future passive 

income. In contrast to the general restrictions on passive losses, the Tax Code exempts certain owners of rental real estate activities 

from “passive income” limitations. The exemption is limited to $25,000 in losses and phases out for taxpayers with income between 

$100,000 and $150,000. 

63. Credit for low-income housing investments.—The baseline tax system would uniformly tax all returns to investments and 

not allow credits for particular activities, investments, or industries. However, under current law taxpayers who invest in certain lowincome housing are eligible for a tax credit. The credit rate is set so that the present value of the credit is equal to 70 percent for new 

construction and 30 percent for (1) housing receiving other Federal benefits (such as tax-exempt bond financing), or (2) substantially 

rehabilitated existing housing. The credit can exceed these levels in certain statutorily defined and State designated areas where 

project development costs are higher. The credit is allowed in equal amounts over 10 years and is generally subject to a volume cap. 

64. Accelerated depreciation on rental housing.—Under an economic income tax, the costs of acquiring a building are 

capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and tear or

obsolescence. This insures that the net income from the rental property is measured appropriately each year. Current law allows 

depreciation that is accelerated relative to economic depreciation. However, the depreciation provisions of the Tax Code are part of 

the reference law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, in contrast, depreciation 

allowances reflect estimates of economic depreciation.

65. Discharge of mortgage indebtedness.—Under the baseline tax system, all income would generally be taxed under the regular 

tax rate schedule. The baseline tax system would not allow preferentially low (or zero) tax rates to apply to certain types or sources of 

income. In contrast, the Tax Code allowed an exclusion from a taxpayer’s taxable income for any discharge of indebtedness of up to 

$2 million ($1 million in the case of a married individual filing a separate return) from a qualified principal residence. The provision 

applied to debt discharged after January 1, 2007, and before January 1, 2015. 

66. Discharge of business indebtedness.—Under the baseline tax system, all income would generally be taxed under the regular 

tax rate schedule. The baseline tax system would not allow preferentially low (or zero) tax rates to apply to certain types or sources of 

income. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income for any discharge of qualified real property 

business indebtedness by taxpayers other than a C corporation. If the canceled debt is not reported as current income, however, the 

basis of the underlying property must be reduced by the amount canceled.

67. Exceptions from imputed interest rules.—Under the baseline tax system, holders (issuers) of debt instruments are generally 

required to report interest earned (paid) in the period it accrues, not when received. In addition, the amount of interest accrued is 

determined by the actual price paid, not by the stated principal and interest stipulated in the instrument. But under current law, any 

debt associated with the sale of property worth less than $250,000 is exempted from the general interest accounting rules. This general 

$250,000 exception is not a tax expenditure under reference law but is under normal law. Current law also includes exceptions for 

certain property worth more than $250,000. These are tax expenditure under reference law and normal law. These exceptions include, 

sales of personal residences worth more than $250,000, and sales of farms and small businesses worth between $250,000 and $1 

million.

68. Treatment of qualified dividends.—The baseline tax system generally would tax all income under the regular tax rate 

schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. For individuals, tax rates on 

regular income vary from 10 percent to 39.6 percent (plus a 3.8-percent surtax on high income taxpayers), depending on the 

taxpayer’s income. In contrast, under current law, qualified dividends are taxed at a preferentially low rate that is no higher than 20 

percent (plus the 3.8-percent surtax). 

69. Capital gains (except agriculture, timber, iron ore, and coal).—The baseline tax system generally would tax all income 

under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. For 

individuals, tax rates on regular income vary from 10 percent to 39.6 percent (plus a 3.8-percent surtax on high income taxpayers), 

depending on the taxpayer’s income. In contrast, under current law, capital gains on assets held for more than one year are taxed at a 

preferentially low rate that is no higher than 20 percent (plus the 3.8-percent surtax). 

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70. Capital gains exclusion of small corporation stock.—The baseline tax system would not allow deductions and exemptions, 

or provide preferential treatment of certain sources of income or types of activities. In contrast, the Tax Code provided an exclusion of 

50 percent, applied to ordinary rates with a maximum of a 28 percent tax rate, for capital gains from qualified small business stock 

held by individuals for more than 5 years; 75 percent for stock issued after February 17, 2009 and before September 28, 2010; and 100 

percent for stock issued after September 27, 2010 and before January 1, 2015. A qualified small business is a corporation whose gross 

assets do not exceed $50 million as of the date of issuance of the stock. 

71. Step-up basis of capital gains at death.—Under the baseline tax system, unrealized capital gains would be taxed when assets 

are transferred at death. It would not allow for exempting gains upon transfer of the underlying assets to the heirs. In contrast, capital 

gains on assets held at the owner’s death are not subject to capital gains tax under current law. The cost basis of the appreciated assets 

is adjusted to the market value at the owner’s date of death which becomes the basis for the heirs.

72. Carryover basis of capital gains on gifts.—Under the baseline tax system, unrealized capital gains would be taxed when 

assets are transferred by gift. In contrast, when a gift of appreciated asset is made under current law, the donor’s basis in the 

transferred property (the cost that was incurred when the transferred property was first acquired) carries over to the donee. The 

carryover of the donor’s basis allows a continued deferral of unrealized capital gains.

73. Deferral of capital gains from like-kind exchanges.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates, or deferral of tax, to apply to certain types or 

sources of income. In contrast, current law allows the deferral of accrued gains on assets transferred in qualified like-kind exchanges.

74. Ordinary income treatment of loss from small business corporation stock sale.—The baseline tax system limits to $3,000 

the write-off of losses from capital assets, with carryover of the excess to future years. In contrast, the Tax Code allows up to 

$100,000 in losses from the sale of small business corporate stock (capitalization less than $1 million) to be treated as ordinary losses 

and fully deducted.

75. Accelerated depreciation of buildings other than rental housing.—Under an economic income tax, the costs of acquiring a 

building are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and 

tear or obsolescence. This insures that the net income from the property is measured appropriately each year. Current law allows 

depreciation deductions that are accelerated relative to economic depreciation. However, the depreciation provisions of the Tax Code 

are part of the reference law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, in contrast, 

depreciation allowances reflect estimates of economic depreciation.

76. Accelerated depreciation of machinery and equipment.—Under an economic income tax, the costs of acquiring machinery 

and equipment are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear 

and tear or obsolescence. This insures that the net income from the property is measured appropriately each year. Current law allows 

depreciation deductions that are accelerated relative to economic depreciation. However, the depreciation provisions of the Tax Code 

are part of the reference law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, in contrast 

depreciation allowances reflect estimates of economic depreciation.

77. Expensing of certain small investments.—Under the reference law baseline, the costs of acquiring tangible property and 

computer software would be depreciated using the Tax Code’s depreciation provisions. Under the normal tax baseline, depreciation 

allowances are estimates of economic depreciation. However, the Tax Code allows qualifying investments by small businesses in

tangible property and certain computer software to be expensed rather than depreciated over time.

78. Graduated corporation income tax rate.—Because the corporate rate schedule is part of reference tax law, it is not 

considered a tax expenditure under the reference method. A flat corporation income tax rate is taken as the baseline under the normal 

tax method; therefore the lower rate is considered a tax expenditure under this concept.

79. Exclusion of interest on small issue bonds.—The baseline tax system generally would tax all income under the regular tax 

rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the 

Tax Code allows interest earned on small issue industrial development bonds (IDBs) issued by State and local governments to finance 

manufacturing facilities to be tax exempt. Depreciable property financed with small issue IDBs must be depreciated, however, using 

the straight-line method. The annual volume of small issue IDBs is subject to the unified volume cap discussed in the mortgage 

housing bond section above.

80. Deduction for U.S. production activities.—The baseline tax system generally would tax all income under the regular tax rate 

schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax 

Code allows for a deduction equal to a portion of taxable income attributable to domestic production.

81. Special rules for certain film and TV production.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow deductions and exemptions or preferentially low (or zero) tax rates to apply to certain 

types or sources of income. In contrast, the Tax Code allowed taxpayers to deduct up to $15 million per production ($20 million in 

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certain distressed areas) in non-capital expenditures incurred during the year. This provision expired at the end of 2014. 

Transportation

82. Tonnage tax.—The baseline tax system generally would tax all profits and income under the regular tax rate schedule. U.S. 

shipping companies may choose to be subject to a tonnage tax based on gross shipping weight in lieu of an income tax, in which case 

profits would not be subject to tax under the regular tax rate schedule.

83. Deferral of tax on shipping companies.—The baseline tax system generally would tax all profits and income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In 

contrast, the Tax Code allows certain companies that operate U.S. flag vessels to defer income taxes on that portion of their income 

used for shipping purposes (e.g., primarily construction, modernization and major repairs to ships, and repayment of loans to finance 

these investments). 

84. Exclusion of reimbursed employee parking expenses.—Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent 

accretions to wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from taxable income 

for employee parking expenses that are paid for by the employer or that are received by the employee in lieu of wages. In 2015, the 

maximum amount of the parking exclusion is $250 per month. The tax expenditure estimate does not include any subsidy provided

through employer-owned parking facilities.

85. Exclusion for employer-provided transit passes.—Under the baseline tax system, all compensation, including dedicated 

payments and in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent accretions to 

wealth that do not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from a taxpayer’s taxable income 

for passes, tokens, fare cards, and vanpool expenses that are paid for by an employer or that are received by the employee in lieu of 

wages to defray an employee’s commuting costs. The maximum amount of the transit exclusion is $130 per month in 2015. (There 

had been a parity provision that had temporary resulted in a higher maximum equal to those for parking passes for several years, but it 

expired on December 31, 2014). 

86. Tax credit for certain expenditures for maintaining railroad tracks.—The baseline tax system would not allow credits for 

particular activities, investments, or industries. However, the Tax Code allowed eligible taxpayers to claim a credit equal to the lesser 

of 50 percent of maintenance expenditures and the product of $3,500 and the number of miles of track owned or leased. This provision 

expired at the end of 2014. 

87. Exclusion of interest on bonds for Highway Projects and rail-truck transfer facilities.—The baseline tax system generally 

would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain 

types or sources of income. In contrast, the Tax Code provides for $15 billion of tax-exempt bond authority to finance qualified 

highway or surface freight transfer facilities. 

Community and Regional Development

88. Investment credit for rehabilitation of structures.—The baseline tax system would uniformly tax all returns to investments 

and not allow credits for particular activities, investments, or industries. However, the Tax Code allows a 10-percent investment tax 

credit for the rehabilitation of buildings that are used for business or productive activities and that were erected before 1936 for other 

than residential purposes. The taxpayer’s recoverable basis must be reduced by the amount of the credit. 

89. Exclusion of interest for airport, dock, and similar bonds.—The baseline tax system generally would tax all income under 

the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In 

contrast, the Tax Code allows interest earned on State and local bonds issued to finance high-speed rail facilities and Governmentowned airports, docks, wharves, and sport and convention facilities to be tax-exempt. These bonds are not subject to a volume cap.

90. Exemption of certain mutuals' and cooperatives' income.—Under the baseline tax system, corporations pay taxes on their 

profits under the regular tax rate schedule. In contrast, the Tax Code provides for the incomes of mutual and cooperative telephone 

and electric companies to be exempt from tax if at least 85 percent of their revenues are derived from patron service charges. 

91. Empowerment zones.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would 

not allow preferentially low tax rates to apply to certain types or sources of income, tax credits, and write-offs faster than economic 

depreciation. In contrast, the Tax Code allowed qualifying businesses in designated economically depressed areas to receive tax 

benefits such as an employment credit, increased expensing of investment in equipment, special tax-exempt financing, and certain 

capital gains incentives. A taxpayer’s ability to accrue new tax benefits for empowerment zones expired on December 31, 2014. 

92. New markets tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. 

However, the Tax Code allowed taxpayers who made qualified equity investments in a community development entity (CDE), which 

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then made qualified investments in low-income communities, to be eligible for a tax credit that is received over 7 years. The total 

equity investment available for the credit across all CDEs was $3.5 billion for 2014, the last year for which credit allocations could be 

made. 

93. Credit to holders of Gulf and Midwest Tax Credit Bonds.—The baseline tax system would not allow credits for particular 

activities, investments, or industries. Instead, under current law taxpayers that own Gulf and Midwest Tax Credit bonds receive a nonrefundable tax credit rather than interest. The credit is included in gross income.

94. Recovery Zone Bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. 

In addition, it would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to 

apply to certain types or sources of income. In contrast, the Tax Code allowed local governments to issue up $10 billion in taxable 

Recovery Zone Economic Development Bonds in 2009 and 2010 and receive a direct payment from Treasury equal to 45 percent of 

interest expenses. In addition, local governments could issue up to $15 billion in tax exempt Recovery Zone Facility Bonds. These 

bonds financed certain kinds of business development in areas of economic distress.

95. Tribal Economic Development Bonds.—The baseline tax system generally would tax all income under the regular tax rate 

schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax 

Code was modified in 2009 to allow Indian tribal governments to issue tax exempt “tribal economic development bonds.” There is a 

national bond limitation of $2 billion on such bonds.

Education, Training, Employment, and Social Services

96. Exclusion of scholarship and fellowship income.—Scholarships and fellowships are excluded from taxable income to the 

extent they pay for tuition and course-related expenses of the grantee. Similarly, tuition reductions for employees of educational 

institutions and their families are not included in taxable income. From an economic point of view, scholarships and fellowships are 

either gifts not conditioned on the performance of services, or they are rebates of educational costs. Thus, under the baseline tax 

system of the reference law method, this exclusion is not a tax expenditure because this method does not include either gifts or price 

reductions in a taxpayer’s gross income. The exclusion, however, is considered a tax expenditure under the normal tax method, which 

includes gift-like transfers of Government funds in gross income (many scholarships are derived directly or indirectly from 

Government funding).

97. HOPE tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. 

Under current law, however, the non-refundable HOPE tax credit allows a credit for 100 percent of an eligible student’s first $1,300 of 

tuition and fees and 50 percent of the next $1,300 of tuition and fees (2015 levels, indexed). The credit only covers tuition and fees 

paid during the first two years of a student’s post-secondary education. In 2015, the credit is phased out ratably for taxpayers with 

modified AGI between $110,000 and $130,000 if married filing jointly ($55,000 and $65,000 for other taxpayers), indexed. This 

credit is replaced by the American Opportunity Tax Credit for 2009 through 2017. See provision number 99, American Opportunity 

Tax Credit.

98. Lifetime Learning tax credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Under current law, however, the non-refundable Lifetime Learning tax credit allows a credit for 20 percent of an eligible 

student’s tuition and fees, up to a maximum credit per return of $2,000. In 2015, the credit is phased out ratably for taxpayers with 

modified AGI between $110,000 and $130,000 if married filing jointly ($55,000 and $65,000 for other taxpayers), indexed. The credit 

applies to both undergraduate and graduate students.

99. American Opportunity Tax Credit.—The baseline tax system would not allow credits for particular activities, investments, 

or industries. Under current law in 2015, however, the American Opportunity Tax Credit allows a partially refundable credit of up to 

$2,500 per eligible student for qualified tuition and related expenses paid during each of the first four years of the student’s postsecondary education. The credit is phased out for taxpayers with modified adjusted gross income between $80,000 and $90,000 

($160,000 and $180,000 for married taxpayers filing a joint return). The credit expires at the end of 2017.

100. Education Individual Retirement Accounts (IRA).—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. While 

contributions to an education IRA are not tax-deductible under current law, investment income earned by education IRAs is not taxed 

when earned, and investment income from an education IRA is tax-exempt when withdrawn to pay for a student’s education expenses. 

The maximum contribution to an education IRA in 2015 is $2,000 per beneficiary. In 2015, the maximum contribution is phased down 

ratably for taxpayers with modified AGI between $190,000 and $220,000 if married filing jointly ($95,000 and $110,000 for other

taxpayers).

101. Deductibility of student loan interest.—The baseline tax system accepts current law’s general rule limiting taxpayers’ ability 

to deduct non-business interest expenses. In contrast, taxpayers may claim an above-the-line deduction of up to $2,500 on interest paid 

on an education loan. In 2015, the maximum deduction is phased down ratably for taxpayers with modified AGI between $130,000

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and $160,000 if married filing jointly ($65,000 and $80,000 for other taxpayers).

102. Deduction for higher education expenses.—The baseline tax system would not allow a deduction for personal expenditures. 

In contrast, the Tax Code provided a maximum annual deduction of $4,000 for qualified higher education expenses for taxpayers with 

adjusted gross income up to $130,000 on a joint return ($65,000 for other taxpayers). Taxpayers with adjusted gross income up to 

$160,000 on a joint return ($80,000 for other taxpayers) could deduct up to $2,000. This provision expired on December 31, 2014. 

103. Qualified tuition programs.—The baseline tax system generally would tax all income under the regular tax rate schedule. It 

would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Some States have adopted prepaid 

tuition plans, prepaid room and board plans, and college savings plans, which allow persons to pay in advance or save for college 

expenses for designated beneficiaries. Under current law, investment income, or the return on prepayments, is not taxed when earned, 

and is tax-exempt when withdrawn to pay for qualified expenses.

104. Exclusion of interest on student-loan bonds.—The baseline tax system generally would tax all income under the regular tax 

rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, 

interest earned on State and local bonds issued to finance student loans is tax-exempt under current law. The volume of all such 

private activity bonds that each State may issue annually is limited.

105. Exclusion of interest on bonds for private nonprofit educational facilities.—The baseline tax system generally would tax all 

income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources 

of income. In contrast, under current law interest earned on State and local Government bonds issued to finance the construction of

facilities used by private nonprofit educational institutions is not taxed.

106. Credit for holders of zone academy bonds.—The baseline tax system would not allow credits for particular activities, 

investments, or industries. Under current law, however, financial institutions that own zone academy bonds receive a non-refundable 

tax credit rather than interest. The credit is included in gross income. Proceeds from zone academy bonds may only be used to 

renovate, but not construct, qualifying schools and for certain other school purposes. The total amount of zone academy bonds that 

may be issued was limited to $1.4 billion in 2009 and 2010. As of March 2010, issuers of the unused authorization of such bonds 

could opt to receive direct payment with the yield becoming fully taxable. An additional $0.4 billion of these bonds with a tax credit 

was authorized to be issued before January 1, 2015. 

107. Exclusion of interest on savings bonds redeemed to finance educational expenses.—The baseline tax system generally 

would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain 

types or sources of income. Under current law, however, interest earned on U.S. savings bonds issued after December 31, 1989 is taxexempt if the bonds are transferred to an educational institution to pay for educational expenses. The tax exemption is phased out for 

taxpayers with AGI between $115,751 and $145,749 if married filing jointly ($77,200 and $92,199 for other taxpayers) in 2015. 

108. Parental personal exemption for students age 19 or over.—Under the baseline tax system, a personal exemption would be 

allowed for the taxpayer, as well as for the taxpayer's spouse and dependents who do not claim a personal exemption on their own tax 

returns. To be considered a dependent, a child would have to be under age 19. In contrast, the Tax Code allows taxpayers to claim

personal exemptions for children aged 19 to 23, as long as the children are full-time students and reside with the taxpayer for over half 

the year (with exceptions for temporary absences from home, such as for school attendance).

109. Charitable contributions to educational institutions.—The baseline tax system would not allow a deduction for personal 

expenditures. In contrast, the Tax Code provides taxpayers a deduction for contributions to nonprofit educational institutions that are 

similar to personal expenditures. Moreover, taxpayers who donate capital assets to educational institutions can deduct the asset’s 

current value without being taxed on any appreciation in value. An individual’s total charitable contribution generally may not exceed 

50 percent of adjusted gross income; a corporation’s total charitable contributions generally may not exceed 10 percent of pre-tax 

income.

110. Exclusion of employer-provided educational assistance.—Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not 

materially differ from cash wages. Under current law, however, employer-provided educational assistance is excluded from an 

employee’s gross income, even though the employer’s costs for this assistance are a deductible business expense. The maximum 

exclusion is $5,250 per taxpayer.

111. Special deduction for teacher expenses.—The baseline tax system would not allow a deduction for personal expenditures. In 

contrast, the Tax Code allowed educators in both public and private elementary and secondary schools, who worked at least 900 hours 

during a school year as a teacher, instructor, counselor, principal or aide, to subtract up to $250 of qualified expenses when 

determining their adjusted gross income (AGI). This provision expired on December 31, 2014. 

112. Discharge of student loan indebtedness.—Under the baseline tax system, all compensation, including dedicated payments 

and in-kind benefits, should be included in taxable income. In contrast, the Tax Code allows certain professionals who perform in 

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underserved areas or specific fields, and as a consequence have their student loans discharged, not to recognize such discharge as 

income.

113. Qualified school construction bonds.—The baseline tax system would not allow credits for particular activities, investments, 

or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code 

was modified in 2009 to provide a tax credit in lieu of interest to holders of qualified school construction bonds. The national volume 

limit is $22.4 billion over 2009 and 2010. As of March 2010, issuers of such bonds could opt to receive direct payment with the yield 

becoming fully taxable.

114. Work opportunity tax credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code 

provides employers with a tax credit for qualified wages paid to individuals. The credit applies to employees who began work on or 

before December 31, 2014 and who are certified as members of various targeted groups. The amount of the credit that can be claimed 

is 25 percent of qualified wages for employment less than 400 hours and 40 percent for employment of 400 hours or more. Generally, 

the maximum credit per employee is $2,400 and can only be claimed on the first year of wages an individual earns from an employer. 

However, the credit for long-term welfare recipients can be claimed on second year wages as well and has a $9,000 maximum. Also, 

certain categories of veterans are eligible for a higher maximum credit of up to $9,600. Employers must reduce their deduction for 

wages paid by the amount of the credit claimed. 

115. Employer-provided child care exclusion.—Under the baseline tax system, all compensation, including dedicated payments 

and in-kind benefits, should be included in taxable income. In contrast, under current law up to $5,000 of employer-provided child 

care is excluded from an employee’s gross income even though the employer’s costs for the child care are a deductible business 

expense.

116. Employer-provided child care credit.—The baseline tax system would not allow credits for particular activities, investments, 

or industries. In contrast, current law provides a credit equal to 25 percent of qualified expenses for employee child care and 10 

percent of qualified expenses for child care resource and referral services. Employer deductions for such expenses are reduced by the 

amount of the credit. The maximum total credit is limited to $150,000 per taxable year.

117. Assistance for adopted foster children.—Under the baseline tax system, all compensation, including dedicated payments and 

in-kind benefits, should be included in taxable income. Taxpayers who adopt eligible children from the public foster care system can 

receive monthly payments for the children’s significant and varied needs and a reimbursement of up to $2,000 for nonrecurring

adoption expenses; special needs adoptions receive the maximum benefit even if that amount is not spent. These payments are 

excluded from gross income under current law.

118. Adoption credit and exclusion.—The baseline tax system would not allow credits for particular activities. In contrast, 

taxpayers can receive a tax credit for qualified adoption expenses under current law. Taxpayers may also exclude qualified adoption 

expenses provided or reimbursed by an employer from income, subject to the same maximum amounts and phase-out as the credit. 

The same expenses cannot qualify for tax benefits under both programs; however, a taxpayer may use the benefits of the exclusion and 

the tax credit for different expenses. 

119. Exclusion of employee meals and lodging.—Under the baseline tax system, all compensation, including dedicated payments 

and in-kind benefits, should be included in taxable income. In contrast, under current law employer-provided meals and lodging are 

excluded from an employee’s gross income even though the employer’s costs for these items are a deductible business expense.

120. Credit for child and dependent care expenses.—The baseline tax system would not allow credits for particular activities or 

targeted at specific groups. In contrast, the Tax Code provides parents who work or attend school and who have child and dependent 

care expenses a tax credit. Expenditures up to a maximum $3,000 for one dependent and $6,000 for two or more dependents are 

eligible for the credit. The credit is equal to 35 percent of qualified expenditures for taxpayers with incomes of up to $15,000. The 

credit is reduced to a minimum of 20 percent by one percentage point for each $2,000 of income in excess of $15,000.

121. Credit for disabled access expenditures.—The baseline tax system would not allow credits for particular activities, 

investments, or industries. In contrast, the Tax Code provides small businesses (less than $1 million in gross receipts or fewer than 31 

full-time employees) a 50-percent credit for expenditures in excess of $250 to remove access barriers for disabled persons. The credit 

is limited to $5,000. 

122. Deductibility of charitable contributions, other than education and health.—The baseline tax system would not allow a 

deduction for personal expenditures including charitable contributions. In contrast, the Tax Code provides taxpayers a deduction for 

contributions to charitable, religious, and certain other nonprofit organizations. Taxpayers who donate capital assets to charitable 

organizations can deduct the assets’ current value without being taxed on any appreciation in value. An individual’s total charitable 

contribution generally may not exceed 50 percent of adjusted gross income; a corporation’s total charitable contributions generally 

may not exceed 10 percent of pre-tax income.

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123. Exclusion of certain foster care payments.—The baseline tax system generally would tax all income under the regular tax 

rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Foster parents 

provide a home and care for children who are wards of the State, under contract with the State. Under current law, compensation 

received for this service is excluded from the gross incomes of foster parents; the expenses they incur are nondeductible.

124. Exclusion of parsonage allowances.—Under the baseline tax system, all compensation, including dedicated payments and 

in-kind benefits, would be included in taxable income. Dedicated payments and in-kind benefits represent accretions to wealth that do 

not differ materially from cash wages. In contrast, the Tax Code allows an exclusion from a clergyman’s taxable income for the value 

of the clergyman’s housing allowance or the rental value of the clergyman’s parsonage.

125. Indian employment credit.—The baseline tax system would not allow credits for particular activities, investments, or 

industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code 

provided employers with a tax credit for qualified wages paid to employees who were enrolled members of Indian tribes. The amount 

of the credit that could be claimed was 20 percent of the excess of qualified wages and health insurance costs paid by the employer in 

the current tax year over the amount of such wages and costs paid by the employer in 1993. Qualified wages and health insurance 

costs with respect to any employee for the taxable year could not exceed $20,000. Employees had to live on or near the reservation 

where he or she worked to be eligible for the credit. Employers had to reduce their deduction for wages paid by the amount of the 

credit claimed. The credit does not apply to taxable years beginning after December 31, 2014. 

Health

126. Exclusion of employer contributions for medical insurance premiums and medical care.—Under the baseline tax system, 

all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current 

law, employer-paid health insurance premiums and other medical expenses (including long-term care) are not included in employee 

gross income even though they are deducted as a business expense by the employee.

127. Self-employed medical insurance premiums.—Under the baseline tax system, all compensation and remuneration, including 

dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law self-employed taxpayers 

may deduct their family health insurance premiums. Taxpayers without self-employment income are not eligible for this special 

deduction. The deduction is not available for any month in which the self-employed individual is eligible to participate in an 

employer-subsidized health plan and the deduction may not exceed the self-employed individual’s earned income from selfemployment.

128. Medical Savings Accounts and Health Savings Accounts.—Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, should be included in taxable income. Also, the baseline tax system would not allow a 

deduction for personal expenditures and generally would tax investment earnings. In contrast, individual contributions to Archer 

Medical Savings Accounts (Archer MSAs) and Health Savings Accounts (HSAs) are allowed as a deduction in determining adjusted 

gross income whether or not the individual itemizes deductions. Employer contributions to Archer MSAs and HSAs are excluded 

from income and employment taxes. Archer MSAs and HSAs require that the individual have coverage by a qualifying high 

deductible health plan. Earnings from the accounts are excluded from taxable income. Distributions from the accounts used for

medical expenses are not taxable. The rules for HSAs are generally more flexible than for Archer MSAs and the deductible 

contribution amounts are greater (in 2015, $3,350 for taxpayers with individual coverage and $6,650 for taxpayers with family 

coverage). Thus, HSAs have largely replaced MSAs.

129. Deductibility of medical expenses.—The baseline tax system would not allow a deduction for personal expenditures. In 

contrast, under current law personal expenditures for medical care (including the costs of prescription drugs) exceeding 7.5 percent of 

the taxpayer’s adjusted gross income are deductible. For tax years beginning after 2012, only medical expenditures exceeding 10 

percent of the taxpayer’s adjusted gross income are deductible. However, for the years 2013, 2014, 2015 and 2016, if either the 

taxpayer or the taxpayer’s spouse turns 65 before the end of the taxable year, the threshold remains at 7.5 percent of adjusted income. 

Beginning in 2017, the 10-percent threshold will apply to all taxpayers, including those over 65.

130. Exclusion of interest on hospital construction bonds.—The baseline tax system generally would tax all income under the 

regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In 

contrast, under current law interest earned on State and local government debt issued to finance hospital construction is excluded from 

income subject to tax.

131. Refundable Premium Assistance Tax Credit.—The baseline tax system would not allow credits for particular activities or 

targeted at specific groups. In contrast, for taxable years ending after 2013, the Tax Code provides a premium assistance credit to any 

eligible taxpayer for any qualified health insurance purchased through a Health Insurance Exchange. In general, an eligible taxpayer is 

a taxpayer with annual household income between 100% and 400% of the federal poverty level for a family of the taxpayer’s size and 

that does not have access to affordable minimum essential health care coverage. The amount of the credit equals the lesser of (1) the 

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actual premiums paid by the taxpayer for such coverage or (2) the difference between the cost of a statutorily-identified benchmark 

plan offered on the exchange and a required payment by the taxpayer that increases with income. 

132. Credit for employee health insurance expenses of small business.—The baseline tax system would not allow credits for 

particular activities or targeted at specific groups. In contrast, the Tax Code provides a tax credit to qualified small employers that 

make a certain level of non-elective contributions towards the purchase of certain health insurance coverage for its employees. To 

receive a credit, an employer must have fewer than 25 full-time-equivalent employees whose average annual full-time-equivalent 

wages from the employer are less than $50,000 (indexed for taxable years after 2013). However, to receive a full credit, an employer 

must have no more than 10 full-time employees, and the average wage paid to these employees must be no more than $25,000 

(indexed for taxable years after 2013). A qualifying employer may claim the credit for any taxable year beginning in 2010, 2011, 

2012, and 2013 and for up to two years for insurance purchased through a Health Insurance Exchange thereafter. For taxable years 

beginning in 2010, 2011, 2012, and 2013, the maximum credit is 35 percent of premiums paid by qualified taxable employers and 25 

percent of premiums paid by qualified tax-exempt organizations. For taxable years beginning in 2014 and later years, the maximum 

tax credit increases to 50 percent of premiums paid by qualified taxable employers and 35 percent of premiums paid by qualified taxexempt organizations.

133. Deductibility of charitable contributions to health institutions.—The baseline tax system would not allow a deduction for 

personal expenditures including charitable contributions. In contrast, the Tax Code provides individuals and corporations a deduction 

for contributions to nonprofit health institutions. Tax expenditures resulting from the deductibility of contributions to other charitable 

institutions are listed under the education, training, employment, and social services function.

134. Tax credit for orphan drug research.—The baseline tax system would not allow credits for particular activities, investments, 

or industries. In contrast, under current law drug firms can claim a tax credit of 50 percent of the costs for clinical testing required by 

the Food and Drug Administration for drugs that treat rare physical conditions or rare diseases.

135. Special Blue Cross/Blue Shield deduction.— The baseline tax system generally would tax all profits under the regular tax 

rate schedule using broadly applicable measures of baseline income. It would not allow preferentially low tax rates to apply to certain 

types or sources of income. In contrast, Blue Cross and Blue Shield health insurance providers in existence on August 16, 1986 and 

certain other nonprofit health insurers are provided exceptions from otherwise applicable insurance company income tax accounting 

rules that substantially reduce their tax liabilities, provided that their percentage of total premium revenue expended on reimbursement 

for clinical services provided to enrollees or for activities that improve health care quality is not less than 85 percent for the taxable 

year.

136. Tax credit for health insurance purchased by certain displaced and retired individuals.—The baseline tax system would 

not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides a refundable tax credit of 72.5 

percent for the purchase of health insurance coverage by individuals eligible for Trade Adjustment Assistance and certain Pension 

Benefit Guarantee Corporation pension recipients. This provision will expire on December 31, 2019. 

137. Distributions from retirement plans for premiums for health and long-term care insurance.—Under the baseline tax 

system, all compensation, including dedicated and deferred payments, should be included in taxable income. In contrast, the Tax Code 

provides for tax-free distributions of up to $3,000 from governmental retirement plans for premiums for health and long term care 

premiums of public safety officers.

Income Security

138. Child credit.—The baseline tax system would not allow credits for particular activities or targeted at specific groups. Under 

current law, however, taxpayers with children under age 17 can qualify for a $1,000 partially refundable per child credit. Any 

unclaimed credit due to insufficient tax liability may be refundable – taxpayers may claim a refund for 15 percent of earnings in 

excess of a $3,000 floor, up to the amount of unused credit. Alternatively, taxpayers with three or more children may claim a refund of 

the amount of payroll taxes paid in excess of the Earned Income Tax Credit received (up to the amount of unused credit) if this results 

in a larger refund. The credit is phased out for taxpayers at the rate of $50 per $1,000 of modified AGI above $110,000 ($75,000 for 

single or head of household filers and $55,000 for married taxpayers filing separately). After 2017 refundability is based on earnings 

in excess of $10,000 indexed from 2001, rather than from $3,000 (unindexed); taxpayers with three or more children may continue to 

use the alternative calculation.

139. Exclusion of railroad Social Security equivalent benefits.—Under the baseline tax system, all compensation, including 

dedicated and deferred payments, should be included in taxable income. In contrast, the Social Security Equivalent Benefit paid to 

railroad retirees is not generally subject to the income tax unless the recipient’s gross income reaches a certain threshold under current 

law. See provision number 158, Social Security benefits for retired workers, for discussion of the threshold. 

140. Exclusion of workers' compensation benefits.—Under the baseline tax system, all compensation, including dedicated 

payments and in-kind benefits, should be included in taxable income. However, workers compensation is not subject to the income tax 

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under current law.

141. Exclusion of public assistance benefits.—Under the reference law baseline tax system, gifts and transfers are not treated as 

income to the recipients. In contrast, the normal tax method considers cash transfers from the Government as part of the recipients’ 

income, and thus, treats the exclusion for public assistance benefits under current law as a tax expenditure. 

142. Exclusion of special benefits for disabled coal miners.—Under the baseline tax system, all compensation, including 

dedicated payments and in-kind benefits, should be included in taxable income. However, disability payments to former coal miners 

out of the Black Lung Trust Fund, although income to the recipient, are not subject to the income tax.

143. Exclusion of military disability pensions.—Under the baseline tax system, all compensation, including dedicated payments 

and in-kind benefits, should be included in taxable income. In contrast, most of the military disability pension income received by 

current disabled military retirees is excluded from their income subject to tax.

144. Defined benefit employer plans.—Under the baseline tax system, all compensation, including deferred and dedicated 

payments, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, under current 

law certain contributions to defined benefit pension plans are excluded from an employee’s gross income even though employers can 

deduct their contributions. In addition, the tax on the investment income earned by defined benefit pension plans is deferred until the 

money is withdrawn.

145. Defined contribution employer plans.—Under the baseline tax system, all compensation, including deferred and dedicated 

payments, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, under current 

law individual taxpayers and employers can make tax-preferred contributions to employer-provided 401(k) and similar plans (e.g. 

403(b) plans and the Federal Government’s Thrift Savings Plan). In 2015, an employee could exclude up to $18,000 of wages from 

AGI under a qualified arrangement with an employer’s 401(k) plan. Employees age 50 or over could exclude up to $24,000 in 

contributions. The defined contribution plan limit, including both employee and employer contributions, is $53,000 in 2015. The tax 

on contributions made by both employees and employers and the investment income earned by these plans is deferred until 

withdrawn.

146. Individual Retirement Accounts (IRAs).—Under the baseline tax system, all compensation, including deferred and dedicated 

payments, should be included in taxable income. In addition, investment income would be taxed as earned. In contrast, under current 

law individual taxpayers can take advantage of traditional and Roth IRAs to defer or otherwise reduce the tax on the return to their 

retirement savings. The IRA contribution limit is $5,500 in 2015; taxpayers age 50 or over are allowed to make additional “catch-up’’ 

contributions of $1,000. Contributions to a traditional IRA are generally deductible but the deduction is phased out for workers with 

incomes above certain levels who, or whose spouses, are active participants in an employer-provided retirement plan. Contributions 

and account earnings are includible in income when withdrawn from traditional IRAs. Roth IRA contributions are not deductible, but 

earnings and withdrawals are exempt from taxation. Income limits also apply to Roth IRA contributions.

147. Low and moderate-income savers’ credit.—The baseline tax system would not allow credits for particular activities or 

targeted at specific groups. In contrast, the Tax Code provides an additional incentive for lower-income taxpayers to save through a 

nonrefundable credit of up to 50 percent on IRA and other retirement contributions of up to $2,000. This credit is in addition to any 

deduction or exclusion. The credit is completely phased out by $61,000 for joint filers, $45,750 for head of household filers, and 

$30,500 for other filers in 2015. 

148. Self-employed plans.—Under the baseline tax system, all compensation, including deferred and dedicated payments, should 

be included in taxable income. In addition, investment income would be taxed as earned. In contrast, under current law self-employed 

individuals can make deductible contributions to their own retirement plans equal to 25 percent of their income, up to a maximum of 

$53,000 in 2015. Total plan contributions are limited to 25 percent of a firm’s total wages. The tax on the investment income earned 

by self-employed SEP, SIMPLE, and qualified plans is deferred until withdrawn.

149. Premiums on group term life insurance.—Under the baseline tax system, all compensation, including deferred and 

dedicated payments, should be included in taxable income. In contrast, under current law employer-provided life insurance benefits 

are excluded from an employee’s gross income (to the extent that the employer’s share of the total costs does not exceed the cost of 

$50,000 of such insurance) even though the employer’s costs for the insurance are a deductible business expense.

150. Premiums on accident and disability insurance.—Under the baseline tax system, all compensation, including dedicated 

payments and in-kind benefits, should be included in taxable income. In contrast, under current law employer-provided accident and 

disability benefits are excluded from an employee’s gross income even though the employer’s costs for the benefits are a deductible 

business expense.

151. Income of trusts to finance supplementary unemployment benefits.—Under the baseline tax system, all compensation, 

including dedicated payments and in-kind benefits, should be included in taxable income. In addition, investment income would be 

taxed as earned. Under current law, employers may establish trusts to pay supplemental unemployment benefits to employees 

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separated from employment. Investment income earned by such trusts is exempt from taxation.

152. Special ESOP rules.—ESOPs are a special type of tax-exempt employee benefit plan. Under the baseline tax system, all 

compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In addition, investment 

income would be taxed as earned. In contrast, employer-paid contributions (the value of stock issued to the ESOP) are deductible by 

the employer as part of employee compensation costs. They are not included in the employees’ gross income for tax purposes, 

however, until they are paid out as benefits. In addition, the following special income tax provisions for ESOPs are intended to 

increase ownership of corporations by their employees: (1) annual employer contributions are subject to less restrictive limitations 

than other qualified retirement plans; (2) ESOPs may borrow to purchase employer stock, guaranteed by their agreement with the 

employer that the debt will be serviced by his payment (deductible by him) of a portion of wages (excludable by the employees) to 

service the loan; (3) employees who sell appreciated company stock to the ESOP may defer any taxes due until they withdraw 

benefits; (4) dividends paid to ESOP-held stock are deductible by the employer; and (5) earnings are not taxed as they accrue.

153. Additional deduction for the blind.—Under the baseline tax system, the standard deduction is allowed. An additional 

standard deduction for a targeted group within a given filing status would not be allowed. In contrast, the Tax Code allows taxpayers 

who are blind to claim an additional $1,550 standard deduction if single, or $1,250 if married in 2015. 

154. Additional deduction for the elderly.—Under the baseline tax system, the standard deduction is allowed. An additional 

standard deduction for a targeted group within a given filing status would not be allowed. In contrast, the Tax Code allows taxpayers 

who are 65 years or older to claim an additional $1,550 standard deduction if single, or $1,250 if married in 2015. 

155. Tax credit for the elderly and disabled.—Under the baseline tax system, a credit targeted at a specific group within a given 

filing status or for particular activities would not be allowed. In contrast, the Tax Code allows taxpayers who are 65 years of age or 

older, or who are permanently disabled, to claim a non-refundable tax credit equal to 15 percent of the sum of their earned and 

retirement income. The amount to which the 15-percent rate is applied is limited to no more than $5,000 for single individuals or 

married couples filing a joint return where only one spouse is 65 years of age or older or disabled, and up to $7,500 for joint returns 

where both spouses are 65 years of age or older or disabled. These limits are reduced by one-half of the taxpayer’s adjusted gross 

income over $7,500 for single individuals and $10,000 for married couples filing a joint return. 

156. Deductibility of casualty losses.—Under the baseline tax system, neither the purchase of property nor insurance premiums to 

protect the property's value are deductible as costs of earning income. Therefore, reimbursement for insured loss of such property is 

not included as a part of gross income, and uninsured losses are not deductible. In contrast, the Tax Code provides a deduction for 

uninsured casualty and theft losses of more than $100 each, to the extent that total losses during the year exceed 10 percent of the 

taxpayer’s adjusted gross income.

157. Earned income tax credit (EITC).—The baseline tax system would not allow credits for particular activities or targeted at 

specific groups. In contrast, the Tax Code provides an EITC to low-income workers at a maximum rate of 45 percent of income. For a 

family with one qualifying child, the credit is 34 percent of the first $9,880 of earned income in 2015. The credit is 40 percent of the 

first $13,870 of income for a family with two qualifying children, and it is 45 percent of the first $13,870 of income for a family with 

three or more qualifying children. Low-income workers with no qualifying children are eligible for a 7.65-percent credit on the first 

$6,580 of earned income. The credit is phased out at income levels and rates which depend upon how many qualifying children are 

eligible and marital status. In 2015, the phasedown for married filers begins at incomes $5,520 greater than for otherwise similar 

unmarried filers. Earned income tax credits in excess of tax liabilities owed through the individual income tax system are refundable 

to individuals. After 2017, the additional benefit for families with three or more children will be eliminated and the marriage penalty 

relief will be reduced to $3,000 (indexed from 2008). 

Social Security

158. Social Security benefits for retired workers.—The baseline tax system would tax Social Security benefits to the extent that 

contributions to Social Security were not previously taxed. Thus, the portion of Social Security benefits that is attributable to employer 

contributions and earnings on employer and employee contributions (and not attributable to employee contributions) would be subject 

to tax. In contrast, the Tax Code may not tax all of the Social Security benefits that exceed the beneficiary’s contributions from 

previously taxed income. Actuarially, previously taxed contributions generally do not exceed 15 percent of benefits, even for retirees 

receiving the highest levels of benefits. Up to 85 percent of recipients’ Social Security and Railroad Social Security Equivalent 

retirement benefits are included in (phased into) the income tax base if the recipient’s provisional income exceeds certain base 

amounts. (Provisional income is equal to other items included in adjusted gross income plus foreign or U.S. possession income, taxexempt interest, and one half of Social Security and Railroad Social Security Equivalent retirement benefits.) The untaxed portion of 

the benefits received by taxpayers who are below the income amounts at which 85 percent of the benefits are taxable is counted as a 

tax expenditure. See also provision number 139, Exclusion of railroad Social Security equivalent benefits.

159. Social Security benefits for disabled workers.—Under the baseline tax system, insurance benefits would be taxed to the 

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extent that premiums were paid out of pre-tax income. Under current law, however, benefit payments from the Social Security Trust 

Fund for disability are fully or partially excluded from a beneficiary’s gross income in excess of any exclusion justified by 

contributions made from pre-tax income.

160. Social Security benefits for spouses, dependents and survivors.—Under the baseline tax system, Social Security benefits

would be taxed to the extent they exceed contributions out of after-tax income. Under current law, however, benefit payments from 

the Social Security Trust Fund for spouses, dependents and survivors are fully or partially excluded from a beneficiary’s gross income.

161. Credit for certain employer social security contributions.—Under the baseline tax system, employer contributions to Social 

Security represent labor cost and are deductible expenses. Under current law, however, certain employers are allowed a tax credit, 

instead of a deduction, against taxes paid on tips received from customers in connection with the providing, delivering, or serving of 

food or beverages for consumption, The tip credit equals the full amount of the employer’s share of FICA taxes paid on the portion of 

tips, when added to the employee’s non-tip wages, in excess of $5.15 per hour. The credit is available only with respect to FICA taxes 

paid on tips.

Veterans Benefits and Services

162. Exclusion of veterans death benefits and disability compensation.—Under the baseline tax system, all compensation, 

including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth 

that do not materially differ from cash wages. In contrast, all compensation due to death or disability paid by the Veterans 

Administration is excluded from taxable income under current law.

163. Exclusion of veterans pensions.—Under the baseline tax system, all compensation, including dedicated payments and inkind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash 

wages. Under current law, however, pension payments made by the Veterans Administration are excluded from gross income.

164. Exclusion of G.I. Bill benefits.—Under the baseline tax system, all compensation, including dedicated payments and in-kind 

benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash 

wages. Under current law, however, G.I. Bill benefits paid by the Veterans Administration are excluded from gross income.

165. Exclusion of interest on veterans housing bonds.—The baseline tax system generally would tax all income under the regular 

tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, 

under current law, interest earned on general obligation bonds issued by State and local governments to finance housing for veterans is 

excluded from taxable income.

General Government

166. Exclusion of interest on public purpose State and local bonds.—The baseline tax system generally would tax all income 

under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of 

income. In contrast, under current law interest earned on State and local government bonds issued to finance public-purpose 

construction (e.g., schools, roads, sewers), equipment acquisition, and other public purposes is tax-exempt. Interest on bonds issued by 

Indian tribal governments for essential governmental purposes is also tax-exempt.

167. Build America Bonds.—The baseline tax system would not allow credits for particular activities or targeted at specific 

group. In contrast, the Tax Code in 2009 allowed State and local governments to issue taxable bonds through 2010 and receive a direct

payment from Treasury equal to 35 percent of interest expenses. Alternatively, State and local governments could issue taxable bonds 

and the private lenders receive the 35-percent credit which is included in taxable income.

168. Deductibility of nonbusiness State and local taxes other than on owner-occupied homes.—Under the baseline tax system, a 

deduction for personal consumption expenditures would not be allowed. In contrast, the Tax Code allows taxpayers who itemize their 

deductions to claim a deduction for State and local income taxes (or, at the taxpayer’s election, State and local sales taxes) and 

property taxes, even though these taxes primarily pay for services that, if purchased directly by taxpayers, would not be deductible. 

The ability for taxpayers to elect to deduct State and local sales taxes in lieu of State and local income taxes applied to taxable years 

beginning after December 31, 2003 and before January 1, 2015. (The estimates for this tax expenditure do not include the estimates 

for the deductibility of State and local property tax on owner-occupied homes. See item 58.)

Interest

169. Deferral of interest on U.S. savings bonds.—The baseline tax system would uniformly tax all returns to investments and not 

allow an exemption or deferral for particular activities, investments, or industries. In contrast, taxpayers may defer paying tax on 

interest earned on U.S. savings bonds until the bonds are redeemed.

20

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016-25

National Defense

1 13,680 14,220 13,170 13,310 13,780 14,340 14,970 15,640 16,360 17,130 17,950 150,870

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 5,990 6,280 6,600 6,930 7,280 7,640 8,020 8,420 8,840 9,290 9,750 79,050

3 1,240 1,300 1,370 1,430 1,510 1,580 1,660 1,740 1,830 1,920 2,020 16,360

4 Inventory property sales source rules exception 3,890 4,210 4,560 4,940 5,350 5,790 6,270 6,790 7,350 7,960 8,620 61,840

5 64,560 67,780 71,170 74,730 78,470 82,390 86,510 90,840 95,380 100,150 105,160 852,580

6 4,470 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 7,900 6,350 5,820 6,270 6,830 7,310 7,600 7,840 8,120 8,450 8,820 73,410

8 Credit for increasing research activities 5,710 3,320 2,980 2,670 2,370 2,090 1,840 1,620 1,420 1,240 1,080 20,630

Energy: 

9 Expensing of exploration and development costs, fuels 660 470 460 510 560 600 580 570 600 620 580 5,550

10 Excess of percentage over cost depletion, fuels 650 710 860 1,010 1,150 1,240 1,290 1,400 1,540 1,690 1,810 12,700

11 40 40 40 40 40 30 30 30 30 30 30 340

12 Capital gains treatment of royalties on coal 110 120 130 130 130 140 140 150 150 160 170 1,420

13 Exclusion of interest on energy facility bonds 20 20 30 30 30 30 40 40 40 40 50 350

14 Energy production credit 1/ 1,550 1,950 2,250 2,310 2,230 2,120 2,050 1,970 1,840 1,590 1,160 19,470

15 Energy investment credit 1/ 1,010 1,470 970 250 40 130 320 440 510 530 400 5,060

16 Alcohol fuel credits 2/ 20 0 0 0 0 0 0 0 0 0 0 0

17 70 30 20 10 0 0 0 0 0 0 0 60

18 540 550 670 820 810 700 500 290 140 130 160 4,770

19 Exclusion of utility conservation subsidies 430 450 470 490 520 540 570 590 620 650 680 5,580

20 Credit for holding clean renewable energy bonds 4/ 70 70 70 70 70 70 70 70 70 70 70 700

21 -120 -220 -180 -150 -130 -110 -70 -20 0 0 0 -880

22 Credit for investment in clean coal facilities 40 160 400 440 230 30 -20 -20 -20 -10 -10 1,180

23 -2,250 -2,050 -1,820 -1,500 -1,220 -970 -680 -420 -200 -40 0 -8,900

24 160 160 160 170 170 170 150 80 -20 -120 -230 690

25 90 100 100 90 90 90 90 100 100 100 100 960

26 30 -10 -30 -30 -30 -30 -30 -30 -30 -30 -30 -280

27 Credit for construction of new energy efficient homes 60 20 0 0 0 0 0 0 0 0 0 20

28 270 0 0 0 0 0 0 0 0 0 0 0

29 Credit for residential energy efficient property 850 770 460 180 40 0 0 0 0 0 0 1,450

30 Qualified energy conservation bonds 5/ 30 30 30 30 30 30 30 30 30 30 30 300

31 Advanced energy property credit 60 10 -30 -30 -30 -10 0 0 0 0 0 -90

32 Advanced nuclear power production credit 0 140 140 140 340 620 690 690 690 580 550 4,580

33 Reduced tax rate for nuclear decommissioning funds 160 170 200 220 240 250 270 280 290 300 320 2,540

Natural resources and environment: 

34 10 0 10 30 50 60 60 70 70 50 50 450

35 520 530 540 540 550 520 470 470 460 450 440 4,970

36 450 490 550 620 690 730 780 860 920 980 1,060 7,680

37 Capital gains treatment of certain timber income 110 120 130 130 130 140 140 150 150 160 170 1,420

38 Expensing of multiperiod timber growing costs 320 330 350 370 380 400 420 420 430 430 450 3,980

39 Tax incentives for preservation of historic structures 450 460 470 470 480 490 510 520 530 540 540 5,010

40 Industrial CO2 capture and sequestration tax credit 80 110 150 190 80 0 0 0 0 0 0 530

41 20 30 30 30 30 40 50 50 50 50 70 430

Agriculture: 

42 Expensing of certain capital outlays 220 210 230 240 250 270 280 290 310 330 350 2,760

43 Expensing of certain multiperiod production costs 350 370 390 410 440 460 490 520 550 590 630 4,850

44 Treatment of loans forgiven for solvent farmers 40 40 40 40 40 40 40 40 40 40 40 400

45 Capital gains treatment of certain income 1,150 1,240 1,280 1,300 1,320 1,360 1,410 1,470 1,530 1,590 1,670 14,170

46 Income averaging for farmers 130 140 140 140 140 140 140 140 140 140 140 1,400

47 Deferral of gain on sale of farm refiners 20 20 20 20 20 20 30 30 30 30 30 250

48 Expensing of reforestation expenditures 50 50 60 60 60 70 70 80 80 80 80 690

Exclusion of certain allowances for Federal 

employees abroad

Exclusion of benefits and allowances to armed forces 

personnel 

Bio-Diesel and small agri-biodiesel producer tax 

credits 3/

Tax credits for clean-fuel burning vehicles and 

refueling property

Natural gas distribution pipelines treated as 15-year 

property

Amortize all geological and geophysical expenditures 

over 2 years

Credit for energy efficiency improvements to existing 

homes

Excess of percentage over cost depletion, nonfuel 

minerals 

Expensing of exploration and development costs, 

nonfuel minerals 

Deduction for endangered species recovery 

expenditures

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2015-2025

Deferral of gain from dispositions of transmission 

property to implement FERC restructuring policy

Temporary 50% expensing for equipment used in the 

refining of liquid fuels

Allowance of deduction for certain energy efficient 

commercial building property

Deferral of income from controlled foreign 

corporations (normal tax method) 

Expensing of research and experimentation 

expenditures (normal tax method) 

Exception from passive loss limitation for working 

interests in oil and gas properties 

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

Deferred taxes for financial firms on certain income 

earned overseas

(in millions of dollars)

Total from corporations and individuals

21

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Commerce and housing: 

Financial institutions and insurance: 

49 Exemption of credit union income 1,690 2,300 2,200 2,200 2,350 2,440 2,700 2,890 2,980 3,120 3,570 26,750

50 Exclusion of interest on life insurance savings 17,450 18,870 23,380 28,950 33,790 37,820 41,010 43,550 45,750 47,820 49,900 370,840

51 30 30 40 40 40 40 50 50 50 50 60 450

52 670 700 730 760 800 850 890 910 940 960 980 8,520

53 Small life insurance company deduction 30 30 30 40 40 40 40 40 40 50 50 400

54 Exclusion of interest spread of financial institutions 380 420 450 470 480 500 510 530 540 550 560 5,010

Housing: 

55 1,250 1,350 1,530 1,700 1,900 2,020 2,190 2,380 2,550 2,730 2,940 21,290

56 Exclusion of interest on rental housing bonds 1,050 1,120 1,270 1,420 1,590 1,690 1,820 1,990 2,140 2,280 2,450 17,770

57 58,850 62,440 68,610 75,980 83,760 91,380 98,930 106,150 113,320 120,560 127,360 948,490

58 31,120 33,080 35,580 38,330 41,150 43,850 46,580 49,280 52,060 55,010 57,890 452,810

59 Deferral of income from installment sales 1,570 1,620 1,640 1,650 1,670 1,720 1,770 1,840 1,920 2,000 2,090 17,920

60 Capital gains exclusion on home sales 37,220 40,580 43,460 46,560 49,870 53,420 57,230 61,300 65,670 70,340 75,350 563,780

61 Exclusion of net imputed rental income 97,920 101,100 104,950 108,460 111,480 114,070 118,400 122,900 127,570 132,420 137,450 1,178,800

62 6,810 7,210 7,540 7,870 8,240 8,600 8,880 9,170 9,490 9,850 10,160 87,010

63 Credit for low-income housing investments 7,990 7,880 8,130 8,350 8,520 8,660 8,800 8,960 9,160 9,420 9,690 87,570

64 1,230 1,650 2,270 3,000 3,770 4,570 5,510 6,480 7,350 8,160 8,930 51,690

65 Discharge of mortgage indebtedness 1,100 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

66 Discharge of business indebtedness -160 -120 -50 -10 0 10 30 40 50 50 50 50

67 Exceptions from imputed interest rules 40 50 60 60 60 70 70 80 80 80 90 700

68 Treatment of qualified dividends 25,650 25,530 26,470 27,490 28,590 29,760 31,030 32,380 33,810 35,310 36,880 307,250

69 85,710 92,820 95,870 96,790 98,660 101,520 105,170 109,410 114,070 119,080 124,380 1,057,770

70 Capital gains exclusion of small corporation stock 220 380 620 800 780 680 580 490 430 390 360 5,510

71 Step-up basis of capital gains at death 54,850 58,270 61,910 65,770 69,870 74,220 78,850 83,770 88,990 94,540 100,440 776,630

72 Carryover basis of capital gains on gifts 2,490 2,740 3,010 3,300 3,620 3,970 4,340 4,750 5,170 5,530 5,820 42,250

73 50 50 50 50 50 50 50 50 50 50 50 500

74 Deferral of gains from like-kind exchanges 6,980 7,320 7,700 8,090 8,480 8,920 9,360 9,830 10,320 10,830 11,380 92,230

75 -9,300 -9,170 -9,390 -9,790 -10,440 -11,200 -11,930 -12,630 -13,350 -14,160 -14,690 -116,750

76 -7,510 -8,870 12,180 26,230 35,920 42,260 45,710 47,770 48,950 51,610 54,570 356,330

77 -1,180 -2,290 -790 90 720 1,120 1,530 1,850 2,020 2,160 2,280 8,690

78 3,860 3,770 3,670 3,540 3,610 3,570 3,660 3,780 3,940 3,800 3,740 37,080

79 Exclusion of interest on small issue bonds 170 170 200 220 250 260 280 310 330 350 380 2,750

80 Deduction for US production activities 15,230 15,680 16,440 17,220 17,980 18,770 19,580 20,440 21,320 22,250 23,210 192,890

81 Special rules for certain film and TV production 190 110 60 30 10 0 0 0 0 0 0 210

Transportation: 

82 Tonnage tax 70 70 80 80 90 90 90 100 100 100 110 910

83 Deferral of tax on shipping companies 20 20 20 20 20 20 20 20 20 20 20 200

84 Exclusion of reimbursed employee parking expenses 2,790 2,900 3,000 3,100 3,220 3,340 3,440 3,550 3,670 3,790 3,870 33,880

85 Exclusion for employer-provided transit passes 730 770 820 860 920 980 1,030 1,100 1,170 1,220 1,290 10,160

86 100 0 0 0 0 0 0 0 0 0 0 0

87 220 210 200 190 170 170 160 160 140 140 130 1,670

Community and regional development: 

88 20 20 20 20 20 20 20 20 20 20 20 200

89 740 800 900 1,010 1,130 1,200 1,300 1,410 1,510 1,610 1,730 12,600

90 140 140 150 150 150 160 160 160 170 170 170 1,580

91 Empowerment zones 100 40 30 30 30 20 10 10 10 10 10 200

92 New markets tax credit 1,200 1,230 1,130 910 640 420 230 20 -110 -160 -180 4,130

93 Credit to holders of Gulf Tax Credit Bonds. 240 250 290 310 360 370 410 440 480 510 550 3,970

94 Recovery Zone Bonds 6/ 130 140 150 180 190 210 220 240 250 280 290 2,150

95 Tribal Economic Development Bonds 40 40 50 60 60 70 70 80 80 80 90 680

Exclusion of interest on owner-occupied mortgage 

subsidy bonds 

Deductibility of State and local property tax on 

owner-occupied homes 

Deductibility of mortgage interest on owneroccupied homes 

Exception from passive loss rules for $25,000 of 

rental loss 

Accelerated depreciation on rental housing 

(normal tax method) 

Tax exemption of certain insurance companies 

owned by tax-exempt organizations

Special alternative tax on small property and 

casualty insurance companies 

Accelerated depreciation of buildings other than 

rental housing (normal tax method) 

Accelerated depreciation of machinery and 

equipment (normal tax method) 

Ordinary income treatment of loss from small 

business corporation stock sale 

Capital gains (except agriculture, timber, iron ore, 

and coal)

Graduated corporation income tax rate (normal tax 

method) 

Expensing of certain small investments (normal 

tax method) 

Exemption of certain mutuals' and cooperatives' 

Exclusion of interest for airport, dock, and similar 

Investment credit for rehabilitation of structures (other 

than historic) 

Tax credit for certain expenditures for maintaining 

railroad tracks

Exclusion of interest on bonds for Highway Projects 

and rail-truck transfer facilities

22

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Education, training, employment, and social services: 

Education: 

96 3,130 3,250 3,360 3,450 3,510 3,640 3,770 3,900 4,040 4,190 4,340 37,450

97 HOPE tax credit 0 0 0 670 6,740 6,880 7,290 7,380 7,500 7,880 7,960 52,300

98 Lifetime Learning tax credit 2,270 2,450 2,460 2,660 4,340 4,410 4,500 4,530 4,590 4,660 4,690 39,290

99 American Opportunity Tax Credit 7/ 13,470 13,430 13,500 12,190 0 0 0 0 0 0 0 39,120

100 Education Individual Retirement Accounts 30 30 40 40 40 40 40 40 50 50 50 420

101 Deductibility of student-loan interest 1,800 1,800 1,780 1,780 1,790 1,820 1,820 1,810 1,840 1,830 1,820 18,090

102 Deduction for higher education expenses 390 0 0 0 0 0 0 0 0 0 0 0

103 Qualified tuition programs 1,680 1,870 2,080 2,290 2,510 2,760 3,020 3,310 3,610 3,960 4,330 29,740

104 Exclusion of interest on student-loan bonds 490 530 600 670 750 800 860 940 1,000 1,080 1,150 8,380

105 2,270 2,440 2,760 3,090 3,450 3,660 3,960 4,320 4,630 4,940 5,310 38,560

106 Credit for holders of zone academy bonds 8/ 160 130 120 110 100 100 90 90 80 80 80 980

107 30 30 30 30 30 30 40 40 40 40 40 350

108 4,400 4,400 4,420 4,460 4,590 4,710 4,840 4,950 5,050 5,140 5,250 47,810

109 Deductibility of charitable contributions (education) 4,820 5,180 5,560 5,970 6,400 6,790 7,170 7,550 7,930 8,300 8,680 69,530

110 800 850 890 940 980 1,030 1,080 1,130 1,190 1,240 1,300 10,630

111 Special deduction for teacher expenses 210 0 0 0 0 0 0 0 0 0 0 0

112 Discharge of student loan indebtedness 90 90 90 90 90 90 90 90 90 90 90 900

113 Qualified school construction bonds 9/ 650 650 650 650 650 650 650 650 650 650 650 6,500

Training, employment, and social services: 

114 Work opportunity tax credit 720 420 240 180 140 100 70 60 40 30 30 1,310

115 Employer provided child care exclusion 900 930 980 1,050 1,120 1,180 1,250 1,330 1,410 1,500 1,590 12,340

116 Employer-provided child care credit 10 10 10 10 20 20 20 20 20 20 20 170

117 Assistance for adopted foster children 560 540 560 580 610 630 650 680 710 740 770 6,470

118 Adoption credit and exclusion 10/ 270 250 260 290 270 320 310 320 320 320 330 2,990

119 4,410 4,500 4,600 4,710 4,840 4,970 5,100 5,230 5,360 5,490 5,620 50,420

120 Credit for child and dependent care expenses 4,500 4,520 4,560 4,650 4,760 4,900 5,000 5,120 5,220 5,330 5,440 49,500

121 Credit for disabled access expenditures 10 10 10 10 20 20 20 20 20 20 20 170

122 40,910 44,240 47,630 51,380 55,250 58,830 62,180 65,530 68,810 72,130 75,410 601,390

123 Exclusion of certain foster care payments 430 460 480 500 510 520 530 550 560 570 580 5,260

124 Exclusion of parsonage allowances 690 730 770 810 850 900 940 990 1,050 1,100 1,160 9,300

125 Indian employment credit 40 30 30 20 10 10 10 10 10 10 0 140

Health: 

126 201,450 210,980 220,550 229,620 243,160 259,520 275,600 293,420 313,810 336,070 359,590 2,742,320

127 Self-employed medical insurance premiums 6,690 7,060 7,440 7,680 7,980 8,400 8,820 9,240 9,690 10,210 10,770 87,290

128 Medical Savings Accounts / Health Savings Accounts 4,810 5,730 6,830 8,060 9,560 11,390 13,550 16,130 19,190 22,830 27,150 140,420

129 Deductibility of medical expenses 7,660 8,260 8,700 9,530 10,980 12,850 14,810 16,840 19,380 22,350 25,460 149,160

130 Exclusion of interest on hospital construction bonds 3,570 3,840 4,350 4,870 5,420 5,760 6,230 6,810 7,290 7,780 8,360 60,710

131 Refundable Premium Assistance Tax Credit 12/ 1,960 2,340 3,870 4,880 6,880 7,580 7,810 8,140 8,430 8,730 9,090 67,750

132 513 544 543 517 453 395 301 358 242 181 78 3,612

133 Deductibility of charitable contributions (health) 4,620 4,990 5,390 5,810 6,240 6,640 7,030 7,400 7,770 8,150 8,520 67,940

134 Tax credit for orphan drug research 1,460 1,760 2,120 2,570 3,090 3,730 4,490 5,430 6,540 7,890 9,520 47,140

135 Special Blue Cross/Blue Shield deduction 250 250 260 270 280 290 300 320 330 340 350 2,990

136 0 30 30 20 10 0 0 0 0 0 0 90

137 400 440 460 480 500 520 540 560 580 600 620 5,300

Income security: 

138 Child credit 15/ 23,980 24,000 24,290 24,700 25,190 25,080 24,770 24,440 24,040 23,600 23,180 243,290

139 Exclusion of railroad retirement system benefits 300 300 300 290 280 270 250 240 220 190 170 2,510

140 Exclusion of workers' compensation benefits 9,720 9,820 9,920 10,010 10,110 10,220 10,320 10,420 10,530 10,630 10,730 102,710

141 560 570 590 600 630 650 670 680 710 730 680 6,510

142 Exclusion of special benefits for disabled coal miners 30 30 20 20 20 10 10 10 10 10 0 140

143 Exclusion of military disability pensions 220 220 240 250 260 270 290 300 310 330 340 2,810

Net exclusion of pension contributions and earnings: 

144 Defined benefit employer plans 66,620 66,600 66,760 67,020 66,180 64,820 63,190 60,910 58,470 55,930 52,650 622,530

145 Defined contribution employer plans 62,070 64,710 65,620 68,120 73,930 78,960 98,370 107,980 114,420 121,240 128,130 921,480

146 Individual Retirement Accounts 16,400 16,850 16,970 17,240 18,080 19,270 19,680 20,630 21,780 22,840 24,080 197,420

147 Low and moderate income savers credit 1,280 1,280 1,270 1,270 1,300 1,310 1,310 1,330 1,340 1,350 1,360 13,120

148 Self-Employed plans 25,490 28,030 30,800 33,760 37,030 40,480 44,020 47,870 52,060 56,610 61,560 432,220

Exclusion of other employee benefits: 

149 Premiums on group term life insurance 2,340 2,450 2,560 2,610 2,700 2,800 2,900 3,000 3,110 3,240 3,350 28,720

150 Premiums on accident and disability insurance 310 320 320 330 330 330 340 340 340 350 350 3,350

151 20 20 30 40 40 50 50 60 60 60 60 470

152 Special ESOP rules 1,890 2,000 2,100 2,210 2,320 2,450 2,580 2,710 2,860 3,010 3,160 25,400

153 Additional deduction for the blind 40 40 40 40 40 50 50 50 60 60 60 490

154 Additional deduction for the elderly 2,890 3,080 3,310 3,560 3,760 4,010 4,210 4,500 4,870 5,170 5,530 42,000

155 Tax credit for the elderly and disabled 10 10 10 10 10 10 10 0 0 0 0 60

156 Deductibility of casualty losses 350 370 390 410 430 450 460 470 490 500 520 4,490

157 Earned income tax credit 16/ 2,120 2,820 2,340 3,040 1,820 1,910 1,980 2,080 2,180 2,280 2,380 22,830

Exclusion of scholarship and fellowship income 

(normal tax method) 

Exclusion of employer-provided educational 

assistance 

Parental personal exemption for students age 19 

or over 

Exclusion of employee meals and lodging (other 

than military) 

Exclusion of public assistance benefits (normal tax 

method) 

Income of trusts to finance supplementary 

unemployment benefits 

Exclusion of interest on savings bonds redeemed 

to finance educational expenses

Deductibility of charitable contributions, other than 

education and health

Credit for employee health insurance expenses of 

small business 13/

Exclusion of interest on bonds for private nonprofit 

educational facilities 

Exclusion of employer contributions for medical 

insurance premiums and medical care 11/

Tax credit for health insurance purchased by certain 

displaced and retired individuals 14/

Distributions from retirement plans for premiums for 

health and long-term care insurance

23

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Social Security: 

Exclusion of social security benefits: 

158 Social Security benefits for retired workers 25,780 26,900 28,280 29,490 30,730 31,760 32,510 33,130 33,690 34,340 34,590 315,420

159 Social Security benefits for disabled workers 8,280 8,490 8,580 8,730 8,970 9,210 9,500 9,840 10,190 10,540 10,870 94,920

160 4,060 4,160 4,310 4,440 4,610 4,750 4,870 5,000 5,140 5,310 5,420 48,010

161 980 1,010 1,060 1,110 1,160 1,210 1,260 1,320 1,370 1,440 1,500 12,440

Veterans benefits and services: 

162 6,150 6,760 7,250 7,590 7,870 8,170 8,460 8,770 9,080 9,400 9,740 83,090

163 Exclusion of veterans pensions 420 450 490 510 530 560 580 600 630 650 680 5,680

164 Exclusion of GI bill benefits 1,530 1,690 1,830 1,960 2,070 2,190 2,310 2,440 2,580 2,720 2,880 22,670

165 Exclusion of interest on veterans housing bonds 10 10 10 10 10 10 10 10 10 10 30 120

General purpose fiscal assistance: 

166 29,430 31,700 35,900 40,180 44,810 47,550 51,430 56,190 60,140 64,220 69,030 501,150

167 Build America Bonds 17/ 0 0 0 0 0 0 0 0 0 0 0 0

168 48,430 51,380 55,130 59,030 62,870 66,730 70,830 75,060 79,410 83,920 88,280 692,640

Interest: 

169 Deferral of interest on U.S. savings bonds 1,020 1,010 1,000 990 980 970 960 950 940 930 920 9,650

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 31,120 33,080 35,580 38,330 41,150 43,850 46,580 49,280 52,060 55,010 57,890 452,810

48,430 51,380 55,130 59,030 62,870 66,730 70,830 75,060 79,410 83,920 88,280 692,640

Exclusion of interest on State and local bonds for: 

Public purposes 29,430 31,700 35,900 40,180 44,810 47,550 51,430 56,190 60,140 64,220 69,030 501,150

Energy facilities 20 20 30 30 30 30 40 40 40 40 50 350

450 490 550 620 690 730 780 860 920 980 1,060 7,680

Small-issues 170 170 200 220 250 260 280 310 330 350 380 2,750

Owner-occupied mortgage subsidies 1,250 1,350 1,530 1,700 1,900 2,020 2,190 2,380 2,550 2,730 2,940 21,290

Rental housing 1,050 1,120 1,270 1,420 1,590 1,690 1,820 1,990 2,140 2,280 2,450 17,770

Airports, docks, and similar facilities 740 800 900 1,010 1,130 1,200 1,300 1,410 1,510 1,610 1,730 12,600

Student loans 490 530 600 670 750 800 860 940 1,000 1,080 1,150 8,380

Private nonprofit educational facilities 2,270 2,440 2,760 3,090 3,450 3,660 3,960 4,320 4,630 4,940 5,310 38,560

Hospital construction 3,570 3,840 4,350 4,870 5,420 5,760 6,230 6,810 7,290 7,780 8,360 60,710

Veterans' housing 10 10 10 10 10 10 10 10 10 10 30 120

1/

2/ The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2015 $630; and $0 thereafter.

3/ In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2015 $1,870; and $0 thereafter.

4/ In addition, the inventory property sales source rules exception has outlay effects of (in millions of dollars):

2015 $30; 2016 $30; 2017 $30; 2018 $30; 2019 $30; 2020 $30; 2021 $30; 2022 $30; 2023 $30; 2024 $30; and 2025 $30.

5/ In addition, the deferral of income from controlled foreign corporations (normal tax method) has outlay effects of (in millions of dollars):

2015 $30; 2016 $30; 2017 $30; 2018 $30; 2019 $30; 2020 $30; 2021 $30; 2022 $30; 2023 $30; 2024 $30; 2025 $30.

6/ In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows:

2015 $220; 2016 $220; 2017 $220; 2018 $220; 2019 $220; 2020 $220; 2021 $220; 2022 $220; 2023 $220; 2024 $220; and 2025 $220.

7/ In addition, the expensing of research and experimentation expenditures has outlay effects of (in millions of dollars): 

2015 $4,200; 2016 $4,360; 2017 $4,490; 2018 $4,630; and 2019 $2,620.

8/ In addition, the credit for holders of zone academy bonds has outlay effects of (in millions of dollars):

2015 $50; 2016 $50; 2017 $50; 2018 $50; 2019 $50; 2020 $50; 2021 $50; 2022 $50; 2023 $50; 2024 $50; and 2025 $50.

9/ In addition, the provision for school construction bonds has outlay effects of (in millions of dollars):

2015 $740; 2016 $740; 2017 $740; 2018 $740; 2019 $740; 2020 $740; 2021 $740; 2022 $740; 2023 $740; 2024 $740; and 2025 $740.

10/ In addition, the adoption tax credit has outlay effects of (in millions of dollars): 2015 $30 and $0 thereafter.

11/ In addition, the employer contributions for health have effects on payroll tax receipts (in millions of dollars) as follows: 2015 $127,500; 2016 $131,380; 2017 $135,470;

12/ In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows:

2015 $20,730; 2016 $38,030; 2017 $53,030; 2018 $75,400; 2019 $88,990; 2020 $95,320; 2021 $100,580; 2022 $106,400; 2023 $110,970; 2024 $115,910; and 2025 $121,040. 

13/ In addition, the small business credit provision has outlay effects (in millions of dollars) as follows:

2015 $70; 2016 $80; 2017 $70; 2018 $70; 2019 $60; 2020 $50; 2021 $30; 2022 $30; 2023 $20; 2024 $20; and 2025 $10. 

14/ In addition, the effect of the health coverage tax credit on receipts has outlay effects of (in millions of dollars)

2015 $0; 2016 $10; 2017 $20; 2018 $30; 2019 $30; 2020 $10; and $0 thereafter.

15/ In addition, the effect of the child tax credit on receipts has outlay effects of (in millions of dollars):

2015 $26,990; 2016 $27,060; 2017 $27,050; 2018 $26,890; 2019 $ 15,330; 2020 $15,240; 2021 $15,340; 2022 $15,340; 2023 $15,390; 2024 $15,430; and 2025 $15,400.

16/ In addition, the earned income tax credit on receipts has outlay effects of (in millions of dollars):

2015 $61,880; 2016 $63,370; 2017 $63,100; 2018 $63,380; 2019 $ 61,620; 2020 $63,670; 2021 $63,040; 2022 $64,520; 2023 $66,090; 2024 $67,700; and 2025 $69,120.

17/ In addition, the Build America Bonds have outlay effects of (in millions of dollars):

2015 $3,800; 2016 $3,800; 2017 $3,800; 2018 $3,800, 2019 $3,800; 2020 $3,800; 2021 $3,800; 2022 $3,800; 2023 $3,800; 2024 $3,800; and 2025 $3,800.

Note: Provisions with estimates denoted normal tax method have no revenue loss under the reference tax law method.

All estimates have been rounded to the nearest $10 million. Provisions with estimates that rounded to zero in each year are not included in the table.

2018 $140,080; 2019 $147,360; 2020 $156,090; 2021 $164,510; 2022 $172,600; 2023 $181,400; 2024 $190,900; and 2025 $200,930. 

Firms can take an energy grant in lieu of the energy production credit or the energy investment credit for facilities placed in service in 2009 and 2010 or whose construction 

commenced in 2009 and 2010. The effect of the grant on outlays (in millions of dollars) is as follows: 2015 $2,300; 2016 $1,200; 2017 $650; and $0 thereafter.

Social Security benefits for spouses, dependents 

and survivors

Credit for certain employer contributions to social 

security

Exclusion of veterans death benefits and disability 

compensation 

Exclusion of interest on public purpose State and local 

bonds

Water, sewage, and hazardous waste disposal 

facilities 

Deductibility of nonbusiness State and local taxes 

other than on owner-occupied homes 

Nonbusiness State and local taxes other than on 

owner-occupied homes 

24

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016-25

National Defense

1 0 0 0 0 0 0 0 0 0 0 0 0

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 0 0 0 0 0 0 0 0 0 0 0 0

3 0 0 0 0 0 0 0 0 0 0 0 0

4 Inventory property sales source rules exception 3,890 4,210 4,560 4,940 5,350 5,790 6,270 6,790 7,350 7,960 8,620 61,840

5 64,560 67,780 71,170 74,730 78,470 82,390 86,510 90,840 95,380 100,150 105,160 852,580

6 4,470 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 7,130 5,730 5,410 5,840 6,360 6,810 7,070 7,300 7,560 7,870 8,210 68,160

8 Credit for increasing research activities 5,420 3,160 2,840 2,540 2,250 1,990 1,750 1,540 1,350 1,180 1,020 19,620

Energy: 

9 Expensing of exploration and development costs, fuels 500 360 350 390 430 460 430 420 440 450 420 4,150

10 Excess of percentage over cost depletion, fuels 520 570 690 810 920 990 1,030 1,120 1,230 1,350 1,450 10,160

11 0 0 0 0 0 0 0 0 0 0 0 0

12 Capital gains treatment of royalties on coal 0 0 0 0 0 0 0 0 0 0 0 0

13 Exclusion of interest on energy facility bonds 10 10 10 10 10 10 10 10 10 10 10 100

14 Energy production credit 1/ 1,160 1,460 1,690 1,730 1,670 1,590 1,540 1,480 1,380 1,190 870 14,600

15 Energy investment credit 1/ 810 1,180 780 200 30 100 260 350 410 420 320 4,050

16 Alcohol fuel credits 2/ 10 0 0 0 0 0 0 0 0 0 0 0

17 40 20 10 10 0 0 0 0 0 0 0 40

18 210 220 280 310 280 220 130 50 20 30 50 1,590

19 Exclusion of utility conservation subsidies 30 30 30 30 30 30 30 30 30 30 30 300

20 Credit for holding clean renewable energy bonds 4/ 20 20 20 20 20 20 20 20 20 20 20 200

21 -120 -220 -180 -150 -130 -110 -70 -20 0 0 0 -880

22 Credit for investment in clean coal facilities 40 140 360 400 210 30 -20 -20 -20 -10 -10 1,060

23 -2,250 -2,050 -1,820 -1,500 -1,220 -970 -680 -420 -200 -40 0 -8,900

24 160 160 160 170 170 170 150 80 -20 -120 -230 690

25 70 80 80 70 70 70 70 80 80 80 80 760

26 10 0 -10 -10 -10 -10 -10 -10 -10 -10 -10 -90

27 Credit for construction of new energy efficient homes 20 10 0 0 0 0 0 0 0 0 0 10

28 0 0 0 0 0 0 0 0 0 0 0 0

29 Credit for residential energy efficient property 0 0 0 0 0 0 0 0 0 0 0 0

30 Qualified energy conservation bonds 5/ 10 10 10 10 10 10 10 10 10 10 10 100

31 Advanced energy property credit 50 10 -20 -20 -20 -10 0 0 0 0 0 -60

32 Advanced nuclear power production credit 0 140 140 140 340 620 690 690 690 580 550 4,580

33 Reduced tax rate for nuclear decommissioning funds 160 170 200 220 240 250 270 280 290 300 320 2,540

Natural resources and environment: 

34 10 0 10 30 50 60 60 60 60 50 50 430

35 490 500 510 510 520 490 450 450 440 430 420 4,720

36 130 170 190 200 210 200 200 220 230 240 270 2,130

37 Capital gains treatment of certain timber income 0 0 0 0 0 0 0 0 0 0 0 0

38 Expensing of multiperiod timber growing costs 190 200 210 230 240 250 260 260 270 270 280 2,470

39 Tax incentives for preservation of historic structures 380 390 400 400 410 420 430 440 450 460 460 4,260

40 Industrial CO2 capture and sequestration tax credit 80 110 150 190 80 0 0 0 0 0 0 530

41 10 10 10 10 10 20 20 20 20 20 30 170

Total from corporations

Exclusion of benefits and allowances to armed forces 

personnel 

Tax credits for clean-fuel burning vehicles and 

refueling property

Bio-Diesel and small agri-biodiesel producer tax 

credits 3/

Natural gas distribution pipelines treated as 15-year 

property

Amortize all geological and geophysical expenditures 

over 2 years

Credit for energy efficiency improvements to existing 

homes

Excess of percentage over cost depletion, nonfuel 

minerals 

Expensing of exploration and development costs, 

nonfuel minerals 

Deduction for endangered species recovery 

expenditures

Table 2a. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2015-2025

(in millions of dollars)

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

Deferral of income from controlled foreign 

corporations (normal tax method) 

Expensing of research and experimentation 

expenditures (normal tax method) 

Exception from passive loss limitation for working 

interests in oil and gas properties 

Deferral of gain from dispositions of transmission 

property to implement FERC restructuring policy

Temporary 50% expensing for equipment used in the 

refining of liquid fuels

Allowance of deduction for certain energy efficient 

commercial building property

Exclusion of certain allowances for Federal 

employees abroad

Deferred taxes for financial firms on certain income 

earned overseas

25

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Agriculture: 

42 Expensing of certain capital outlays 10 10 20 20 20 20 20 20 20 30 30 210

43 Expensing of certain multiperiod production costs 20 20 30 30 30 30 40 40 40 50 50 360

44 Treatment of loans forgiven for solvent farmers 0 0 0 0 0 0 0 0 0 0 0 0

45 Capital gains treatment of certain income 0 0 0 0 0 0 0 0 0 0 0 0

46 Income averaging for farmers 0 0 0 0 0 0 0 0 0 0 0 0

47 Deferral of gain on sale of farm refiners 20 20 20 20 20 20 30 30 30 30 30 250

48 Expensing of reforestation expenditures 20 20 20 20 20 30 30 30 30 30 30 260

Commerce and housing: 

Financial institutions and insurance: 

49 Exemption of credit union income 1,690 2,300 2,200 2,200 2,350 2,440 2,700 2,890 2,980 3,120 3,570 26,750

50 Exclusion of interest on life insurance savings 1,630 1,740 2,020 2,350 2,630 2,860 3,040 3,210 3,360 3,520 3,680 28,410

51 30 30 40 40 40 40 50 50 50 50 60 450

52 670 700 730 760 800 850 890 910 940 960 980 8,520

53 Small life insurance company deduction 30 30 30 40 40 40 40 40 40 50 50 400

54 Exclusion of interest spread of financial institutions 0 0 0 0 0 0 0 0 0 0 0 0

Housing: 

55 360 460 530 550 580 550 570 610 640 680 750 5,920

56 Exclusion of interest on rental housing bonds 300 380 440 460 490 460 470 510 540 570 620 4,940

57 0 0 0 0 0 0 0 0 0 0 0 0

58 0 0 0 0 0 0 0 0 0 0 0 0

59 Deferral of income from installment sales 0 0 0 0 0 0 0 0 0 0 0 0

60 Capital gains exclusion on home sales 0 0 0 0 0 0 0 0 0 0 0 0

61 Exclusion of net imputed rental income 0 0 0 0 0 0 0 0 0 0 0 0

62 0 0 0 0 0 0 0 0 0 0 0 0

63 Credit for low-income housing investments 7,590 7,490 7,720 7,930 8,090 8,230 8,360 8,510 8,700 8,950 9,210 83,190

64 190 260 370 500 630 770 920 1,080 1,220 1,350 1,470 8,570

65 Discharge of mortgage indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

66 Discharge of business indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

67 Exceptions from imputed interest rules 0 0 0 0 0 0 0 0 0 0 0 0

68 Treatment of qualified dividends 0 0 0 0 0 0 0 0 0 0 0 0

69 0 0 0 0 0 0 0 0 0 0 0 0

70 Capital gains exclusion of small corporation stock 0 0 0 0 0 0 0 0 0 0 0 0

71 Step-up basis of capital gains at death 0 0 0 0 0 0 0 0 0 0 0 0

72 Carryover basis of capital gains on gifts 0 0 0 0 0 0 0 0 0 0 0 0

73 0 0 0 0 0 0 0 0 0 0 0 0

74 Deferral of gains from like-kind exchanges 5,450 5,720 6,010 6,310 6,620 6,960 7,300 7,670 8,050 8,450 8,880 71,970

75 -3,890 -3,850 -4,020 -4,280 -4,620 -5,000 -5,330 -5,630 -5,940 -6,290 -6,520 -51,480

76 -5,850 -7,250 6,410 15,890 22,610 27,120 29,640 31,210 32,150 34,040 36,130 227,950

77 -230 -380 -200 -80 10 70 130 180 200 220 230 380

78 3,860 3,770 3,670 3,540 3,610 3,570 3,660 3,780 3,940 3,800 3,740 37,080

79 Exclusion of interest on small issue bonds 50 60 70 70 80 70 70 80 80 90 100 770

80 Deduction for US production activities 11,540 11,850 12,440 13,040 13,610 14,210 14,820 15,470 16,140 16,840 17,570 145,990

81 Special rules for certain film and TV production 150 90 50 20 10 0 0 0 0 0 0 170

Transportation: 

82 Tonnage tax 70 70 80 80 90 90 90 100 100 100 110 910

83 Deferral of tax on shipping companies 20 20 20 20 20 20 20 20 20 20 20 200

84 Exclusion of reimbursed employee parking expenses 0 0 0 0 0 0 0 0 0 0 0 0

85 Exclusion for employer-provided transit passes 0 0 0 0 0 0 0 0 0 0 0 0

86 90 0 0 0 0 0 0 0 0 0 0 0

87 50 50 50 50 40 40 40 40 30 30 30 400

Tax credit for certain expenditures for maintaining 

railroad tracks

Exclusion of interest on owner-occupied mortgage 

subsidy bonds 

Deductibility of mortgage interest on owneroccupied homes 

Deductibility of State and local property tax on 

owner-occupied homes 

Exception from passive loss rules for $25,000 of 

rental loss 

Accelerated depreciation on rental housing 

(normal tax method) 

Capital gains (except agriculture, timber, iron ore, 

and coal)

Graduated corporation income tax rate (normal tax 

method) 

Expensing of certain small investments (normal 

tax method) 

Exclusion of interest on bonds for Highway Projects 

and rail-truck transfer facilities

Accelerated depreciation of machinery and 

equipment (normal tax method) 

Accelerated depreciation of buildings other than 

rental housing (normal tax method) 

Ordinary income treatment of loss from small 

business corporation stock sale 

Special alternative tax on small property and 

casualty insurance companies 

Tax exemption of certain insurance companies 

owned by tax-exempt organizations

26

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Community and regional development: 

88 10 10 10 10 10 10 10 10 10 10 10 100

89 210 270 310 330 350 330 340 360 380 400 440 3,510

90 140 140 150 150 150 160 160 160 170 170 170 1,580

91 Empowerment zones 40 20 10 10 10 1000000 60

92 New markets tax credit 1,170 1,200 1,110 890 620 410 220 20 -110 -160 -180 4,020

93 Credit to holders of Gulf Tax Credit Bonds. 70 80 100 100 110 100 110 110 120 130 140 1,100

94 Recovery Zone Bonds 6/ 40 50 50 60 60 60 60 60 60 70 70 600

95 Tribal Economic Development Bonds 10 10 20 20 20 20 20 20 20 20 20 190

Education, training, employment, and social services: 

Education: 

96000000000000

97 HOPE tax credit000000000000

98 Lifetime Learning tax credit000000000000

99 American Opportunity Tax Credit 7/000000000000

100 Education Individual Retirement Accounts000000000000

101 Deductibility of student-loan interest000000000000

102 Deduction for higher education expenses000000000000

103 Qualified tuition programs000000000000

104 Exclusion of interest on student-loan bonds 140 180 210 220 230 220 220 240 250 270 290 2,330

105 650 830 960 1,000 1,060 1,000 1,030 1,110 1,160 1,230 1,350 10,730

106 Credit for holders of zone academy bonds 8/ 160 130 120 110 100 100 90 90 80 80 80 980

107000

000000000

108000000000000

109 Deductibility of charitable contributions (education) 860 900 940 980 1,030 1,070 1,120 1,170 1,220 1,270 1,320 11,020

110000000000000

111 Special deduction for teacher expenses000000000000

112 Discharge of student loan indebtedness000000000000

113 Qualified school construction bonds 9/ 160 160 160 160 160 160 160 160 160 160 160 1,600

Training, employment, and social services: 

114 Work opportunity tax credit 540 300 170 130 100 70 50 40 30 20 20 930

115 Employer provided child care exclusion000000000000

116 Employer-provided child care credit 10 10 10 10 20 20 20 20 20 20 20 170

117 Assistance for adopted foster children000000000000

118 Adoption credit and exclusion 10/00000000

0000

119000000000000

120 Credit for child and dependent care expenses 000000000000

121 Credit for disabled access expenditures 000000000000

122 1,800 1,890 1,970 2,060 2,150 2,250 2,340 2,450 2,550 2,650 2,750 23,060

123 Exclusion of certain foster care payments 000000000000

124 Exclusion of parsonage allowances 000000000000

125 Indian employment credit 20 10 10 100000000 30

Health: 

126000000000000

127 Self-employed medical insurance premiums000000000000

128 Medical Savings Accounts / Health Savings Accounts0000

00000000

129 Deductibility of medical expenses 000000000000

130 Exclusion of interest on hospital construction bonds 1,020 1,300 1,510 1,580 1,660 1,580 1,620 1,750 1,830 1,930 2,130 16,890

131 Refundable Premium Assistance Tax Credit 12/000000000000

132 137 154 162 160 149 129 113 118 82 56 25 1,148

133 Deductibility of charitable contributions (health) 240 250 270 280 290 300 320 330 340 360 380 3,120

134 Tax credit for orphan drug research 1,450 1,750 2,110 2,550 3,070 3,710 4,470 5,400 6,510 7,850 9,480 46,900

135 Special Blue Cross/Blue Shield deduction 250 250 260 270 280 290 300 320 330 340 350 2,990

136000000000000

137000000000000

Investment credit for rehabilitation of structures (other 

than historic) 

Exclusion of interest for airport, dock, and similar 

Exclusion of scholarship and fellowship income 

(normal tax method) 

Exemption of certain mutuals' and cooperatives' 

Exclusion of interest on bonds for private nonprofit 

educational facilities 

Exclusion of interest on savings bonds redeemed 

to finance educational expenses

Deductibility of charitable contributions, other than 

education and health

Tax credit for health insurance purchased by certain 

displaced and retired individuals 14/

Parental personal exemption for students age 19 

or over 

Exclusion of employer-provided educational 

assistance 

Exclusion of employee meals and lodging (other 

than military) 

Credit for employee health insurance expenses of 

small business 13/

Distributions from retirement plans for premiums for 

health and long-term care insurance

Exclusion of employer contributions for medical 

insurance premiums and medical care 11/

27

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Income security: 

138 Child credit 15/ 0 0 0 0 0 0 0 0 0 0 0 0

139 Exclusion of railroad retirement system benefits 0 0 0 0 0 0 0 0 0 0 0 0

140 Exclusion of workers' compensation benefits 0 0 0 0 0 0 0 0 0 0 0 0

141 0 0 0 0 0 0 0 0 0 0 0 0

142 Exclusion of special benefits for disabled coal miners 0 0 0 0 0 0 0 0 0 0 0 0

143 Exclusion of military disability pensions 0 0 0 0 0 0 0 0 0 0 0 0

Net exclusion of pension contributions and earnings: 

144 Defined benefit employer plans 0 0 0 0 0 0 0 0 0 0 0 0

145 Defined contribution employer plans 0 0 0 0 0 0 0 0 0 0 0 0

146 Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

147 Low and moderate income savers credit 0 0 0 0 0 0 0 0 0 0 0 0

148 Self-Employed plans 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of other employee benefits: 

149 Premiums on group term life insurance 0 0 0 0 0 0 0 0 0 0 0 0

150 Premiums on accident and disability insurance 0 0 0 0 0 0 0 0 0 0 0 0

151 0 0 0 0 0 0 0 0 0 0 0 0

152 Special ESOP rules 1,780 1,880 1,980 2,090 2,200 2,320 2,450 2,580 2,720 2,870 3,020 24,110

153 Additional deduction for the blind 0 0 0 0 0 0 0 0 0 0 0 0

154 Additional deduction for the elderly 0 0 0 0 0 0 0 0 0 0 0 0

155 Tax credit for the elderly and disabled 0 0 0 0 0 0 0 0 0 0 0 0

156 Deductibility of casualty losses 0 0 0 0 0 0 0 0 0 0 0 0

157 Earned income tax credit 16/ 0 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 

158 Social Security benefits for retired workers 0 0 0 0 0 0 0 0 0 0 0 0

159 Social Security benefits for disabled workers 0 0 0 0 0 0 0 0 0 0 0 0

160 0 0 0 0 0 0 0 0 0 0 0 0

161 430 440 460 490 510 530 550 580 600 630 660 5,450

Veterans benefits and services: 

162 0 0 0 0 0 0 0 0 0 0 0 0

163 Exclusion of veterans pensions 0 0 0 0 0 0 0 0 0 0 0 0

164 Exclusion of GI bill benefits 0 0 0 0 0 0 0 0 0 0 0 0

165 Exclusion of interest on veterans housing bonds 0 0 0 0 0 0 0 0 0 0 10 10

General purpose fiscal assistance: 

166 8,410 10,750 12,450 13,030 13,750 13,020 13,350 14,430 15,070 15,940 17,560 139,350

167 Build America Bonds 17/ 0 0 0 0 0 0 0 0 0 0 0 0

168 0 0 0 0 0 0 0 0 0 0 0 0

Interest: 

169 Deferral of interest on U.S. savings bonds 0 0 0 0 0 0 0 0 0 0 0 0

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 0 0 0 0 0 0 0 0 0 0 0 0

0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of interest on State and local bonds for: 

Public purposes 8,410 10,750 12,450 13,030 13,750 13,020 13,350 14,430 15,070 15,940 17,560 139,350

Energy facilities 10 10 10 10 10 10 10 10 10 10 10 100

130 170 190 200 210 200 200 220 230 240 270 2,130

Small-issues 50 60 70 70 80 70 70 80 80 90 100 770

Owner-occupied mortgage subsidies 360 460 530 550 580 550 570 610 640 680 750 5,920

Rental housing 300 380 440 460 490 460 470 510 540 570 620 4,940

Airports, docks, and similar facilities 210 270 310 330 350 330 340 360 380 400 440 3,510

Student loans 140 180 210 220 230 220 220 240 250 270 290 2,330

Private nonprofit educational facilities 650 830 960 1,000 1,060 1,000 1,030 1,110 1,160 1,230 1,350 10,730

Hospital construction 1,020 1,300 1,510 1,580 1,660 1,580 1,620 1,750 1,830 1,930 2,130 16,890

Veterans' housing 0 0 0 0 0 0 0 0 0 0 10 10

Deductibility of nonbusiness State and local taxes 

other than on owner-occupied homes 

Nonbusiness State and local taxes other than on 

owner-occupied homes 

See Table 1 footnotes for specific table information

Exclusion of public assistance benefits (normal tax 

method) 

Income of trusts to finance supplementary 

unemployment benefits 

Social Security benefits for spouses, dependents 

and survivors

Credit for certain employer contributions to social 

security

Exclusion of veterans death benefits and disability 

compensation 

Exclusion of interest on public purpose State and local 

bonds

Water, sewage, and hazardous waste disposal 

facilities 

28

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2016-25

National Defense

1 13,680 14,220 13,170 13,310 13,780 14,340 14,970 15,640 16,360 17,130 17,950 150,870

International affairs: 

2 Exclusion of income earned abroad by U.S. citizens 5,990 6,280 6,600 6,930 7,280 7,640 8,020 8,420 8,840 9,290 9,750 79,050

3 1,240 1,300 1,370 1,430 1,510 1,580 1,660 1,740 1,830 1,920 2,020 16,360

4 Inventory property sales source rules exception 0 0 0 0 0 0 0 0 0 0 0 0

5 0 0 0 0 0 0 0 0 0 0 0 0

6 0 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 770 620 410 430 470 500 530 540 560 580 610 5,250

8 Credit for increasing research activities 290 160 140 130 120 100 90 80 70 60 60 1,010

Energy: 

9 Expensing of exploration and development costs, fuels 160 110 110 120 130 140 150 150 160 170 160 1,400

10 Excess of percentage over cost depletion, fuels 130 140 170 200 230 250 260 280 310 340 360 2,540

11 40 40 40 40 40 30 30 30 30 30 30 340

12 Capital gains treatment of royalties on coal 110 120 130 130 130 140 140 150 150 160 170 1,420

13 Exclusion of interest on energy facility bonds 10 10 20 20 20 20 30 30 30 30 40 250

14 Energy production credit 1/ 390 490 560 580 560 530 510 490 460 400 290 4,870

15 Energy investment credit 1/ 200 290 190 50 10 30 60 90 100 110 80 1,010

16 Alcohol fuel credits 2/ 10 0 0 0 0 0 0 0 0 0 0 0

17 30 10 10 0 0 0 0 0 0 0 0 20

18 330 330 390 510 530 480 370 240 120 100 110 3,180

19 Exclusion of utility conservation subsidies 400 420 440 460 490 510 540 560 590 620 650 5,280

20 Credit for holding clean renewable energy bonds 4/ 50 50 50 50 50 50 50 50 50 50 50 500

21 0 0 0 0 0 0 0 0 0 0 0 0

22 Credit for investment in clean coal facilities 0 20 40 40 20 0 0 0 0 0 0 120

23 0 0 0 0 0 0 0 0 0 0 0 0

24 0 0 0 0 0 0 0 0 0 0 0 0

25 20 20 20 20 20 20 20 20 20 20 20 200

26 20 -10 -20 -20 -20 -20 -20 -20 -20 -20 -20 -190

27 Credit for construction of new energy efficient homes 40 10 0 0 0 0 0 0 0 0 0 10

28 270 0 0 0 0 0 0 0 0 0 0 0

29 Credit for residential energy efficient property 850 770 460 180 40 0 0 0 0 0 0 1,450

30 Qualified energy conservation bonds 5/ 20 20 20 20 20 20 20 20 20 20 20 200

31 Advanced energy property credit 10 0 -10 -10 -10 0 0 0 0 0 0 -30

32 Advanced nuclear power production credit 0 0 0 0 0 0 0 0 0 0 0 0

33 Reduced tax rate for nuclear decommissioning funds 0 0 0 0 0 0 0 0 0 0 0 0

Natural resources and environment: 

34 0 0 0 0 0 0 0 10 10 0 0 20

35 30 30 30 30 30 30 20 20 20 20 20 250

36 320 320 360 420 480 530 580 640 690 740 790 5,550

37 Capital gains treatment of certain timber income 110 120 130 130 130 140 140 150 150 160 170 1,420

38 Expensing of multiperiod timber growing costs 130 130 140 140 140 150 160 160 160 160 170 1,510

39 Tax incentives for preservation of historic structures 70 70 70 70 70 70 80 80 80 80 80 750

40 Industrial CO2 capture and sequestration tax credit 0 0 0 0 0 0 0 0 0 0 0 0

41 10 20 20 20 20 20 30 30 30 30 40 260

Total from individuals

Deduction for endangered species recovery 

expenditures

Natural gas distribution pipelines treated as 15-year 

property

Amortize all geological and geophysical expenditures 

over 2 years

Credit for energy efficiency improvements to existing 

homes

Expensing of exploration and development costs, 

nonfuel minerals 

Excess of percentage over cost depletion, nonfuel 

minerals 

Exclusion of benefits and allowances to armed forces 

personnel 

Exclusion of certain allowances for Federal 

employees abroad

Deferred taxes for financial firms on certain income 

earned overseas

Bio-Diesel and small agri-biodiesel producer tax 

credits 3/

Tax credits for clean-fuel burning vehicles and 

refueling property

Table 2b. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2015-2025

(in millions of dollars)

Deferral of income from controlled foreign 

corporations (normal tax method) 

Expensing of research and experimentation 

expenditures (normal tax method) 

Exception from passive loss limitation for working 

interests in oil and gas properties 

Deferral of gain from dispositions of transmission 

property to implement FERC restructuring policy

Temporary 50% expensing for equipment used in the 

refining of liquid fuels

Allowance of deduction for certain energy efficient 

commercial building property

Exclusion of interest on bonds for water, sewage, and 

hazardous waste facilities

29

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Agriculture: 

42 Expensing of certain capital outlays 210 200 210 220 230 250 260 270 290 300 320 2,550

43 Expensing of certain multiperiod production costs 330 350 360 380 410 430 450 480 510 540 580 4,490

44 Treatment of loans forgiven for solvent farmers 40 40 40 40 40 40 40 40 40 40 40 400

45 Capital gains treatment of certain income 1,150 1,240 1,280 1,300 1,320 1,360 1,410 1,470 1,530 1,590 1,670 14,170

46 Income averaging for farmers 130 140 140 140 140 140 140 140 140 140 140 1,400

47 Deferral of gain on sale of farm refiners 0 0 0 0 0 0 0 0 0 0 0 0

48 Expensing of reforestation expenditures 30 30 40 40 40 40 40 50 50 50 50 430

Commerce and housing: 

Financial institutions and insurance: 

49 Exemption of credit union income 0 0 0 0 0 0 0 0 0 0 0 0

50 Exclusion of interest on life insurance savings 15,820 17,130 21,360 26,600 31,160 34,960 37,970 40,340 42,390 44,300 46,220 342,430

51 0 0 0 0 0 0 0 0 0 0 0 0

52 0 0 0 0 0 0 0 0 0 0 0 0

53 Small life insurance company deduction 0 0 0 0 0 0 0 0 0 0 0 0

54 Exclusion of interest spread of financial institutions 380 420 450 470 480 500 510 530 540 550 560 5,010

Housing: 

55 890 890 1,000 1,150 1,320 1,470 1,620 1,770 1,910 2,050 2,190 15,370

56 Exclusion of interest on rental housing bonds 750 740 830 960 1,100 1,230 1,350 1,480 1,600 1,710 1,830 12,830

57 58,850 62,440 68,610 75,980 83,760 91,380 98,930 106,150 113,320 120,560 127,360 948,490

58 31,120 33,080 35,580 38,330 41,150 43,850 46,580 49,280 52,060 55,010 57,890 452,810

59 Deferral of income from installment sales 1,570 1,620 1,640 1,650 1,670 1,720 1,770 1,840 1,920 2,000 2,090 17,920

60 Capital gains exclusion on home sales 37,220 40,580 43,460 46,560 49,870 53,420 57,230 61,300 65,670 70,340 75,350 563,780

61 Exclusion of net imputed rental income 97,920 101,100 104,950 108,460 111,480 114,070 118,400 122,900 127,570 132,420 137,450 1,178,800

62 6,810 7,210 7,540 7,870 8,240 8,600 8,880 9,170 9,490 9,850 10,160 87,010

63 Credit for low-income housing investments 400 390 410 420 430 430 440 450 460 470 480 4,380

64 1,040 1,390 1,900 2,500 3,140 3,800 4,590 5,400 6,130 6,810 7,460 43,120

65 Discharge of mortgage indebtedness 1,100 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

66 Discharge of business indebtedness -160 -120 -50 -10 0 10 30 40 50 50 50 50

67 Exceptions from imputed interest rules 40 50 60 60 60 70 70 80 80 80 90 700

68 Treatment of qualified dividends 25,650 25,530 26,470 27,490 28,590 29,760 31,030 32,380 33,810 35,310 36,880 307,250

69 85,710 92,820 95,870 96,790 98,660 101,520 105,170 109,410 114,070 119,080 124,380 1,057,770

70 Capital gains exclusion of small corporation stock 220 380 620 800 780 680 580 490 430 390 360 5,510

71 Step-up basis of capital gains at death 54,850 58,270 61,910 65,770 69,870 74,220 78,850 83,770 88,990 94,540 100,440 776,630

72 Carryover basis of capital gains on gifts 2,490 2,740 3,010 3,300 3,620 3,970 4,340 4,750 5,170 5,530 5,820 42,250

73 50 50 50 50 50 50 50 50 50 50 50 500

74 Deferral of gains from like-kind exchanges 1,530 1,600 1,690 1,780 1,860 1,960 2,060 2,160 2,270 2,380 2,500 20,260

75 -5,410 -5,320 -5,370 -5,510 -5,820 -6,200 -6,600 -7,000 -7,410 -7,870 -8,170 -65,270

76 -1,660 -1,620 5,770 10,340 13,310 15,140 16,070 16,560 16,800 17,570 18,440 128,380

77 -950 -1,910 -590 170 710 1,050 1,400 1,670 1,820 1,940 2,050 8,310

78 0 0 0 0 0 0 0 0 0 0 0 0

79 Exclusion of interest on small issue bonds 120 110 130 150 170 190 210 230 250 260 280 1,980

80 Deduction for US production activities 3,690 3,830 4,000 4,180 4,370 4,560 4,760 4,970 5,180 5,410 5,640 46,900

81 Special rules for certain film and TV production 40 20 10 10 0 0 0 0 0 0 0 40

Transportation: 

82 Tonnage tax 0 0 0 0 0 0 0 0 0 0 0 0

83 Deferral of tax on shipping companies 0 0 0 0 0 0 0 0 0 0 0 0

84 Exclusion of reimbursed employee parking expenses 2,790 2,900 3,000 3,100 3,220 3,340 3,440 3,550 3,670 3,790 3,870 33,880

85 Exclusion for employer-provided transit passes 730 770 820 860 920 980 1,030 1,100 1,170 1,220 1,290 10,160

86 10 0 0 0 0 0 0 0 0 0 0 0

87 170 160 150 140 130 130 120 120 110 110 100 1,270

Exclusion of interest on owner-occupied mortgage 

subsidy bonds 

Deductibility of mortgage interest on owneroccupied homes 

Deductibility of State and local property tax on 

owner-occupied homes 

Exception from passive loss rules for $25,000 of 

rental loss 

Accelerated depreciation on rental housing 

(normal tax method) 

Capital gains (except agriculture, timber, iron ore, 

and coal)

Expensing of certain small investments (normal 

tax method) 

Graduated corporation income tax rate (normal tax 

method) 

Tax credit for certain expenditures for maintaining 

railroad tracks

Tax exemption of certain insurance companies 

owned by tax-exempt organizations

Special alternative tax on small property and 

casualty insurance companies 

Ordinary income treatment of loss from small 

business corporation stock sale 

Accelerated depreciation of buildings other than 

rental housing (normal tax method) 

Accelerated depreciation of machinery and 

equipment (normal tax method) 

Exclusion of interest on bonds for Highway Projects 

and rail-truck transfer facilities

30

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Community and regional development: 

88 10 10 10 10 10 10 10 10 10 10 10 100

89 530 530 590 680 780 870 960 1,050 1,130 1,210 1,290 9,090

90 0 0 0 0 0 0 0 0 0 0 0 0

91 Empowerment zones 60 20 20 20 20 10 10 10 10 10 10 140

92 New markets tax credit 30 30 20 20 20 10 10 0 0 0 0 110

93 Credit to holders of Gulf Tax Credit Bonds. 170 170 190 210 250 270 300 330 360 380 410 2,870

94 Recovery Zone Bonds 6/ 90 90 100 120 130 150 160 180 190 210 220 1,550

95 Tribal Economic Development Bonds 30 30 30 40 40 50 50 60 60 60 70 490

Education, training, employment, and social services: 

Education: 

96 3,130 3,250 3,360 3,450 3,510 3,640 3,770 3,900 4,040 4,190 4,340 37,450

97 HOPE tax credit 0 0 0 670 6,740 6,880 7,290 7,380 7,500 7,880 7,960 52,300

98 Lifetime Learning tax credit 2,270 2,450 2,460 2,660 4,340 4,410 4,500 4,530 4,590 4,660 4,690 39,290

99 American Opportunity Tax Credit 7/ 13,470 13,430 13,500 12,190 0 0 0 0 0 0 0 39,120

100 Education Individual Retirement Accounts 30 30 40 40 40 40 40 40 50 50 50 420

101 Deductibility of student-loan interest 1,800 1,800 1,780 1,780 1,790 1,820 1,820 1,810 1,840 1,830 1,820 18,090

102 Deduction for higher education expenses 390 0 0 0 0 0 0 0 0 0 0 0

103 Qualified tuition programs 1,680 1,870 2,080 2,290 2,510 2,760 3,020 3,310 3,610 3,960 4,330 29,740

104 Exclusion of interest on student-loan bonds 350 350 390 450 520 580 640 700 750 810 860 6,050

105 1,620 1,610 1,800 2,090 2,390 2,660 2,930 3,210 3,470 3,710 3,960 27,830

106 Credit for holders of zone academy bonds 8/ 0 0 0 0 0 0 0 0 0 0 0 0

107 30 30 30 30 30 30 40 40 40 40 40 350

108 4,400 4,400 4,420 4,460 4,590 4,710 4,840 4,950 5,050 5,140 5,250 47,810

109 Deductibility of charitable contributions (education) 3,960 4,280 4,620 4,990 5,370 5,720 6,050 6,380 6,710 7,030 7,360 58,510

110 800 850 890 940 980 1,030 1,080 1,130 1,190 1,240 1,300 10,630

111 Special deduction for teacher expenses 210 0 0 0 0 0 0 0 0 0 0 0

112 Discharge of student loan indebtedness 90 90 90 90 90 90 90 90 90 90 90 900

113 Qualified school construction bonds 9/ 490 490 490 490 490 490 490 490 490 490 490 4,900

Training, employment, and social services: 

114 Work opportunity tax credit 180 120 70 50 40 30 20 20 10 10 10 380

115 Employer provided child care exclusion 900 930 980 1,050 1,120 1,180 1,250 1,330 1,410 1,500 1,590 12,340

116 Employer-provided child care credit 0 0 0 0 0 0 0 0 0 0 0 0

117 Assistance for adopted foster children 560 540 560 580 610 630 650 680 710 740 770 6,470

118 Adoption credit and exclusion 10/ 270 250 260 290 270 320 310 320 320 320 330 2,990

119 4,410 4,500 4,600 4,710 4,840 4,970 5,100 5,230 5,360 5,490 5,620 50,420

120 Credit for child and dependent care expenses 4,500 4,520 4,560 4,650 4,760 4,900 5,000 5,120 5,220 5,330 5,440 49,500

121 Credit for disabled access expenditures 10 10 10 10 20 20 20 20 20 20 20 170

122 39,110 42,350 45,660 49,320 53,100 56,580 59,840 63,080 66,260 69,480 72,660 578,330

123 Exclusion of certain foster care payments 430 460 480 500 510 520 530 550 560 570 580 5,260

124 Exclusion of parsonage allowances 690 730 770 810 850 900 940 990 1,050 1,100 1,160 9,300

125 Indian employment credit 20 20 20 10 10 10 10 10 10 10 0 110

Health: 

126 201,450 210,980 220,550 229,620 243,160 259,520 275,600 293,420 313,810 336,070 359,590 2,742,320

127 Self-employed medical insurance premiums 6,690 7,060 7,440 7,680 7,980 8,400 8,820 9,240 9,690 10,210 10,770 87,290

128 Medical Savings Accounts / Health Savings Accounts 4,810 5,730 6,830 8,060 9,560 11,390 13,550 16,130 19,190 22,830 27,150 140,420

129 Deductibility of medical expenses 7,660 8,260 8,700 9,530 10,980 12,850 14,810 16,840 19,380 22,350 25,460 149,160

130 Exclusion of interest on hospital construction bonds 2,550 2,540 2,840 3,290 3,760 4,180 4,610 5,060 5,460 5,850 6,230 43,820

131 Refundable Premium Assistance Tax Credit 12/ 1,960 2,340 3,870 4,880 6,880 7,580 7,810 8,140 8,430 8,730 9,090 67,750

132 376 390 381 357 304 266 188 240 160 125 53 2,464

133 Deductibility of charitable contributions (health) 4,380 4,740 5,120 5,530 5,950 6,340 6,710 7,070 7,430 7,790 8,140 64,820

134 Tax credit for orphan drug research 10 10 10 20 20 20 20 30 30 40 40 240

135 Special Blue Cross/Blue Shield deduction 0 0 0 0 0 0 0 0 0 0 0 0

136 0 30 30 20 10 0 0 0 0 0 0 90

137 400 440 460 480 500 520 540 560 580 600 620 5,300

Investment credit for rehabilitation of structures (other 

than historic) 

Exclusion of scholarship and fellowship income 

(normal tax method) 

Exclusion of employer-provided educational 

assistance 

Parental personal exemption for students age 19 

or over 

Exclusion of employee meals and lodging (other 

than military) 

Exclusion of interest on bonds for private nonprofit 

educational facilities 

Exclusion of interest on savings bonds redeemed 

to finance educational expenses

Deductibility of charitable contributions, other than 

education and health

Exclusion of employer contributions for medical 

insurance premiums and medical care 11/

Distributions from retirement plans for premiums for 

health and long-term care insurance

Tax credit for health insurance purchased by certain 

displaced and retired individuals 14/

Credit for employee health insurance expenses of 

small business 13/

Exclusion of interest for airport, dock, and similar 

Exemption of certain mutuals' and cooperatives' 

31

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
Income security: 

138 Child credit 15/ 23,980 24,000 24,290 24,700 25,190 25,080 24,770 24,440 24,040 23,600 23,180 243,290

139 Exclusion of railroad retirement system benefits 300 300 300 290 280 270 250 240 220 190 170 2,510

140 Exclusion of workers' compensation benefits 9,720 9,820 9,920 10,010 10,110 10,220 10,320 10,420 10,530 10,630 10,730 102,710

141 560 570 590 600 630 650 670 680 710 730 680 6,510

142 Exclusion of special benefits for disabled coal miners 30 30 20 20 20 10 10 10 10 10 0 140

143 Exclusion of military disability pensions 220 220 240 250 260 270 290 300 310 330 340 2,810

Net exclusion of pension contributions and earnings: 

144 Defined benefit employer plans 66,620 66,600 66,760 67,020 66,180 64,820 63,190 60,910 58,470 55,930 52,650 622,530

145 Defined contribution employer plans 62,070 64,710 65,620 68,120 73,930 78,960 98,370 107,980 114,420 121,240 128,130 921,480

146 Individual Retirement Accounts 16,400 16,850 16,970 17,240 18,080 19,270 19,680 20,630 21,780 22,840 24,080 197,420

147 Low and moderate income savers credit 1,280 1,280 1,270 1,270 1,300 1,310 1,310 1,330 1,340 1,350 1,360 13,120

148 Self-Employed plans 25,490 28,030 30,800 33,760 37,030 40,480 44,020 47,870 52,060 56,610 61,560 432,220

Exclusion of other employee benefits: 

149 Premiums on group term life insurance 2,340 2,450 2,560 2,610 2,700 2,800 2,900 3,000 3,110 3,240 3,350 28,720

150 Premiums on accident and disability insurance 310 320 320 330 330 330 340 340 340 350 350 3,350

151 20 20 30 40 40 50 50 60 60 60 60 470

152 Special ESOP rules 110 120 120 120 120 130 130 130 140 140 140 1,290

153 Additional deduction for the blind 40 40 40 40 40 50 50 50 60 60 60 490

154 Additional deduction for the elderly 2,890 3,080 3,310 3,560 3,760 4,010 4,210 4,500 4,870 5,170 5,530 42,000

155 Tax credit for the elderly and disabled 10 10 10 10 10 10 10 0 0 0 0 60

156 Deductibility of casualty losses 350 370 390 410 430 450 460 470 490 500 520 4,490

157 Earned income tax credit 16/ 2,120 2,820 2,340 3,040 1,820 1,910 1,980 2,080 2,180 2,280 2,380 22,830

Social Security: 

Exclusion of social security benefits: 

158 Social Security benefits for retired workers 25,780 26,900 28,280 29,490 30,730 31,760 32,510 33,130 33,690 34,340 34,590 315,420

159 Social Security benefits for disabled workers 8,280 8,490 8,580 8,730 8,970 9,210 9,500 9,840 10,190 10,540 10,870 94,920

160 4,060 4,160 4,310 4,440 4,610 4,750 4,870 5,000 5,140 5,310 5,420 48,010

161 550 570 600 620 650 680 710 740 770 810 840 6,990

Veterans benefits and services: 

162 6,150 6,760 7,250 7,590 7,870 8,170 8,460 8,770 9,080 9,400 9,740 83,090

163 Exclusion of veterans pensions 420 450 490 510 530 560 580 600 630 650 680 5,680

164 Exclusion of GI bill benefits 1,530 1,690 1,830 1,960 2,070 2,190 2,310 2,440 2,580 2,720 2,880 22,670

165 Exclusion of interest on veterans housing bonds 10 10 10 10 10 10 10 10 10 10 20 110

General purpose fiscal assistance: 

166 21,020 20,950 23,450 27,150 31,060 34,530 38,080 41,760 45,070 48,280 51,470 361,800

167 Build America Bonds 17/ 0 0 0 0 0 0 0 0 0 0 0 0

168 48,430 51,380 55,130 59,030 62,870 66,730 70,830 75,060 79,410 83,920 88,280 692,640

Interest: 

169 Deferral of interest on U.S. savings bonds 1,020 1,010 1,000 990 980 970 960 950 940 930 920 9,650

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied homes 31,120 33,080 35,580 38,330 41,150 43,850 46,580 49,280 52,060 55,010 57,890 452,810

48,430 51,380 55,130 59,030 62,870 66,730 70,830 75,060 79,410 83,920 88,280 692,640

Exclusion of interest on State and local bonds for: 

Public purposes 21,020 20,950 23,450 27,150 31,060 34,530 38,080 41,760 45,070 48,280 51,470 361,800

Energy facilities 10 10 20 20 20 20 30 30 30 30 40 250

320 320 360 420 480 530 580 640 690 740 790 5,550

Small-issues 120 110 130 150 170 190 210 230 250 260 280 1,980

Owner-occupied mortgage subsidies 890 890 1,000 1,150 1,320 1,470 1,620 1,770 1,910 2,050 2,190 15,370

Rental housing 750 740 830 960 1,100 1,230 1,350 1,480 1,600 1,710 1,830 12,830

Airports, docks, and similar facilities 530 530 590 680 780 870 960 1,050 1,130 1,210 1,290 9,090

Student loans 350 350 390 450 520 580 640 700 750 810 860 6,050

Private nonprofit educational facilities 1,620 1,610 1,800 2,090 2,390 2,660 2,930 3,210 3,470 3,710 3,960 27,830

Hospital construction 2,550 2,540 2,840 3,290 3,760 4,180 4,610 5,060 5,460 5,850 6,230 43,820

Veterans' housing 10 10 10 10 10 10 10 10 10 10 20 110

Water, sewage, and hazardous waste disposal 

facilities 

Deductibility of nonbusiness State and local taxes 

other than on owner-occupied homes 

Nonbusiness State and local taxes other than on 

owner-occupied homes 

Exclusion of public assistance benefits (normal tax 

method) 

See Table 1 footnotes for specific table information

Income of trusts to finance supplementary 

unemployment benefits 

Social Security benefits for spouses, dependents 

and survivors

Credit for certain employer contributions to social 

security

Exclusion of veterans death benefits and disability 

compensation 

Exclusion of interest on public purpose State and local 

bonds

32

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
(in millions of dollars)

Provision 2016 2017 2016-25

126 Exclusion of employer contributions for medical insurance premiums and medical care 210,980 220,550 2,742,320

61 Exclusion of net imputed rental income 101,100 104,950 1,178,800

69 Capital gains (except agriculture, timber, iron ore, and coal) 92,820 95,870 1,057,770

57 Deductibility of mortgage interest on owner-occupied homes 62,440 68,610 948,490

145 Defined contribution employer plans 64,710 65,620 921,480

5 Deferral of income from controlled foreign corporations (normal tax method) 67,780 71,170 852,580

71 Step-up basis of capital gains at death 58,270 61,910 776,630

168 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 51,380 55,130 692,640

144 Defined benefit employer plans 66,600 66,760 622,530

122 Deductibility of charitable contributions, other than education and health 44,240 47,630 601,390

60 Capital gains exclusion on home sales 40,580 43,460 563,780

166 Exclusion of interest on public purpose State and local bonds 31,700 35,900 501,150

58 Deductibility of State and local property tax on owner-occupied homes 33,080 35,580 452,810

148 Self-Employed plans 28,030 30,800 432,220

50 Exclusion of interest on life insurance savings 18,870 23,380 370,840

76 Accelerated depreciation of machinery and equipment (normal tax method) -8,870 12,180 356,330

158 Social Security benefits for retired workers 26,900 28,280 315,420

68 Treatment of qualified dividends 25,530 26,470 307,250

136 Child credit 24,000 24,290 243,290

146 Individual Retirement Accounts 16,850 16,970 197,420

80 Deduction for US production activities 15,680 16,440 192,890

1 Exclusion of benefits and allowances to armed forces personnel 14,220 13,170 150,870

129 Deductibility of medical expenses 8,260 8,700 149,160

128 Medical Savings Accounts / Health Savings Accounts 5,730 6,830 140,420

140 Exclusion of workers' compensation benefits 9,820 9,920 102,710

159 Social Security benefits for disabled workers 8,490 8,580 94,920

74 Deferral of gains from like-kind exchanges 7,320 7,700 92,230

63 Credit for low-income housing investments 7,880 8,130 87,570

127 Self-employed medical insurance premiums 7,060 7,440 87,290

62 Exception from passive loss rules for $25,000 of rental loss 7,210 7,540 87,010

162 Exclusion of veterans death benefits and disability compensation 6,760 7,250 83,090

2 Exclusion of income earned abroad by U.S. citizens 6,280 6,600 79,050

7 Expensing of research and experimentation expenditures (normal tax method) 6,350 5,820 73,410

109 Deductibility of charitable contributions (education) 5,180 5,560 69,530

133 Deductibility of charitable contributions (health) 4,990 5,390 67,940

131 Refundable Premium Assistance Tax Credit 2,340 3,870 67,750

4 Inventory property sales source rules exception 4,210 4,560 61,840

130 Exclusion of interest on hospital construction bonds 3,840 4,350 60,710

97 HOPE tax credit 0 0 52,300

64 Accelerated depreciation on rental housing (normal tax method) 1,650 2,270 51,690

119 Exclusion of employee meals and lodging (other than military) 4,500 4,600 50,420

120 Credit for child and dependent care expenses 4,520 4,560 49,500

160 Social Security benefits for spouses, dependents and survivors 4,160 4,310 48,010

108 Parental personal exemption for students age 19 or over 4,400 4,420 47,810

134 Tax credit for orphan drug research 1,760 2,120 47,140

72 Carryover basis of capital gains on gifts 2,740 3,010 42,250

154 Additional deduction for the elderly 3,080 3,310 42,000

98 Lifetime Learning tax credit 2,450 2,460 39,290

99 Lifetime Learning tax credit 13,430 13,500 39,120

105 Exclusion of interest on bonds for private nonprofit educational facilities 2,440 2,760 38,560

96 Exclusion of scholarship and fellowship income (normal tax method) 3,250 3,360 37,450

78 Graduated corporation income tax rate (normal tax method) 3,770 3,670 37,080

84 Exclusion of reimbursed employee parking expenses 2,900 3,000 33,880

103 Qualified Tuition Programs 1,870 2,080 29,740

149 Premiums on group term life insurance 2,450 2,560 28,720

49 Exemption of credit union income 2,300 2,200 26,750

152 Special ESOP rules 2,000 2,100 25,400

157 Earned income tax credit 2,820 2,340 22,830

164 Exclusion of GI bill benefits 1,690 1,830 22,670

55 Exclusion of interest on owner-occupied mortgage subsidy bonds 1,350 1,530 21,290

8 Credit for increasing research activities 3,320 2,980 20,630

14 New technology credit 1,950 2,250 19,470

101 Deductibility of student-loan interest 1,800 1,780 18,090

59 Deferral of income from installment sales 1,620 1,640 17,920

56 Exclusion of interest on rental housing bonds 1,120 1,270 17,770

3 Exclusion of certain allowances for Federal employees abroad 1,300 1,370 16,360

45 Capital gains treatment of certain income 1,240 1,280 14,170

147 Low and moderate income savers credit 1,280 1,270 13,120

10 Excess of percentage over cost depletion, fuels 710 860 12,700

89 Exclusion of interest for airport, dock, and similar bonds 800 900 12,600

161 Credit for certain employer contributions to social security 1,010 1,060 12,440

115 Employer provided child care exclusion 930 980 12,340

110 Exclusion of employer-provided educational assistance 850 890 10,630

85 Exclusion for employer-provided transit passes 770 820 10,160

169 Deferral of interest on U.S. savings bonds 1,010 1,000 9,650

124 Exclusion of parsonage allowances 730 770 9,300

FISCAL YEAR 2016-2025 PROJECTED REVENUE EFFECT

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

33

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
77 Expensing of certain small investments (normal tax method) -2,290 -790 8,690

52 Tax exemption of certain insurance companies owned by tax-exempt organizations 700 730 8,520

104 Exclusion of interest on student-loan bonds 530 600 8,380

36 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 490 550 7,680

141 Exclusion of public assistance benefits (normal tax method) 570 590 6,510

113 Qualified school construction bonds 650 650 6,500

117 Assistance for adopted foster children 540 560 6,470

163 Exclusion of veterans pensions 450 490 5,680

19 Exclusion of utility conservation subsidies 450 470 5,580 9 Expensing of exploration and development costs, fuels 470 460 5,550

70 Capital gains exclusion of small corporation stock 380 620 5,510

138 Distributions from retirement plans for premiums for health and long-term care insurance 440 460 5,300

123 Exclusion of certain foster care payments 460 480 5,260

15 Energy investment credit 1,470 970 5,060

39 Tax incentives for preservation of historic structures 460 470 5,010

54 Exclusion of interest spread of financial institutions 420 450 5,010

35 Excess of percentage over cost depletion, nonfuel minerals 530 540 4,970

43 Expensing of certain multiperiod production costs 370 390 4,850

18 Tax credits for clean-fuel burning vehicles 550 670 4,770

32 Advanced nuclear power production credit 140 140 4,580

156 Deductibility of casualty losses 370 390 4,490

92 New markets tax credit 1,230 1,130 4,130

38 Expensing of multiperiod timber growing costs 330 350 3,980

93 Credit to holders of Gulf Tax Credit Bonds. 250 290 3,970

132 Credit for employee health insurance expenses of small business. 544 543 3,612

150 Premiums on accident and disability insurance 320 320 3,350

118 Adoption credit and exclusion 250 260 2,990

135 Special Blue Cross/Blue Shield deduction 250 260 2,990

143 Exclusion of military disability pensions 220 240 2,810

42 Expensing of certain capital outlays 210 230 2,760

79 Exclusion of interest on small issue bonds 170 200 2,750

33 Advanced nuclear power production credit 170 200 2,540

139 Exclusion of railroad retirement system benefits 300 300 2,510

94 Recovery Zone Bonds 140 150 2,150

87 Exclusion of interest on bonds for Financing of Highway Projects and rail-truck transfer facilities 210 200 1,670

90 Exemption of certain mutuals' and cooperatives' income 140 150 1,580

29 30% credit for residential purchases/installations of solar and fuel cells 770 460 1,450

12 Capital gains treatment of royalties on coal 120 130 1,420

37 Capital gains treatment of certain timber income 120 130 1,420

46 Income averaging for farmers 140 140 1,400

114 Work opportunity tax credit 420 240 1,310

22 Credit for investment in clean coal facilities 160 400 1,180

106 Credit for holders of zone academy bonds 130 120 980

25 Amortize all geological and geophysical expenditures over 2 years 100 100 960

82 Tonnage tax 70 80 910

112 Discharge of student loan indebtedness 90 90 900

20 Credit for holding clean renewable energy bonds 70 70 700

67 Exceptions from imputed interest rules 50 60 700

24 Natural gas distribution pipelines treated as 15-year property 160 160 690

48 Expensing of reforestation expenditures 50 60 690

95 Tribal Economic Development Bonds 40 50 680

40 Industrial CO2 capture and sequestration tax credit 110 150 530

73 Ordinary income treatment of loss from small business corporation stock sale 50 50 500

153 Additional deduction for the blind 40 40 490

151 Income of trusts to finance supplementary unemployment benefits 20 30 470

34 Expensing of exploration and development costs, nonfuel minerals 0 10 450

51 Special alternative tax on small property and casualty insurance companies 30 40 450

41 Deduction for endangered species recovery expenditures 30 30 430

100 Education Individual Retirement Accounts 30 40 420

44 Treatment of loans forgiven for solvent farmers 40 40 400

53 Small life insurance company deduction 30 30 400

13 Exclusion of interest on energy facility bonds 20 30 350

107 Exclusion of interest on savings bonds redeemed to finance educational expenses 30 30 350

11 Exception from passive loss limitation for working interests in oil and gas properties 40 40 340

30 Qualified energy conservation bonds 30 30 300

47 Deferral of gain on sale of farm refiners 20 20 250

81 Special rules for certain film and TV production 110 60 210

83 Deferral of tax on shipping companies 20 20 200

88 Investment credit for rehabilitation of structures (other than historic) 20 20 200

91 Empowerment zones 40 30 200

116 Employer-provided child care credit 10 10 170

121 Credit for disabled access expenditures 10 10 170

125 Indian employment credi 30 30 140

142 Exclusion of special benefits for disabled coal miners 30 20 140

165 Exclusion of interest on veterans housing bonds 10 10 120

137 Tax credit for health insurance purchased by certain displaced and retired individuals 30 30 90

17 Bio-Diesel and small agri-biodiesel producer tax credits 30 20 60

155 Tax credit for the elderly and disabled 10 10 60

66 Discharge of business indebtedness -120 -50 50

27 Credit for construction of new energy efficient homes 200 20

6 Deferred taxes for financial firms on certain income earned overseas

000

34

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
16 Alcohol fuel credits 0 0 0

28 Credit for energy efficiency improvements to existing homes 0 0 0

65 Discharge of mortgage indebtedness 0 0 0

86 Tax credit for certain expenditures for maintaining railroad tracks 0 0 0

102 Deduction for higher education expenses 0 0 0

111 Special deduction for teacher expenses 0 0 0

167 Build America Bonds 0 0 0

31 Advanced Energy Property Credit 10 -30 -90

26 Allowance of deduction for certain energy efficient commercial building property -10 -30 -280

21 Deferral of gain from dispositions of transmission property to implement FERC restructuring policy -220 -180 -880

23 Temporary 50% expensing for equipment used in the refining of liquid fuels -2,050 -1,820 -8,900

75 Accelerated depreciation of buildings other than rental housing (normal tax method) -9,170 -9,390 -116,750

35

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015
2015

Provision Present Value

of Revenue Loss

5 Deferral of income from controlled foreign corporations (normal tax method) 44,630

7 Expensing of research and experimentation expenditures (normal tax method) 3,030

20 Credit for holding clean renewable energy bonds 0

9 Expensing of exploration and development costs - fuels 338

35 Expensing of exploration and development costs - nonfuels 63

39 Expensing of multiperiod timber growing costs 110

44 Expensing of certain multiperiod production costs - agriculture -80

43 Expensing of certain capital outlays - agriculture -30

49 Expensing of reforestation expenditures 20

51 Deferral of income on life insurance and annuity contracts 1/ 13,920

65 Accelerated depreciation on rental housing 14,780

76 Accelerated depreciation of buildings other than rental -11,280

77 Accelerated depreciation of machinery and equipment 12,130

78 Expensing of certain small investments (normal tax method) 550

107 Credit for holders of zone academy bonds 160

64 Credit for low-income housing investments 5,760

104 Deferral for state prepaid tuition plans 3,790

145 Defined benefit employer plans 24,960

146 Defined contribution employer plans 67,150

147 Exclusion of IRA contributions and earnings 1,350

147 Exclusion of Roth earnings and distributions 4,720

147 Exclusion of non-deductible IRA earnings 420

149 Exclusion of contributions and earnings for Self-Employed plans 4,960

167 Exclusion of interest on public-purpose bonds 12,420

Exclusion of interest on non-public purpose bonds 4,170

170 Deferral of interest on U.S. savings bonds 250

1/ Estimate is for annuities only. Life insurance earnings are mostly excluded from taxable income.

Table 4. PRESENT VALUE OF SELECTED TAX EXPENDITURES

FOR ACTIVITY IN CALENDAR YEAR 2015

(in millions of dollars)

36

U.S. Department of the Treasury

Office of Tax Analysis

November 11, 2015