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 2014–2024 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, 2014. In some cases, expired or 

repealed provisions are listed if their revenue effects occur in fiscal year 2014 or later. The estimates are based on the economic 

assumptions from the Mid-Session Review of the 2015 Budget. 

The total revenue effects for tax expenditures for fiscal years 2014–2024 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 2015–2024 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 

 

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.

1
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. 

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 2014 which cause the deferrals or other long-term revenue effects. For instance, a pension contribution in 2014 would 

cause a deferral of tax payments on wages in 2014 and on pension fund earnings on this contribution (e.g., interest) in later years. In 

some future year, however, the 2014 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 

2
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).

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, 2014. 

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 ($99,200 in 2014), 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.

 

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.

3
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 

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 2013.

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, 2013. 

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.

4
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 

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. Alternative fuel 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 

provided a credit of $3 per oil-equivalent barrel of production (in 2004 dollars) for coke or coke gas during a four-year period for 

qualified facilities. Qualifying facilities producing coke and coke gas must have been placed in service by December 31, 2009. 

12. 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. 

13. 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 in 2014, 

tax rates on regular income vary from 10 percent to 39.6 percent, 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. 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. 

14. 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.

15. 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, 2014. 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, 2013. 

16. 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.

17. 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, 2013. 

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

5
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, 2013. 

19. Tax credits for clean-fuel burning vehicles and refueling property.—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 number of credits for certain types of vehicles and property. These are 

available for hydrogen vehicle refueling property, fuel cell vehicles, and plug-in electric-drive motor vehicles. Credits for two- and 

three-wheeled plug-in electric vehicles and non-hydrogen alternative fuel vehicle refueling property expired on December 31, 2013.

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

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.

21. 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. The limit on the volume 

authorized in 2009–2010 is $2.4 billion. As of March 2010, issuers of the unused authorization of such bonds could opt to receive 

direct payment with the yield becoming fully taxable.

22. 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, 2014. 

23. 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. 

24. 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.

25. 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.

26. 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.

27. 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, 2013.

28. 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, 2013.

29. 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 

6
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, 2013. 

30. Credit for energy efficient appliances.—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 tax credits for the manufacture of efficient dishwashers, clothes washers, and refrigerators. The size of the credit 

depended on the efficiency of the appliance. This provision expired on December 31, 2013. 

31. 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.

32. 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. The limit on the volume issued in 

2009–2010 is $3.2 billion. As of March 2010, issuers of the unused authorization of such bonds could opt to receive direct payment 

with the yield becoming fully taxable.

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

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. 

34. 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.

Natural Resources and Environment

35. 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.

36. 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.

37. 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.

38. 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 in 2014, tax rates on regular income vary from 10 percent to 39.6 percent, 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. 

39. 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.

40. 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 

7
reduced by the amount of the credit. 

41. 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 of $20 

per metric ton for qualified carbon dioxide captured at a qualified facility and disposed of in secure geological storage. In addition, the 

provision allows a credit of $10 per metric ton of 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.

42. 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.

Agriculture

43. 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.

44. 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.

45. 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.

46. Capital gains treatment of certain income.—For individuals in 2014, tax rates on regular income vary from 10 percent to 

39.6 percent, 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. 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. 

47. 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.

48. 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.

49. 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.

50. 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.

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

8
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), while 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.

52. 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.

53. 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.

54. 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.

55. 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.

56. 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.

57. 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.

58. 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.

59. 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 

9
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.

60. 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.

61. 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.

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

63. 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 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. 

64. 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. 

65. 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.

66. 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, 2014.

67. Discharge of business indebtedness.—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 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.

68. 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 

10
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. 

69. 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 in 2014, tax 

rates on regular income vary from 10 percent to 39.6 percent, 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. 

70. 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 in 2014, tax rates on regular income vary from 10 percent to 39.6 percent, 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. 

71. 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, 2014. A qualified small business is a corporation whose gross 

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

72. 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.

73. 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.

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 

11
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 

certain distressed areas) in non-capital expenditures incurred during the year. This provision expired at the end of 2013.

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 2014, 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 (indexed) per month in 2014. 

(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, 2013). 

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 2013. 

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. The authority to issue these bonds expires on December 31, 2015.

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. 

12
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, 2013. 

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 

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 2013, the last year for which credit allocations could be 

made. 

93. Expensing of environmental remediation costs.—Under the baseline tax system, the costs would be amortized (or 

depreciated) over an estimate of the useful life of the building. This insures that the net income from the buildings is measured 

appropriately each year. However, the Tax Code allowed taxpayers who cleaned up certain hazardous substances at a qualified site to 

expense the clean-up costs, even though the expenses would generally increase the value of the property significantly or appreciably 

prolong the life of the property. This provision expired on December 31, 2011.

94. 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.

95. 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.

96. 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

97. 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).

98. 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 $1,200 of 

tuition and fees and 50 percent of the next $1,200 of tuition and fees (2014 levels, indexed). The credit only covers tuition and fees 

paid during the first two years of a student’s post-secondary education. In 2014, the credit is phased out ratably for taxpayers with 

modified AGI between $108,000 and $128,000 if married filing jointly ($54,000 and $64,000 for other taxpayers), indexed.

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

13
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 2014, the credit is phased out ratably for taxpayers with 

modified AGI between $108,000 and $128,000 if married filing jointly ($54,000 and $64,000 for other taxpayers), indexed. The credit 

applies to both undergraduate and graduate students.

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

or industries. Under current law in 2014, 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.

101. 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 2014 is $2,000 per beneficiary. In 2014, 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).

102. 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 2014, the maximum deduction is phased down ratably for taxpayers with modified AGI between $130,000 

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

103. 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, 2013. 

104. 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.

105. 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.

106. 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.

107. 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, 2014. 

108. 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 $113,950 and $143,950 if married filing jointly ($76,000 and $91,000 for other taxpayers) in 2014.

109. 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 

14
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).

110. 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.

111. 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.

112. 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, 2013. 

113. 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 

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

income.

114. 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.

115. Work opportunity tax credit (WOTC).—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, 2013 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. 

116. 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.

117. 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.

118. 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.

119. 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 

15
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. 

120. 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.

121. 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 EITC 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.

122. 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.

123. 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. 

124. 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.

125. 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.

126. 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.

127. 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, 2013.

Health

128. 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.

16
129. 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.

130. Medical Savings Accounts / 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 2014, $3,300 for taxpayers with individual coverage and $6,550 for taxpayers with family 

coverage). Thus, HSAs have largely replaced MSAs.

131. 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.

132. 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.

133. 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 

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. 

134. 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.

135. 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.

136. 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.

17
137. 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 is not less than 85 percent for the taxable year.

138. 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 provided 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 expired on December 31, 2013.

139. 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

140. Exclusion of railroad retirement system 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 159, Social Security benefits for retired workers, for discussion of the threshold. 

141. 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 

under current law.

142. 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. 

143. 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.

144. 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.

145. 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.

146. 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 2014, an employee could exclude up to $17,500 (indexed) of 

wages from AGI under a qualified arrangement with an employer’s 401(k) plan. Employees age 50 or over could exclude up to 

$23,000 in contributions (indexed). The defined contribution plan limit, including both employee and employer contributions, is 

$52,000 in 2014 (indexed). The tax on contributions made by both employees and employers and the investment income earned by 

these plans is deferred until withdrawn.

147. 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 2014 (indexed); 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. 

18
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.

148. 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 $60,000 for joint filers, $45,000 for head of household filers, and 

$30,000 for other filers in 2014. 

149. 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 

$52,000 in 2014. 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.

150. 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.

151. 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.

152. 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 

separated from employment. Investment income earned by such trusts is exempt from taxation.

153. 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.

154. 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 $1,200 if married in 2014.

155. 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 $1,200 if married in 2014.

156. 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. 

157. 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 

19
taxpayer’s adjusted gross income.

158. 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 $9,720 of earned income in 2014. The credit is 40 percent of the 

first $13,650 of income for a family with two qualifying children, and it is 45 percent of the first $13,650 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 

$6,480 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 2014, the phasedown for married filers begins at incomes $5,430 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

159. 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 140, Railroad retirement benefits.

160. Social Security benefits for disabled workers.—Under the baseline tax system, insurance benefits would be taxed to the 

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. 

161. 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. 

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 GI 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 

20
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, 2014. (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 59.)

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.

21
Total from corporations and individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

National Defense:

1 Exclusion of benefits and allowances 

 to armed forces personnel 12,960 13,570 14,110 13,060 13,190 13,640 14,200 14,820 15,480 16,190 16,950 145,210

International affairs: 

2 Exclusion of income earned abroad by 

 U.S. citizens 5,700 5,990 6,280 6,600 6,930 7,280 7,640 8,020 8,420 8,840 9,290 75,290

3 Exclusion of certain allowances for 

 Federal employees abroad 1,180 1,240 1,300 1,370 1,430 1,510 1,580 1,660 1,740 1,830 1,920 15,580

4 Inventory property sales source rules 

 exception 3,650 3,960 4,290 4,660 5,050 5,470 5,930 6,430 6,960 7,550 8,180 58,480

5 Deferral of income from controlled 

 foreign corporations (normal tax 

 method) 61,710 64,560 67,780 71,170 74,730 78,470 82,390 86,510 90,840 95,380 100,150 811,980

6 Deferred taxes for financial firms on 

 certain income earned overseas 4,250 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 Expensing of research and 

 experimentation expenditures 

 (normal tax method) 7,060 7,110 7,040 7,320 7,360 7,420 7,510 7,610 7,800 8,040 8,340 75,550

8 Credit for increasing research 

 activities 6,020 3,620 3,090 2,630 2,230 1,880 1,580 1,330 1,110 920 770 19,160

Energy: 

9 Expensing of exploration and 

 development costs, fuels 240 290 450 510 530 610 690 720 760 810 850 6,220

10 Excess of percentage over cost 

 depletion, fuels 660 790 910 1,050 1,200 1,350 1,450 1,510 1,640 1,790 1,940 13,630

11 Alternative fuel production credit 0 0 0 0 0 0 0 0 0 0 0 0

12 Exception from passive loss limitation 

 for working interests in oil and gas 

 properties 20 10 10 10 10 10 10 10 10 10 10 100

13 Capital gains treatment of royalties on 

 coal 100 110 120 130 130 140 140 150 150 160 170 1,400

14 Exclusion of interest on energy facility 

 bonds 20 20 30 30 30 30 30 40 40 40 40 330

15 Energy production credit 1/ 2,240 2,570 2,540 2,380 2,250 2,140 1,920 1,610 1,300 950 490 18,150

16 Energy investment credit 1/ 1,870 1,490 1,320 1,040 290 -20 -60 -10 30 50 50 4,180

17 Alcohol fuel credits 2/ 0 0 0 0 0 0 0 0 0 0 0 0

18 Bio-Diesel and small agri-biodiesel 

 producer tax credits 3/ 80 30 20 10 0 0 0 0 0 0 0 60

19 Tax credits for clean-fuel burning 

 vehicles and refueling property 430 580 740 720 810 790 470 240 170 170 180 4,870

20 Exclusion of utility conservation 

 subsidies 410 430 450 470 490 520 540 570 590 620 650 5,330

21 Credit for holding clean renewable 

 energy bonds 4/ 70 70 70 70 70 70 70 70 70 70 70 700

22 Deferral of gain from dispositions of 

 transmission property to implement 

 FERC restructuring policy -70 -230 -210 -180 -150 -130 -90 -30 0 0 0 -1,020

23 Credit for investment in clean coal 

 facilities 200 180 110 100 190 190 90 0 -20 -10 -10 820

24 Temporary 50% expensing for 

 equipment used in the refining of 

 liquid fuels -880 -1,600 -1,320 -1,100 -910 -740 -590 -450 -290 -140 170 -6,970

25 Natural gas distribution pipelines 

 treated as 15-year property 170 170 170 180 190 190 180 130 40 -70 -200 980

26 Amortize all geological and 

 geophysical expenditures over 2 

 years 80 100 120 120 120 120 110 110 110 110 110 1,130

27 Allowance of deduction for certain 

 energy efficient commercial 

 building property 50 20 0 0 -20 -20 -20 -20 -20 -20 -20 -120

28 Credit for construction of new energy 

 efficient homes 140 60 20 0 0 0 0 0 0 0 0 80

29 Credit for energy efficiency 

 improvements to existing homes 380 0 0 0 0 0 0 0 0 0 0 0

(in millions of dollars)

Table 1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2014-2024

22
Total from corporations and individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

30 Credit for energy efficient appliances 150 120 110 40 0 0 0 0 0 0 0 270

31 Credit for residential energy efficient 

 property 1,040 1,140 1,120 650 250 50 0 0 0 0 0 3,210

32 Qualified energy conservation bonds 

 5/ 30 30 30 30 30 30 30 30 30 30 30 300

33 Advanced energy property credit 100 60 0 -30 -30 -20 -10 0 0 0 0 -30

34 Advanced nuclear power production 

 credit 0 80 220 440 630 690 690 690 690 610 470 5,210

Natural resources and environment: 

35 Expensing of exploration and 

 development costs, nonfuel 

 minerals 80 80 80 80 80 80 80 80 90 90 90 830

36 Excess of percentage over cost 

 depletion, nonfuel minerals 590 610 620 640 650 650 670 680 690 700 710 6,620

37 Exclusion of interest on bonds for 

 water, sewage, and hazardous 

 waste facilities 460 490 560 620 680 740 790 840 920 980 1,050 7,670

38 Capital gains treatment of certain 

 timber income 100 110 120 130 130 140 140 150 150 160 170 1,400

39 Expensing of multiperiod timber 

 growing costs 320 350 360 380 400 400 430 440 440 440 450 4,090

40 Tax incentives for preservation of 

 historic structures 580 600 610 620 630 640 660 680 690 700 710 6,540

41 Industrial CO2 capture and 

 sequestration tax credit 80 80 110 150 100 20 0 0 0 0 0 460

42 Deduction for endangered species 

 recovery expenditures 20 20 30 30 30 30 40 50 50 50 50 380

Agriculture: 

43 Expensing of certain capital outlays 230 220 210 230 240 250 270 280 290 310 330 2,630

44 Expensing of certain multiperiod 

 production costs 350 350 370 390 410 440 460 490 520 550 590 4,570

45 Treatment of loans forgiven for 

 solvent farmers 40 40 40 40 40 40 40 40 40 40 40 400

46 Capital gains treatment of certain 

 income 1,020 1,140 1,250 1,310 1,330 1,360 1,410 1,460 1,520 1,590 1,660 14,030

47 Income averaging for farmers 130 130 140 140 140 140 140 140 140 140 140 1,390

48 Deferral of gain on sale of farm 

 refiners 20 20 20 20 20 20 30 30 30 30 30 250

49 Expensing of reforestation 

 expenditures 70 80 90 90 100 100 100 110 120 120 130 1,040

Commerce and housing: 

Financial institutions and insurance: 

50 Exemption of credit union income 1,580 1,760 2,170 2,240 2,320 2,430 2,520 2,780 2,930 2,970 3,270 25,390

51 Exclusion of interest on life insurance 

 savings 13,370 13,100 17,730 22,430 26,910 30,760 34,450 38,460 42,000 44,730 46,850 317,420

52 Special alternative tax on small 

 property and casualty insurance 

 companies 10 10 10 20 20 20 20 20 20 20 20 180

53 Tax exemption of certain insurance 

 companies owned by tax-exempt 

 organizations 660 690 730 750 790 820 880 910 940 960 990 8,460

54 Small life insurance company 

 deduction 30 30 40 40 40 40 40 50 50 50 50 430

55 Exclusion of interest spread of 

 financial institutions 1,710 2,540 2,720 2,920 3,120 3,310 3,500 3,700 3,900 4,090 4,260 34,060

Housing: 

56 Exclusion of interest on owner-

 occupied mortgage subsidy bonds 1,260 1,340 1,530 1,720 1,850 2,020 2,150 2,300 2,510 2,700 2,870 20,990

57 Exclusion of interest on rental housing 

 bonds 1,030 1,100 1,240 1,400 1,510 1,640 1,750 1,880 2,040 2,200 2,330 17,090

58 Mortgage interest expense on owner-

 occupied residences 66,910 69,480 75,260 83,100 92,170 101,730 111,190 120,440 129,540 138,390 147,610 1,068,910

59 Deduction for property taxes on real 

 property 31,590 33,120 35,520 38,190 40,980 43,830 46,730 49,550 52,400 55,340 58,450 454,110

60 Deferral of income from installment 

 sales 1,530 1,660 1,770 1,850 1,890 1,940 2,010 2,090 2,170 2,260 2,360 20,000

61 Capital gains exclusion on home sales 35,540 36,930 39,560 42,380 45,390 48,630 52,090 55,800 59,770 64,030 68,580 513,160

62 Exclusion of net imputed rental income 75,240 78,810 82,420 86,800 90,570 93,610 96,220 100,340 104,630 109,120 113,800 956,320

63 Exception from passive loss rules for 

 $25,000 of rental loss 7,220 8,330 8,820 9,340 9,860 10,370 10,840 11,260 11,650 12,050 12,500 105,020

23
Total from corporations and individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

64 Credit for low-income housing 

 investments 8,120 7,980 7,890 8,190 8,460 8,710 8,920 9,110 9,320 9,580 9,860 88,020

65 Accelerated depreciation on rental 

 housing (normal tax method) 1,050 1,080 1,330 1,770 2,230 2,760 3,330 3,990 4,690 5,290 5,880 32,350

66 Discharge of mortgage indebtedness 3,100 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

67 Discharge of business indebtedness -80 -110 -80 -40 -30 -20 -10 20 40 50 50 -130

68 Exceptions from imputed interest rules 40 40 50 60 60 60 70 70 70 70 70 620

69 Treatment of qualified dividends 26,920 26,320 26,810 27,770 28,940 30,170 31,510 32,920 34,410 35,950 37,590 312,390

70 Capital gains (except agriculture, 

 timber, iron ore, and coal) 76,140 85,360 93,030 97,560 99,340 101,750 105,060 109,090 113,640 118,560 123,750 1,047,140

71 Capital gains exclusion of small 

 corporation stock 140 220 380 530 680 780 720 600 520 460 400 5,290

72 Step-up basis of capital gains at 

 death 60,370 63,440 66,670 70,070 73,630 77,380 81,320 85,460 89,810 94,380 99,180 801,340

73 Carryover basis of capital gains on 

 gifts 7,360 7,750 7,420 6,810 6,290 5,840 5,480 5,180 4,960 4,810 4,740 59,280

74 Ordinary income treatment of loss 

 from small business corporation 

 stock sale 50 50 50 50 50 50 50 50 50 50 50 500

75 Accelerated depreciation of buildings 

 other than rental housing (normal 

 tax method) -8,260 -8,480 -8,530 -8,850 -9,090 -9,530 -10,360 -10,950 -11,480 -12,040 -12,800 -102,110

76 Accelerated depreciation of 

 machinery and equipment 

 (normal tax method) -9,360 -12,260 4,770 17,690 26,780 33,790 40,380 44,420 47,070 49,580 54,590 306,810

77 Expensing of certain small 

 investments (normal tax method) -1,050 -1,980 -740 80 640 980 1,220 1,470 1,700 1,880 2,030 7,280

78 Graduated corporation income tax 

 rate (normal tax method) 3,960 3,890 3,860 3,700 3,730 3,780 3,680 3,820 3,900 4,040 3,900 38,300

79 Exclusion of interest on small issue 

 bonds 170 180 210 230 250 270 290 310 340 370 390 2,840

80 Deduction for US production activities 13,930 14,500 15,230 15,930 16,630 17,370 18,150 18,960 19,780 20,640 21,550 178,740

81 Special rules for certain film and TV 

 production 170 100 60 30 10 0 0 0 0 0 0 200

Transportation: 

82 Tonnage tax 70 70 70 80 80 90 90 90 100 100 110 880

83 Deferral of tax on shipping companies 10 0 0 0 0 0 0 0 0 0 0 0

84 Exclusion of reimbursed employee 

 parking expenses 2,690 2,800 2,910 3,040 3,140 3,220 3,330 3,450 3,540 3,680 3,800 32,910

85 Exclusion for employer-provided 

 transit passes 710 720 770 820 870 910 970 1,020 1,080 1,150 1,220 9,530

86 Tax credit for certain expenditures for 

 maintaining railroad tracks 70 0 0 0 0 0 0 0 0 0 0 0

87 Exclusion of interest on bonds for 

 Highway Projects and rail-truck 

 transfer facilities 230 220 210 200 190 170 170 160 160 140 140 1,760

Community and regional development: 

88 Investment credit for rehabilitation of 

 structures (other than historic) 30 30 30 30 30 30 30 30 30 30 30 300

89 Exclusion of interest for airport, dock, 

 and similar bonds 760 820 920 1,030 1,120 1,220 1,300 1,390 1,520 1,630 1,730 12,680

90 Exemption of certain mutuals' and 

 cooperatives' income 120 120 120 130 130 130 140 140 140 140 150 1,340

91 Empowerment zones 90 40 30 20 20 30 20 10 10 10 10 200

92 New markets tax credit 1,010 1,040 1,050 960 750 520 370 210 40 -70 -130 4,740

93 Expensing of environmental 

 remediation costs -190 -180 -170 -160 -160 -160 -140 -140 -130 -130 -130 -1,500

94 Credit to holders of Gulf Tax Credit 

 Bonds 220 240 270 310 340 360 390 420 450 490 520 3,790

95 Recovery Zone Bonds 6/ 120 130 150 170 180 200 210 230 240 260 280 2,050

96 Tribal Economic Development Bonds 40 40 50 50 60 60 70 70 80 80 80 640

Education, training, employment, and social services: 

Education: 

97 Exclusion of scholarship and 

 fellowship income (normal tax 

 method) 2,980 3,090 3,200 3,310 3,420 3,550 3,670 3,800 3,940 4,080 4,230 36,290

98 HOPE tax credit 0 0 0 0 780 7,860 8,270 8,350 8,450 8,770 8,810 51,290

99 Lifetime Learning tax credit 2,240 2,430 2,460 2,480 2,730 4,660 4,740 4,790 4,840 4,850 4,870 38,850

100 American Opportunity Tax Credit 7/ 15,710 15,660 15,690 15,760 14,100 0 0 0 0 0 0 61,210

24
Total from corporations and individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

101 Education Individual Retirement 

 Accounts 60 60 70 70 80 80 90 100 110 110 120 890

102 Deductibility of student-loan interest 1,730 1,770 1,760 1,760 1,750 1,790 1,790 1,780 1,810 1,810 1,790 17,810

103 Deduction for higher education 

 expenses 400 0 0 0 0 0 0 0 0 0 0 0

104 Qualified tuition programs 1,820 1,950 2,100 2,270 2,430 2,620 2,820 3,040 3,280 3,540 3,820 27,870

105 Exclusion of interest on student-loan 

 bonds 510 550 620 700 750 830 880 950 1,030 1,100 1,170 8,580

106 Exclusion of interest on bonds for 

 private nonprofit educational 

 facilities 2,300 2,450 2,780 3,130 3,380 3,700 3,930 4,200 4,580 4,920 5,230 38,300

107 Credit for holders of zone academy 

 bonds 8/ 180 160 130 120 110 100 100 90 90 80 80 1,060

108 Exclusion of interest on savings 

 bonds redeemed to finance 

 educational expenses 20 30 30 30 30 30 30 40 40 40 40 340

109 Parental personal exemption for 

 students age 19 or over 4,390 4,460 4,540 4,640 4,690 4,770 4,860 4,990 5,110 5,210 5,360 48,630

110 Deductibility of charitable 

 contributions (education) 4,840 5,120 5,480 5,890 6,330 6,760 7,170 7,570 7,970 8,360 8,750 69,400

111 Exclusion of employer-provided 

 educational assistance 750 800 840 890 930 980 1,030 1,090 1,140 1,200 1,260 10,160

112 Special deduction for teacher 

 expenses 130 0 0 0 0 0 0 0 0 0 0 0

113 Discharge of student loan 

 indebtedness 90 90 90 100 100 100 100 100 110 110 110 1,010

114 Qualified school construction bonds 9/ 490 490 650 650 650 650 650 650 650 650 650 6,340

Training, employment, and social services: 

115 Work opportunity tax credit 950 510 270 200 150 110 80 60 50 30 30 1,490

116 Employer provided child care 

 exclusion 890 940 1,000 1,060 1,130 1,210 1,280 1,340 1,420 1,500 1,620 12,500

117 Employer-provided child care credit 10 10 10 10 10 10 10 10 10 10 10 100

118 Assistance for adopted foster 

 children 530 560 590 620 660 700 740 790 840 890 940 7,330

119 Adoption credit and exclusion 10/ 260 340 310 310 360 350 390 400 400 400 410 3,670

120 Exclusion of employee meals and 

 lodging (other than military) 2,590 4,370 4,490 4,620 4,770 4,910 5,050 5,190 5,330 5,470 5,610 49,810

121 Child credit 11/ 23,800 23,900 24,070 24,160 24,230 24,300 24,010 23,670 23,210 22,780 22,050 236,380

122 Credit for child and dependent care 

 expenses 4,420 4,510 4,590 4,690 4,780 4,840 4,950 5,070 5,180 5,280 5,400 49,290

123 Credit for disabled access 

 expenditures 30 30 30 30 40 40 40 40 40 40 40 370

124 Deductibility of charitable 

 contributions, other than education 

 and health 41,910 44,280 47,380 51,170 55,220 59,100 62,810 66,430 69,980 73,460 76,920 606,750

125 Exclusion of certain foster care 

 payments 380 390 380 370 370 360 350 350 340 330 320 3,560

126 Exclusion of parsonage allowances 700 740 780 820 860 910 960 1,010 1,060 1,120 1,180 9,440

127 Indian employment credit 40 30 30 20 10 10 10 10 10 0 0 130

Health: 

128 Exclusion of employer contributions 

 for medical insurance premiums 

 and medical care 12/ 195,050 206,430 216,080 226,860 236,640 250,420 267,950 285,890 305,610 327,230 350,670 2,673,780

129 Self-employed medical insurance 

 premiums 6,380 6,660 6,970 7,270 7,600 7,930 8,270 8,650 9,150 9,650 9,380 81,530

130 Medical Savings Accounts / Health 

 Savings Accounts 4,010 4,770 5,660 6,720 7,950 9,440 11,240 13,370 15,900 18,900 22,540 116,490

131 Deductibility of medical expenses 6,810 7,080 7,660 7,700 8,090 9,080 10,530 12,300 14,250 16,720 19,700 113,110

132 Exclusion of interest on hospital 

 construction bonds 3,500 3,730 4,230 4,770 5,150 5,630 5,980 6,410 6,970 7,500 7,960 58,330

133 Refundable Premium Assistance Tax 

 Credit 13/ 0 -1,780 -3,070 -3,920 -5,650 -7,920 -8,850 -9,410 -10,030 -10,310 -10,770 -71,710

134 Credit for employee health insurance 

 expenses of small business 14/ 510 630 630 570 510 390 330 210 190 120 120 3,700

135 Deductibility of charitable 

 contributions (health) 4,740 5,010 5,350 5,780 6,240 6,680 7,090 7,500 7,910 8,290 8,680 68,530

136 Tax credit for orphan drug research 1,210 1,450 1,750 2,110 2,550 3,070 3,710 4,470 5,400 6,510 7,850 38,870

137 Special Blue Cross/Blue Shield 

 deduction 150 280 380 400 350 320 350 380 360 350 380 3,550

138 Tax credit for health insurance 

 purchased by certain displaced 

 and retired individuals 15/ 0 0 0 0 0 0 0 0 0 0 0 0

25
Total from corporations and individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

139 Distributions from retirement plans for 

 premiums for health and long-term 

 care insurance 360 400 440 460 480 500 520 540 560 580 600 5,080

Income security: 

140 Exclusion of railroad retirement 

 system benefits 320 320 320 320 320 320 320 310 310 310 310 3,160

141 Exclusion of workers' compensation 

 benefits 9,890 9,990 10,090 10,190 10,290 10,390 10,490 10,600 10,710 10,810 10,920 104,480

142 Exclusion of public assistance 

 benefits (normal tax method) 610 640 660 710 760 750 760 790 810 860 830 7,570

143 Exclusion of special benefits for 

 disabled coal miners 30 30 30 20 20 20 10 10 10 10 10 170

144 Exclusion of military disability

 pensions 140 140 140 140 150 150 150 150 160 160 160 1,500

Net exclusion of pension contributions and earnings: 

145 Defined benefit employer plans 42,780 44,640 46,260 48,040 49,100 50,780 55,840 66,620 77,960 86,490 95,320 621,050

146 Defined contribution employer plans 62,530 68,040 73,910 74,670 79,380 81,190 92,750 101,870 108,470 114,770 122,340 917,390

147 Individual Retirement Accounts 16,580 17,240 18,270 19,230 20,240 21,200 21,930 23,320 25,100 26,210 27,010 219,750

148 Low and moderate income savers 

 credit 1,230 1,240 1,290 1,270 1,280 1,290 1,310 1,320 1,320 1,350 1,340 13,010

149 Self-Employed plans 23,240 25,480 28,020 30,780 33,740 37,000 40,450 43,990 47,850 52,040 56,600 395,950

Exclusion of other employee benefits: 

150 Premiums on group term life

 insurance 2,200 2,320 2,420 2,520 2,630 2,740 2,840 2,960 3,070 3,190 3,310 28,000

151 Premiums on accident and disability 

 insurance 310 310 320 320 330 330 330 340 340 340 350 3,310

152 Income of trusts to finance 

 supplementary unemployment 

 benefits 20 30 40 40 50 60 60 70 80 80 90 600

153 Special ESOP rules 1,730 1,810 1,910 2,000 2,090 2,200 2,300 2,420 2,540 2,660 2,780 22,710

154 Additional deduction for the blind 30 30 30 40 40 40 40 50 50 50 50 420

155 Additional deduction for the elderly 2,520 2,730 2,930 3,210 3,450 3,700 3,980 4,160 4,430 4,770 5,080 38,440

156 Tax credit for the elderly and disabled 10 10 10 10 10 10 10 0 0 0 0 60

157 Deductibility of casualty losses 330 340 360 380 390 410 430 440 460 470 480 4,160

158 Earned income tax credit 16/ 3,660 5,030 5,090 4,300 3,110 1,830 1,910 2,030 2,120 2,220 2,330 29,970

Social Security: 

Exclusion of social security benefits: 

159 Social Security benefits for retired 

 workers 26,200 27,080 28,300 29,850 31,110 32,390 33,640 34,490 35,330 36,090 36,580 324,860

160 Social Security benefits for disabled 

 workers 8,050 8,310 8,580 8,660 8,620 8,660 8,780 8,940 9,160 9,390 9,690 88,790

161 Social Security benefits for spouses, 

 dependents and survivors 4,330 4,390 4,530 4,710 4,840 5,020 5,200 5,360 5,530 5,700 5,850 51,130

Veterans benefits and services: 

162 Exclusion of veterans death benefits 

 and disability compensation 5,720 6,380 6,860 7,200 7,530 7,830 8,160 8,490 8,830 9,170 9,510 79,960

163 Exclusion of veterans pensions 420 460 480 510 530 550 570 590 610 630 650 5,580

164 Exclusion of GI bill benefits 1,460 1,580 1,700 1,840 1,980 2,130 2,280 2,450 2,620 2,810 3,010 22,400

165 Exclusion of interest on veterans 

 housing bonds 10 10 10 10 10 20 10 10 30 30 30 170

General purpose fiscal assistance: 

166 Exclusion of interest on public 

 purpose State and local bonds 29,090 31,070 35,190 39,690 42,820 46,810 49,710 53,270 57,990 62,390 66,170 485,110

167 Build America Bonds 17/ 0 0 0 0 0 0 0 0 0 0 0 0

168 Deductibility of nonbusiness State and 

 local taxes other than on owner-

 occupied homes 45,720 47,490 51,180 55,300 59,490 63,620 67,910 72,140 76,540 81,120 85,490 660,280

Interest: 

169 Deferral of interest on U.S. savings 

 bonds 1,030 1,020 1,010 1,000 990 980 970 960 950 940 930 9,750

26
Total from corporations and individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

Addendum: Aid to State and local governments: 

Deductibility of: 

Property taxes on owner-occupied 

 homes 31,590 33,120 35,520 38,190 40,980 43,830 46,730 49,550 52,400 55,340 58,450 454,110

Nonbusiness State and local taxes 

 other than on owner-occupied 

 homes 45,720 47,490 51,180 55,300 59,490 63,620 67,910 72,140 76,540 81,120 85,490 660,280

Exclusion of interest on State and local bonds for: 

Public purposes 29,090 31,070 35,190 39,690 42,820 46,810 49,710 53,270 57,990 62,390 66,170 485,110

Energy facilities 20 20 30 30 30 30 30 40 40 40 40 330

Water, sewage, and hazardous 

 waste disposal facilities 460 490 560 620 680 740 790 840 920 980 1,050 7,670

Small-issues 170 180 210 230 250 270 290 310 340 370 390 2,840

Owner-occupied mortgage subsidies 1,260 1,340 1,530 1,720 1,850 2,020 2,150 2,300 2,510 2,700 2,870 20,990

Rental housing 1,030 1,100 1,240 1,400 1,510 1,640 1,750 1,880 2,040 2,200 2,330 17,090

Airports, docks, and similar facilities 760 820 920 1,030 1,120 1,220 1,300 1,390 1,520 1,630 1,730 12,680

Student loans 510 550 620 700 750 830 880 950 1,030 1,100 1,170 8,580

Private nonprofit educational facilities 2,300 2,450 2,780 3,130 3,380 3,700 3,930 4,200 4,580 4,920 5,230 38,300

Hospital construction 3,500 3,730 4,230 4,770 5,150 5,630 5,980 6,410 6,970 7,500 7,960 58,330

Veterans' housing 10 10 10 10 10 20 10 10 30 30 30 170

1/

2/

3/

4/

5/

6/

7/

8/

9/

10/

11/

12/

13/

14/

15/

16/

17/

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. In general, provisions with estimates that rounded to zero in each year are not included in the table.

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: 2014 $3,164; 2015 $2,218; 2016 $1,210; 2017 $605.

The alternative fuel mixture credit results in a reduction in excise tax receipts (in millions of dollars) as follows:

2014 $370.

In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 

2014 $1,830.

In addition, the provision has outlay effects of (in millions of dollars):

2014 $30; 2015 $30; 2016 $30; 2017 $30; 2018 $30; 2019 $30; 2020 $30; 2021 $30; 2022 $30; 2023 $30; 2024 $30.

In addition, the provision has outlay effects of (in millions of dollars):

2014 $30; 2015 $30; 2016 $30; 2017 $30; 2018 $30; 2019 $30; 2020 $30; 2021 $30; 2022 $30; 2023 $30; 2024 $30.

In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows:

2014 $210; 2015 $220; 2016 $220; 2017 $220; 2018 $220; 2019 $220; 2020 $220; 2021 $220; 2022 $220; 2023 $220; 2024 $220.

In addition, the provision has outlay effects of (in millions of dollars):

2014 $4,310; 2015 $5,990; 2016 $6,010; 2017 $5,870; 2018 $5,740; 2019 $3,000.

In addition, the credit for holders of zone academy bonds has outlay effects of (in millions of dollars):

2014 $50; 2015 $50; 2016 $50; 2017 $50; 2018 $50; 2019 $50; 2020 $50; 2021 $50; 2022 $50; 2023 $50; 2024 $50.

In addition, the provision for school construction bonds has outlay effects of (in millions of dollars):

2014 $690; 2015 $740; 2016 $740; 2017 $740; 2018 $740; 2019 $740; 2020 $740; 2021 $740; 2022 $740; 2023 $740; 2024 $740.

The figures in the table indicate the effect of the adoption tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 

2014 $60; 2015 $30.

The figures in the table indicate the effect of the child tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 

2014 $22,570; 2015 $22,600; 2016 $22,230; 2017 $21,900; 2018 $21,770; 2019 $15,670; 2020 $15,720; 2021 $15,620; 2022 $15,730; 2023 $15,740; 2024 $15,750.

The figures in the table indicate the effect on income taxes of the employer contributions for health. In addition, the effect on payroll tax receipts (in millions of dollars) is as 

2014 $121,600; 2015 $127,590; 2016 $131,580; 2017 $136,520; 2018 $141,580; 2019 $148,830; 2020 $157,850; 2021 $167,070; 2022 $175,960; 2023 $185,030; 

 2024 $194,390. 

In addition, the premium assistance credit provision has outlay effects (in millions of dollars) as follows:

2014 $11,980; 2015 $31,510; 2016 $45,750; 2017 $62,150; 2018 $86,420; 2019 $103,460; 2020 $111,240; 2021 $117,380; 2022 $123,440; 2023 $129,750; 2024 $134,500. 

In addition, the small business credit provision has outlay effects (in millions of dollars) as follows:

In addition, Build America Bonds have outlay effects of (in millions of dollars):

2014 $3,710; 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.

2014 $90; 2015 $80; 2016 $80; 2017 $70; 2018 $70; 2019 $50; 2020 $50; 2021 $30; 2022 $30; 2023 $20; 2024 $20. 

The figures in the table indicate the effect of the health coverage tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 

2014 $30; 2015 $10; 2016 $10. 

The figures in the table indicate the effect of the earned income tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows:

2014 $60,810; 2015 $58,050; 2016 $58,710; 2017 $60,400; 2018 $62,220; 2019 61,530; 2020 $62,770; 2021 $64,050; 2022 $65,520; 2023 $66,990; 2024 $68,530.

27
Total from corporations

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

National Defense:

1 Exclusion of benefits and allowances 

 to armed forces personnel 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 Exclusion of certain allowances for 

 Federal employees abroad 0 0 0 0 0 0 0 0 0 0 0 0

4 Inventory property sales source rules 

 exception 3,650 3,960 4,290 4,660 5,050 5,470 5,930 6,430 6,960 7,550 8,180 58,480

5 Deferral of income from controlled 

 foreign corporations (normal tax 

 method) 61,710 64,560 67,780 71,170 74,730 78,470 82,390 86,510 90,840 95,380 100,150 811,980

6 Deferred taxes for financial firms on 

 certain income earned overseas 4,250 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 Expensing of research and 

 experimentation expenditures 

 (normal tax method) 6,540 6,610 6,550 6,810 6,840 6,900 6,980 7,070 7,250 7,480 7,760 70,250

8 Credit for increasing research 

 activities 5,750 3,490 2,970 2,520 2,130 1,790 1,500 1,260 1,050 870 720 18,300

Energy: 

9 Expensing of exploration and 

 development costs, fuels 190 230 360 410 430 490 550 580 610 650 680 4,990

10 Excess of percentage over cost 

 depletion, fuels 530 630 730 840 960 1,080 1,160 1,210 1,310 1,430 1,550 10,900

11 Alternative fuel production credit 0 0 0 0 0 0 0 0 0 0 0 0

12 Exception from passive loss limitation 

 for working interests in oil and gas 

 properties 0 0 0 0 0 0 0 0 0 0 0 0

13 Capital gains treatment of royalties on 

 coal 0 0 0 0 0 0 0 0 0 0 0 0

14 Exclusion of interest on energy facility 

 bonds 10 10 10 10 10 10 10 10 10 10 10 100

15 Energy production credit 1,490 1,710 1,690 1,590 1,500 1,430 1,280 1,070 870 630 330 12,100

16 Energy investment credit 1,500 1,190 1,060 830 230 -20 -50 -10 20 40 40 3,330

17 Alcohol fuel credits 0 0 0 0 0 0 0 0 0 0 0 0

18 Bio-Diesel and small agri-biodiesel 

 producer tax credits 30 10 10 0 0 0 0 0 0 0 0 20

19 Tax credits for clean-fuel burning 

 vehicles and refueling property 110 150 150 150 170 120 50 20 20 20 30 880

20 Exclusion of utility conservation 

 subsidies 30 30 30 30 30 30 30 30 30 30 30 300

21 Credit for holding clean renewable 

 energy bonds 20 20 20 20 20 20 20 20 20 20 20 200

22 Deferral of gain from dispositions of 

 transmission property to implement 

 FERC restructuring policy -70 -230 -210 -180 -150 -130 -90 -30 0 0 0 -1,020

23 Credit for investment in clean coal 

 facilities 190 170 100 90 180 180 80 0 -20 -10 -10 760

24 Temporary 50% expensing for 

 equipment used in the refining of 

 liquid fuels -880 -1,600 -1,320 -1,100 -910 -740 -590 -450 -290 -140 170 -6,970

25 Natural gas distribution pipelines 

 treated as 15-year property 170 170 170 180 190 190 180 130 40 -70 -200 980

26 Amortize all geological and 

 geophysical expenditures over 2 

 years 60 80 100 100 100 100 90 90 90 90 90 930

27 Allowance of deduction for certain 

 energy efficient commercial 

 building property 20 10 0 0 -10 -10 -10 -10 -10 -10 -10 -60

28 Credit for construction of new energy 

 efficient homes 50 20 10 0 0 0 0 0 0 0 0 30

29 Credit for energy efficiency 

 improvements to existing homes 0 0 0 0 0 0 0 0 0 0 0 0

Table 2A. ESTIMATES OF TOTAL CORPORATE INCOME TAX EXPENDITURES FOR FISCAL YEARS 2014-2024

(in millions of dollars)

28
Total from corporations

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

30 Credit for energy efficient appliances 150 120 110 40 0 0 0 0 0 0 0 270

31 Credit for residential energy efficient 

 property 0 0 0 0 0 0 0 0 0 0 0 0

32 Qualified energy conservation bonds 10 10 10 10 10 10 10 10 10 10 10 100

33 Advanced energy property credit 90 50 0 -30 -30 -20 -10 0 0 0 0 -40

34 Advanced nuclear power production 

 credit 0 80 220 440 630 690 690 690 690 610 470 5,210

Natural resources and environment: 

35 Expensing of exploration and 

 development costs, nonfuel 

 minerals 70 70 70 70 70 70 70 70 80 80 80 730

36 Excess of percentage over cost 

 depletion, nonfuel minerals 550 570 580 600 610 610 620 630 640 650 660 6,170

37 Exclusion of interest on bonds for 

 water, sewage, and hazardous 

 waste facilities 130 140 180 210 220 230 220 220 240 260 280 2,200

38 Capital gains treatment of certain 

 timber income 0 0 0 0 0 0 0 0 0 0 0 0

39 Expensing of multiperiod timber 

 growing costs 190 220 230 240 250 250 270 280 280 280 290 2,590

40 Tax incentives for preservation of 

 historic structures 500 510 520 530 540 550 560 580 590 600 610 5,590

41 Industrial CO2 capture and 

 sequestration tax credit 80 80 110 150 100 20 0 0 0 0 0 460

42 Deduction for endangered species 

 recovery expenditures 10 10 10 10 10 10 20 20 20 20 20 150

Agriculture: 

43 Expensing of certain capital outlays 10 10 10 20 20 20 20 20 20 20 30 190

44 Expensing of certain multiperiod 

 production costs 20 20 20 30 30 30 30 40 40 40 50 330

45 Treatment of loans forgiven for 

 solvent farmers 0 0 0 0 0 0 0 0 0 0 0 0

46 Capital gains treatment of certain 

 income 0 0 0 0 0 0 0 0 0 0 0 0

47 Income averaging for farmers 0 0 0 0 0 0 0 0 0 0 0 0

48 Deferral of gain on sale of farm 

 refiners 20 20 20 20 20 20 30 30 30 30 30 250

49 Expensing of reforestation 

 expenditures 20 20 30 30 30 30 30 30 40 40 40 320

Commerce and housing: 

Financial institutions and insurance: 

50 Exemption of credit union income 1,580 1,760 2,170 2,240 2,320 2,430 2,520 2,780 2,930 2,970 3,270 25,390

51 Exclusion of interest on life insurance 

 savings 3,020 4,160 5,240 6,310 7,300 7,990 8,740 9,530 10,210 10,730 11,160 81,370

52 Special alternative tax on small 

 property and casualty insurance 

 companies 10 10 10 20 20 20 20 20 20 20 20 180

53 Tax exemption of certain insurance 

 companies owned by tax-exempt 

 organizations 660 690 730 750 790 820 880 910 940 960 990 8,460

54 Small life insurance company 

 deduction 30 30 40 40 40 40 40 50 50 50 50 430

55 Exclusion of interest spread of 

 financial institutions 0 0 0 0 0 0 0 0 0 0 0 0

Housing: 

56 Exclusion of interest on owner-

 occupied mortgage subsidy bonds 350 390 500 590 600 620 590 600 660 720 760 6,030

57 Exclusion of interest on rental housing 

 bonds 290 320 400 480 490 500 480 490 540 590 620 4,910

58 Mortgage interest expense on owner-

 occupied residences 0 0 0 0 0 0 0 0 0 0 0 0

59 Deduction for property taxes on real 

 property 0 0 0 0 0 0 0 0 0 0 0 0

60 Deferral of income from installment 

 sales 0 0 0 0 0 0 0 0 0 0 0 0

61 Capital gains exclusion on home sales 0 0 0 0 0 0 0 0 0 0 0 0

62 Exclusion of net imputed rental income 0 0 0 0 0 0 0 0 0 0 0 0

63 Exception from passive loss rules for 

 $25,000 of rental loss 0 0 0 0 0 0 0 0 0 0 0 0

64 Credit for low-income housing 

 investments 7,710 7,580 7,500 7,780 8,040 8,270 8,470 8,650 8,850 9,100 9,370 83,610

29
Total from corporations

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

65 Accelerated depreciation on rental 

 housing (normal tax method) 170 190 230 320 390 480 600 710 830 920 1,020 5,690

66 Discharge of mortgage indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

67 Discharge of business indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

68 Exceptions from imputed interest rules 0 0 0 0 0 0 0 0 0 0 0 0

69 Treatment of qualified dividends 0 0 0 0 0 0 0 0 0 0 0 0

70 Capital gains (except agriculture, 

 timber, iron ore, and coal) 0 0 0 0 0 0 0 0 0 0 0 0

71 Capital gains exclusion of small 

 corporation stock 0 0 0 0 0 0 0 0 0 0 0 0

72 Step-up basis of capital gains at death 0 0 0 0 0 0 0 0 0 0 0 0

73 Carryover basis of capital gains on 

 gifts 0 0 0 0 0 0 0 0 0 0 0 0

74 Ordinary income treatment of loss 

 from small business corporation 

 stock sale 0 0 0 0 0 0 0 0 0 0 0 0

75 Accelerated depreciation of buildings 

 other than rental housing (normal 

 tax method) -3,490 -3,780 -3,860 -4,060 -4,120 -4,290 -4,790 -5,050 -5,250 -5,480 -5,840 -46,520

76 Accelerated depreciation of 

 machinery and equipment 

 (normal tax method) -8,110 -10,420 1,070 10,170 16,460 21,330 26,350 29,260 31,140 32,930 36,530 194,820

77 Expensing of certain small 

 investments (normal tax method) -200 -350 -170 -40 50 100 140 180 220 240 270 640

78 Graduated corporation income tax rate 

 (normal tax method) 3,960 3,890 3,860 3,700 3,730 3,780 3,680 3,820 3,900 4,040 3,900 38,300

79 Exclusion of interest on small issue 

 bonds 50 50 70 80 80 80 80 80 90 100 100 810

80 Deduction for US production activities 10,950 11,390 11,950 12,490 13,030 13,610 14,220 14,850 15,500 16,170 16,880 140,090

81 Special rules for certain film and TV 

 production 140 80 50 20 10 0 0 0 0 0 0 160

Transportation: 

82 Tonnage tax 70 70 70 80 80 90 90 90 100 100 110 880

83 Deferral of tax on shipping companies 10 0 0 0 0 0 0 0 0 0 0 0

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 Tax credit for certain expenditures for 

 maintaining railroad tracks 50 0 0 0 0 0 0 0 0 0 0 0

87 Exclusion of interest on bonds for 

 Highway Projects and rail-truck 

 transfer facilities 60 50 50 50 50 40 40 40 40 30 30 420

Community and regional development: 

88 Investment credit for rehabilitation of 

 structures (other than historic) 10 10 10 10 10 10 10 10 10 10 10 100

89 Exclusion of interest for airport, dock, 

 and similar bonds 210 240 300 350 360 370 360 360 400 430 460 3,630

90 Exemption of certain mutuals' and 

 cooperatives' income 120 120 120 130 130 130 140 140 140 140 150 1,340

91 Empowerment zones 40 20 10 10 10 10 10 0 0 0 0 70

92 New markets tax credit 990 1,020 1,030 940 730 510 360 200 40 -70 -130 4,630

93 Expensing of environmental 

 remediation costs -160 -150 -140 -130 -130 -130 -120 -120 -110 -110 -110 -1,250

94 Credit to holders of Gulf Tax Credit 

 Bonds 60 70 90 110 110 110 110 110 120 130 140 1,100

95 Recovery Zone Bonds 30 40 50 60 60 60 60 60 60 70 70 590

96 Tribal Economic Development Bonds 10 10 20 20 20 20 20 20 20 20 20 190

Education, training, employment, and social services: 

Education: 

97 Exclusion of scholarship and 

 fellowship income (normal tax 

 method) 0 0 0 0 0 0 0 0 0 0 0 0

98 HOPE tax credit 0 0 0 0 0 0 0 0 0 0 0 0

99 Lifetime Learning tax credit 0 0 0 0 0 0 0 0 0 0 0 0

100 American Opportunity Tax Credit 0 0 0 0 0 0 0 0 0 0 0 0

30
Total from corporations

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

101 Education Individual Retirement 

 Accounts 0 0 0 0 0 0 0 0 0 0 0 0

102 Deductibility of student-loan interest 0 0 0 0 0 0 0 0 0 0 0 0

103 Deduction for higher education 

 expenses 0 0 0 0 0 0 0 0 0 0 0 0

104 Qualified tuition programs 0 0 0 0 0 0 0 0 0 0 0 0

105 Exclusion of interest on student-loan 

 bonds 140 160 200 240 240 250 240 250 270 290 310 2,450

106 Exclusion of interest on bonds for 

 private nonprofit educational 

 facilities 640 710 910 1,070 1,090 1,130 1,080 1,090 1,210 1,310 1,380 10,980

107 Credit for holders of zone academy 

 bonds 180 160 130 120 110 100 100 90 90 80 80 1,060

108 Exclusion of interest on savings 

 bonds redeemed to finance 

 educational expenses 0 0 0 0 0 0 0 0 0 0 0 0

109 Parental personal exemption for 

 students age 19 or over 0 0 0 0 0 0 0 0 0 0 0 0

110 Deductibility of charitable contributions 

 (education) 760 810 860 900 940 980 1,030 1,070 1,120 1,170 1,220 10,100

111 Exclusion of employer-provided 

 educational assistance 0 0 0 0 0 0 0 0 0 0 0 0

112 Special deduction for teacher 

 expenses 0 0 0 0 0 0 0 0 0 0 0 0

113 Discharge of student loan 

 indebtedness 0 0 0 0 0 0 0 0 0 0 0 0

114 Qualified school construction bonds 0 0 160 160 160 160 160 160 160 160 160 1,440

Training, employment, and social services: 

115 Work opportunity tax credit 660 330 170 130 100 70 50 40 30 20 20 960

116 Employer provided child care 

 exclusion 0 0 0 0 0 0 0 0 0 0 0 0

117 Employer-provided child care credit 10 10 10 10 10 10 10 10 10 10 10 100

118 Assistance for adopted foster 

 children 0 0 0 0 0 0 0 0 0 0 0 0

119 Adoption credit and exclusion 0 0 0 0 0 0 0 0 0 0 0 0

120 Exclusion of employee meals and 

 lodging (other than military) 0 0 0 0 0 0 0 0 0 0 0 0

121 Child credit 0 0 0 0 0 0 0 0 0 0 0 0

122 Credit for child and dependent care 

 expenses 0 0 0 0 0 0 0 0 0 0 0 0

123 Credit for disabled access 

 expenditures 10 10 10 10 20 20 20 20 20 20 20 170

124 Deductibility of charitable 

 contributions, other than education 

 and health 1,630 1,710 1,800 1,890 1,970 2,060 2,150 2,250 2,340 2,450 2,550 21,170

125 Exclusion of certain foster care 

 payments 0 0 0 0 0 0 0 0 0 0 0 0

126 Exclusion of parsonage allowances 0 0 0 0 0 0 0 0 0 0 0 0

127 Indian employment credit 20 10 10 10 0 0 0 0 0 0 0 30

Health: 

128 Exclusion of employer contributions 

 for medical insurance premiums 

 and medical care 0 0 0 0 0 0 0 0 0 0 0 0

129 Self-employed medical insurance 

 premiums 0 0 0 0 0 0 0 0 0 0 0 0

130 Medical Savings Accounts / Health 

 Savings Accounts 0 0 0 0 0 0 0 0 0 0 0 0

131 Deductibility of medical expenses 0 0 0 0 0 0 0 0 0 0 0 0

132 Exclusion of interest on hospital 

 construction bonds 980 1,080 1,380 1,630 1,660 1,720 1,650 1,670 1,840 2,000 2,100 16,730

133 Refundable Premium Assistance Tax 

 Credit 0 0 0 0 0 0 0 0 0 0 0 0

134 Credit for employee health insurance 

 expenses of small business 150 170 170 160 150 120 100 70 60 40 40 1,080

135 Deductibility of charitable contributions 

 (health) 220 230 240 250 270 280 290 300 320 330 340 2,850

136 Tax credit for orphan drug research 1,210 1,450 1,750 2,110 2,550 3,070 3,710 4,470 5,400 6,510 7,850 38,870

137 Special Blue Cross/Blue Shield 

 deduction 150 280 380 400 350 320 350 380 360 350 380 3,550

138 Tax credit for health insurance 

 purchased by certain displaced 

 and retired individuals 0 0 0 0 0 0 0 0 0 0 0 0

31
Total from corporations

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

139 Distributions from retirement plans for 

 premiums for health and long-term 

 care insurance 0 0 0 0 0 0 0 0 0 0 0 0

Income security: 

140 Exclusion of railroad retirement 

 system benefits 0 0 0 0 0 0 0 0 0 0 0 0

141 Exclusion of workers' compensation 

 benefits 0 0 0 0 0 0 0 0 0 0 0 0

142 Exclusion of public assistance 

 benefits (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

143 Exclusion of special benefits for 

 disabled coal miners 0 0 0 0 0 0 0 0 0 0 0 0

144 Exclusion of military disability 

pensions 0 0 0 0 0 0 0 0 0 0 0 0

Net exclusion of pension contributions and earnings: 

145 Defined benefit employer plans 0 0 0 0 0 0 0 0 0 0 0 0

146 Defined contribution employer plans 0 0 0 0 0 0 0 0 0 0 0 0

147 Individual Retirement Accounts 0 0 0 0 0 0 0 0 0 0 0 0

148 Low and moderate income savers 

 credit 0 0 0 0 0 0 0 0 0 0 0 0

149 Self-Employed plans 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of other employee benefits: 

150 Premiums on group term life 

insurance 0 0 0 0 0 0 0 0 0 0 0 0

151 Premiums on accident and disability 

 insurance 0 0 0 0 0 0 0 0 0 0 0 0

152 Income of trusts to finance 

 supplementary unemployment 

 benefits 0 0 0 0 0 0 0 0 0 0 0 0

153 Special ESOP rules 1,630 1,710 1,800 1,890 1,980 2,080 2,180 2,290 2,410 2,530 2,650 21,520

154 Additional deduction for the blind 0 0 0 0 0 0 0 0 0 0 0 0

155 Additional deduction for the elderly 0 0 0 0 0 0 0 0 0 0 0 0

156 Tax credit for the elderly and disabled 0 0 0 0 0 0 0 0 0 0 0 0

157 Deductibility of casualty losses 0 0 0 0 0 0 0 0 0 0 0 0

158 Earned income tax credit 0 0 0 0 0 0 0 0 0 0 0 0

Social Security: 

Exclusion of social security benefits: 

159 Social Security benefits for retired 

 workers 0 0 0 0 0 0 0 0 0 0 0 0

160 Social Security benefits for disabled 

 workers 0 0 0 0 0 0 0 0 0 0 0 0

161 Social Security benefits for spouses, 

 dependents and survivors 0 0 0 0 0 0 0 0 0 0 0 0

Veterans benefits and services: 

162 Exclusion of veterans death benefits 

 and disability compensation 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 10 0 0 10 10 10 40

General purpose fiscal assistance: 

166 Exclusion of interest on public 

 purpose State and local bonds 8,130 9,000 11,470 13,570 13,830 14,330 13,690 13,850 15,300 16,640 17,490 139,170

167 Build America Bonds 0 0 0 0 0 0 0 0 0 0 0 0

168 Deductibility of nonbusiness State and 

 local taxes other than on owner-

 occupied homes 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: 

32
Total from corporations

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

Property taxes on owner-occupied 

 homes 0 0 0 0 0 0 0 0 0 0 0 0

Nonbusiness State and local taxes 

 other than on owner-occupied 

 homes 0 0 0 0 0 0 0 0 0 0 0 0

Exclusion of interest on State and local bonds for: 

Public purposes 8,130 9,000 11,470 13,570 13,830 14,330 13,690 13,850 15,300 16,640 17,490 139,170

Energy facilities 10 10 10 10 10 10 10 10 10 10 10 100

Water, sewage, and hazardous 

 waste disposal facilities 130 140 180 210 220 230 220 220 240 260 280 2,200

Small-issues 50 50 70 80 80 80 80 80 90 100 100 810

Owner-occupied mortgage subsidies 350 390 500 590 600 620 590 600 660 720 760 6,030

Rental housing 290 320 400 480 490 500 480 490 540 590 620 4,910

Airports, docks, and similar facilities 210 240 300 350 360 370 360 360 400 430 460 3,630

Student loans 140 160 200 240 240 250 240 250 270 290 310 2,450

Private nonprofit educational facilities 640 710 910 1,070 1,090 1,130 1,080 1,090 1,210 1,310 1,380 10,980

Hospital construction 980 1,080 1,380 1,630 1,660 1,720 1,650 1,670 1,840 2,000 2,100 16,730

Veterans' housing 0 0 0 0 0 10 0 0 10 10 10 40

See Table 1 footnotes for specific table information

33
Total from individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

National Defense:

1 Exclusion of benefits and allowances 

 to armed forces personnel 12,960 13,570 14,110 13,060 13,190 13,640 14,200 14,820 15,480 16,190 16,950 145,210

International affairs: 

2 Exclusion of income earned abroad by 

 U.S. citizens 5,700 5,990 6,280 6,600 6,930 7,280 7,640 8,020 8,420 8,840 9,290 75,290

3 Exclusion of certain allowances for 

 Federal employees abroad 1,180 1,240 1,300 1,370 1,430 1,510 1,580 1,660 1,740 1,830 1,920 15,580

4 Inventory property sales source rules 

 exception 0 0 0 0 0 0 0 0 0 0 0 0

5 Deferral of income from controlled 

 foreign corporations (normal tax 

 method) 0 0 0 0 0 0 0 0 0 0 0 0

6 Deferred taxes for financial firms on 

 certain income earned overseas 0 0 0 0 0 0 0 0 0 0 0 0

General science, space, and technology: 

7 Expensing of research and 

 experimentation expenditures 

 (normal tax method) 520 500 490 510 520 520 530 540 550 560 580 5,300

8 Credit for increasing research 

 activities 270 130 120 110 100 90 80 70 60 50 50 860

Energy: 

9 Expensing of exploration and 

 development costs, fuels 50 60 90 100 100 120 140 140 150 160 170 1,230

10 Excess of percentage over cost 

 depletion, fuels 130 160 180 210 240 270 290 300 330 360 390 2,730

11 Alternative fuel production credit 0 0 0 0 0 0 0 0 0 0 0 0

12 Exception from passive loss limitation 

 for working interests in oil and gas 

 properties 20 10 10 10 10 10 10 10 10 10 10 100

13 Capital gains treatment of royalties on 

 coal 100 110 120 130 130 140 140 150 150 160 170 1,400

14 Exclusion of interest on energy facility 

 bonds 10 10 20 20 20 20 20 30 30 30 30 230

15 Energy production credit 750 860 850 790 750 710 640 540 430 320 160 6,050

16 Energy investment credit 370 300 260 210 60 0 -10 0 10 10 10 850

17 Alcohol fuel credits 0 0 0 0 0 0 0 0 0 0 0 0

18 Bio-Diesel and small agri-biodiesel 

 producer tax credits 50 20 10 10 0 0 0 0 0 0 0 40

19 Tax credits for clean-fuel burning 

 vehicles and refueling property 320 430 590 570 640 670 420 220 150 150 150 3,990

20 Exclusion of utility conservation 

 subsidies 380 400 420 440 460 490 510 540 560 590 620 5,030

21 Credit for holding clean renewable 

 energy bonds 50 50 50 50 50 50 50 50 50 50 50 500

22 Deferral of gain from dispositions of 

 transmission property to implement 

 FERC restructuring policy 0 0 0 0 0 0 0 0 0 0 0 0

23 Credit for investment in clean coal 

 facilities 10 10 10 10 10 10 10 0 0 0 0 60

24 Temporary 50% expensing for 

 equipment used in the refining of 

 liquid fuels 0 0 0 0 0 0 0 0 0 0 0 0

25 Natural gas distribution pipelines 

 treated as 15-year property 0 0 0 0 0 0 0 0 0 0 0 0

26 Amortize all geological and 

 geophysical expenditures over 2 

 years 20 20 20 20 20 20 20 20 20 20 20 200

27 Allowance of deduction for certain 

 energy efficient commercial 

 building property 30 10 0 0 -10 -10 -10 -10 -10 -10 -10 -60

28 Credit for construction of new energy 

 efficient homes 90 40 10 0 0 0 0 0 0 0 0 50

29 Credit for energy efficiency 

 improvements to existing homes 380 0 0 0 0 0 0 0 0 0 0 0

Table 2B. ESTIMATES OF TOTAL INDIVIDUAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2014-2024

(in millions of dollars)

34
Total from individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

30 Credit for energy efficient appliances 0 0 0 0 0 0 0 0 0 0 0 0

31 Credit for residential energy efficient 

 property 1,040 1,140 1,120 650 250 50 0 0 0 0 0 3,210

32 Qualified energy conservation bonds 20 20 20 20 20 20 20 20 20 20 20 200

33 Advanced energy property credit 10 10 0 0 0 0 0 0 0 0 0 10

34 Advanced nuclear power production 

 credit 0 0 0 0 0 0 0 0 0 0 0 0

Natural resources and environment: 

35 Expensing of exploration and 

 development costs, nonfuel 

 minerals 10 10 10 10 10 10 10 10 10 10 10 100

36 Excess of percentage over cost 

 depletion, nonfuel minerals 40 40 40 40 40 40 50 50 50 50 50 450

37 Exclusion of interest on bonds for 

 water, sewage, and hazardous 

 waste facilities 330 350 380 410 460 510 570 620 680 720 770 5,470

38 Capital gains treatment of certain 

 timber income 100 110 120 130 130 140 140 150 150 160 170 1,400

39 Expensing of multiperiod timber 

 growing costs 130 130 130 140 150 150 160 160 160 160 160 1,500

40 Tax incentives for preservation of 

 historic structures 80 90 90 90 90 90 100 100 100 100 100 950

41 Industrial CO2 capture and 

 sequestration tax credit 0 0 0 0 0 0 0 0 0 0 0 0

42 Deduction for endangered species 

 recovery expenditures 10 10 20 20 20 20 20 30 30 30 30 230

Agriculture: 

43 Expensing of certain capital outlays 220 210 200 210 220 230 250 260 270 290 300 2,440

44 Expensing of certain multiperiod 

 production costs 330 330 350 360 380 410 430 450 480 510 540 4,240

45 Treatment of loans forgiven for 

 solvent farmers 40 40 40 40 40 40 40 40 40 40 40 400

46 Capital gains treatment of certain 

 income 1,020 1,140 1,250 1,310 1,330 1,360 1,410 1,460 1,520 1,590 1,660 14,030

47 Income averaging for farmers 130 130 140 140 140 140 140 140 140 140 140 1,390

48 Deferral of gain on sale of farm 

 refiners 0 0 0 0 0 0 0 0 0 0 0 0

49 Expensing of reforestation 

 expenditures 50 60 60 60 70 70 70 80 80 80 90 720

Commerce and housing: 

Financial institutions and insurance: 

50 Exemption of credit union income 0 0 0 0 0 0 0 0 0 0 0 0

51 Exclusion of interest on life insurance 

 savings 10,350 8,940 12,490 16,120 19,610 22,770 25,710 28,930 31,790 34,000 35,690 236,050

52 Special alternative tax on small 

 property and casualty insurance 

 companies 0 0 0 0 0 0 0 0 0 0 0 0

53 Tax exemption of certain insurance 

 companies owned by tax-exempt 

 organizations 0 0 0 0 0 0 0 0 0 0 0 0

54 Small life insurance company 

 deduction 0 0 0 0 0 0 0 0 0 0 0 0

55 Exclusion of interest spread of 

 financial institutions 1,710 2,540 2,720 2,920 3,120 3,310 3,500 3,700 3,900 4,090 4,260 34,060

Housing: 

56 Exclusion of interest on owner-

 occupied mortgage subsidy bonds 910 950 1,030 1,130 1,250 1,400 1,560 1,700 1,850 1,980 2,110 14,960

57 Exclusion of interest on rental housing 

 bonds 740 780 840 920 1,020 1,140 1,270 1,390 1,500 1,610 1,710 12,180

58 Mortgage interest expense on owner-

 occupied residences 66,910 69,480 75,260 83,100 92,170 101,730 111,190 120,440 129,540 138,390 147,610 1,068,910

59 Deduction for property taxes on real 

 property 31,590 33,120 35,520 38,190 40,980 43,830 46,730 49,550 52,400 55,340 58,450 454,110

60 Deferral of income from installment 

 sales 1,530 1,660 1,770 1,850 1,890 1,940 2,010 2,090 2,170 2,260 2,360 20,000

61 Capital gains exclusion on home sales 35,540 36,930 39,560 42,380 45,390 48,630 52,090 55,800 59,770 64,030 68,580 513,160

62 Exclusion of net imputed rental income 75,240 78,810 82,420 86,800 90,570 93,610 96,220 100,340 104,630 109,120 113,800 956,320

63 Exception from passive loss rules for 

 $25,000 of rental loss 7,220 8,330 8,820 9,340 9,860 10,370 10,840 11,260 11,650 12,050 12,500 105,020

64 Credit for low-income housing 

 investments 410 400 390 410 420 440 450 460 470 480 490 4,410

35
Total from individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

65 Accelerated depreciation on rental 

 housing (normal tax method) 880 890 1,100 1,450 1,840 2,280 2,730 3,280 3,860 4,370 4,860 26,660

66 Discharge of mortgage indebtedness 3,100 0 0 0 0 0 0 0 0 0 0 0

Commerce: 

67 Discharge of business indebtedness -80 -110 -80 -40 -30 -20 -10 20 40 50 50 -130

68 Exceptions from imputed interest rules 40 40 50 60 60 60 70 70 70 70 70 620

69 Treatment of qualified dividends 26,920 26,320 26,810 27,770 28,940 30,170 31,510 32,920 34,410 35,950 37,590 312,390

70 Capital gains (except agriculture, 

 timber, iron ore, and coal) 76,140 85,360 93,030 97,560 99,340 101,750 105,060 109,090 113,640 118,560 123,750 1,047,140

71 Capital gains exclusion of small 

 corporation stock 140 220 380 530 680 780 720 600 520 460 400 5,290

72 Step-up basis of capital gains at death 60,370 63,440 66,670 70,070 73,630 77,380 81,320 85,460 89,810 94,380 99,180 801,340

73 Carryover basis of capital gains on 

 gifts 7,360 7,750 7,420 6,810 6,290 5,840 5,480 5,180 4,960 4,810 4,740 59,280

74 Ordinary income treatment of loss 

 from small business corporation 

 stock sale 50 50 50 50 50 50 50 50 50 50 50 500

75 Accelerated depreciation of buildings 

 other than rental housing (normal 

 tax method) -4,770 -4,700 -4,670 -4,790 -4,970 -5,240 -5,570 -5,900 -6,230 -6,560 -6,960 -55,590

76 Accelerated depreciation of 

 machinery and equipment 

 (normal tax method) -1,250 -1,840 3,700 7,520 10,320 12,460 14,030 15,160 15,930 16,650 18,060 111,990

77 Expensing of certain small 

 investments (normal tax method) -850 -1,630 -570 120 590 880 1,080 1,290 1,480 1,640 1,760 6,640

78 Graduated corporation income tax rate 

 (normal tax method) 0 0 0 0 0 0 0 0 0 0 0 0

79 Exclusion of interest on small issue 

 bonds 120 130 140 150 170 190 210 230 250 270 290 2,030

80 Deduction for US production activities 2,980 3,110 3,280 3,440 3,600 3,760 3,930 4,110 4,280 4,470 4,670 38,650

81 Special rules for certain film and TV 

 production 30 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 2,690 2,800 2,910 3,040 3,140 3,220 3,330 3,450 3,540 3,680 3,800 32,910

85 Exclusion for employer-provided 

 transit passes 710 720 770 820 870 910 970 1,020 1,080 1,150 1,220 9,530

86 Tax credit for certain expenditures for 

 maintaining railroad tracks 20 0 0 0 0 0 0 0 0 0 0 0

87 Exclusion of interest on bonds for 

 Highway Projects and rail-truck 

 transfer facilities 170 170 160 150 140 130 130 120 120 110 110 1,340

Community and regional development: 

88 Investment credit for rehabilitation of 

 structures (other than historic) 20 20 20 20 20 20 20 20 20 20 20 200

89 Exclusion of interest for airport, dock, 

 and similar bonds 550 580 620 680 760 850 940 1,030 1,120 1,200 1,270 9,050

90 Exemption of certain mutuals' and 

 cooperatives' income 0 0 0 0 0 0 0 0 0 0 0 0

91 Empowerment zones 50 20 20 10 10 20 10 10 10 10 10 130

92 New markets tax credit 20 20 20 20 20 10 10 10 0 0 0 110

93 Expensing of environmental 

 remediation costs -30 -30 -30 -30 -30 -30 -20 -20 -20 -20 -20 -250

94 Credit to holders of Gulf Tax Credit 

 Bonds 160 170 180 200 230 250 280 310 330 360 380 2,690

95 Recovery Zone Bonds 90 90 100 110 120 140 150 170 180 190 210 1,460

96 Tribal Economic Development Bonds 30 30 30 30 40 40 50 50 60 60 60 450

Education, training, employment, and social services: 

Education: 

97 Exclusion of scholarship and 

 fellowship income (normal tax 

 method) 2,980 3,090 3,200 3,310 3,420 3,550 3,670 3,800 3,940 4,080 4,230 36,290

98 HOPE tax credit 0 0 0 0 780 7,860 8,270 8,350 8,450 8,770 8,810 51,290

99 Lifetime Learning tax credit 2,240 2,430 2,460 2,480 2,730 4,660 4,740 4,790 4,840 4,850 4,870 38,850

100 American Opportunity Tax Credit 15,710 15,660 15,690 15,760 14,100 0 0 0 0 0 0 61,210

36
Total from individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

101 Education Individual Retirement 

 Accounts 60 60 70 70 80 80 90 100 110 110 120 890

102 Deductibility of student-loan interest 1,730 1,770 1,760 1,760 1,750 1,790 1,790 1,780 1,810 1,810 1,790 17,810

103 Deduction for higher education 

 expenses 400 0 0 0 0 0 0 0 0 0 0 0

104 Qualified tuition programs 1,820 1,950 2,100 2,270 2,430 2,620 2,820 3,040 3,280 3,540 3,820 27,870

105 Exclusion of interest on student-loan 

 bonds 370 390 420 460 510 580 640 700 760 810 860 6,130

106 Exclusion of interest on bonds for 

 private nonprofit educational 

 facilities 1,660 1,740 1,870 2,060 2,290 2,570 2,850 3,110 3,370 3,610 3,850 27,320

107 Credit for holders of zone academy 

 bonds 0 0 0 0 0 0 0 0 0 0 0 0

108 Exclusion of interest on savings 

 bonds redeemed to finance 

 educational expenses 20 30 30 30 30 30 30 40 40 40 40 340

109 Parental personal exemption for 

 students age 19 or over 4,390 4,460 4,540 4,640 4,690 4,770 4,860 4,990 5,110 5,210 5,360 48,630

110 Deductibility of charitable contributions 

 (education) 4,080 4,310 4,620 4,990 5,390 5,780 6,140 6,500 6,850 7,190 7,530 59,300

111 Exclusion of employer-provided 

 educational assistance 750 800 840 890 930 980 1,030 1,090 1,140 1,200 1,260 10,160

112 Special deduction for teacher 

 expenses 130 0 0 0 0 0 0 0 0 0 0 0

113 Discharge of student loan 

 indebtedness 90 90 90 100 100 100 100 100 110 110 110 1,010

114 Qualified school construction bonds 490 490 490 490 490 490 490 490 490 490 490 4,900

Training, employment, and social services: 

115 Work opportunity tax credit 290 180 100 70 50 40 30 20 20 10 10 530

116 Employer provided child care 

 exclusion 890 940 1,000 1,060 1,130 1,210 1,280 1,340 1,420 1,500 1,620 12,500

117 Employer-provided child care credit 0 0 0 0 0 0 0 0 0 0 0 0

118 Assistance for adopted foster 

 children 530 560 590 620 660 700 740 790 840 890 940 7,330

119 Adoption credit and exclusion 260 340 310 310 360 350 390 400 400 400 410 3,670

120 Exclusion of employee meals and 

 lodging (other than military) 2,590 4,370 4,490 4,620 4,770 4,910 5,050 5,190 5,330 5,470 5,610 49,810

121 Child credit 23,800 23,900 24,070 24,160 24,230 24,300 24,010 23,670 23,210 22,780 22,050 236,380

122 Credit for child and dependent care 

 expenses 4,420 4,510 4,590 4,690 4,780 4,840 4,950 5,070 5,180 5,280 5,400 49,290

123 Credit for disabled access 

 expenditures 20 20 20 20 20 20 20 20 20 20 20 200

124 Deductibility of charitable 

 contributions, other than education 

 and health 40,280 42,570 45,580 49,280 53,250 57,040 60,660 64,180 67,640 71,010 74,370 585,580

125 Exclusion of certain foster care 

 payments 380 390 380 370 370 360 350 350 340 330 320 3,560

126 Exclusion of parsonage allowances 700 740 780 820 860 910 960 1,010 1,060 1,120 1,180 9,440

127 Indian employment credit 20 20 20 10 10 10 10 10 10 0 0 100

Health: 

128 Exclusion of employer contributions 

 for medical insurance premiums 

 and medical care 195,050 206,430 216,080 226,860 236,640 250,420 267,950 285,890 305,610 327,230 350,670 2,673,780

129 Self-employed medical insurance 

 premiums 6,380 6,660 6,970 7,270 7,600 7,930 8,270 8,650 9,150 9,650 9,380 81,530

130 Medical Savings Accounts / Health 

 Savings Accounts 4,010 4,770 5,660 6,720 7,950 9,440 11,240 13,370 15,900 18,900 22,540 116,490

131 Deductibility of medical expenses 6,810 7,080 7,660 7,700 8,090 9,080 10,530 12,300 14,250 16,720 19,700 113,110

132 Exclusion of interest on hospital 

 construction bonds 2,520 2,650 2,850 3,140 3,490 3,910 4,330 4,740 5,130 5,500 5,860 41,600

133 Refundable Premium Assistance Tax 

 Credit 0 -1,780 -3,070 -3,920 -5,650 -7,920 -8,850 -9,410 -10,030 -10,310 -10,770 -71,710

134 Credit for employee health insurance 

 expenses of small business 360 460 460 410 360 270 230 140 130 80 80 2,620

135 Deductibility of charitable contributions 

 (health) 4,520 4,780 5,110 5,530 5,970 6,400 6,800 7,200 7,590 7,960 8,340 65,680

136 Tax credit for orphan drug research 0 0 0 0 0 0 0 0 0 0 0 0

137 Special Blue Cross/Blue Shield 

 deduction 0 0 0 0 0 0 0 0 0 0 0 0

138 Tax credit for health insurance 

 purchased by certain displaced 

 and retired individuals 0 0 0 0 0 0 0 0 0 0 0 0

37
Total from individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

139 Distributions from retirement plans for 

 premiums for health and long-term 

 care insurance 360 400 440 460 480 500 520 540 560 580 600 5,080

Income security: 

140 Exclusion of railroad retirement 

 system benefits 320 320 320 320 320 320 320 310 310 310 310 3,160

141 Exclusion of workers' compensation 

 benefits 9,890 9,990 10,090 10,190 10,290 10,390 10,490 10,600 10,710 10,810 10,920 104,480

142 Exclusion of public assistance 

 benefits (normal tax method) 610 640 660 710 760 750 760 790 810 860 830 7,570

143 Exclusion of special benefits for 

 disabled coal miners 30 30 30 20 20 20 10 10 10 10 10 170

144 Exclusion of military disability 

pensions 140 140 140 140 150 150 150 150 160 160 160 1,500

Net exclusion of pension contributions and earnings: 

145 Defined benefit employer plans 42,780 44,640 46,260 48,040 49,100 50,780 55,840 66,620 77,960 86,490 95,320 621,050

146 Defined contribution employer plans 62,530 68,040 73,910 74,670 79,380 81,190 92,750 101,870 108,470 114,770 122,340 917,390

147 Individual Retirement Accounts 16,580 17,240 18,270 19,230 20,240 21,200 21,930 23,320 25,100 26,210 27,010 219,750

148 Low and moderate income savers 

 credit 1,230 1,240 1,290 1,270 1,280 1,290 1,310 1,320 1,320 1,350 1,340 13,010

149 Self-Employed plans 23,240 25,480 28,020 30,780 33,740 37,000 40,450 43,990 47,850 52,040 56,600 395,950

Exclusion of other employee benefits: 

150 Premiums on group term life 

insurance 2,200 2,320 2,420 2,520 2,630 2,740 2,840 2,960 3,070 3,190 3,310 28,000

151 Premiums on accident and disability 

 insurance 310 310 320 320 330 330 330 340 340 340 350 3,310

152 Income of trusts to finance 

 supplementary unemployment 

 benefits 20 30 40 40 50 60 60 70 80 80 90 600

153 Special ESOP rules 100 100 110 110 110 120 120 130 130 130 130 1,190

154 Additional deduction for the blind 30 30 30 40 40 40 40 50 50 50 50 420

155 Additional deduction for the elderly 2,520 2,730 2,930 3,210 3,450 3,700 3,980 4,160 4,430 4,770 5,080 38,440

156 Tax credit for the elderly and disabled 10 10 10 10 10 10 10 0 0 0 0 60

157 Deductibility of casualty losses 330 340 360 380 390 410 430 440 460 470 480 4,160

158 Earned income tax credit 3,660 5,030 5,090 4,300 3,110 1,830 1,910 2,030 2,120 2,220 2,330 29,970

Social Security: 

Exclusion of social security benefits: 

159 Social Security benefits for retired 

 workers 26,200 27,080 28,300 29,850 31,110 32,390 33,640 34,490 35,330 36,090 36,580 324,860

160 Social Security benefits for disabled 

 workers 8,050 8,310 8,580 8,660 8,620 8,660 8,780 8,940 9,160 9,390 9,690 88,790

161 Social Security benefits for spouses, 

 dependents and survivors 4,330 4,390 4,530 4,710 4,840 5,020 5,200 5,360 5,530 5,700 5,850 51,130

Veterans benefits and services: 

162 Exclusion of veterans death benefits 

 and disability compensation 5,720 6,380 6,860 7,200 7,530 7,830 8,160 8,490 8,830 9,170 9,510 79,960

163 Exclusion of veterans pensions 420 460 480 510 530 550 570 590 610 630 650 5,580

164 Exclusion of GI bill benefits 1,460 1,580 1,700 1,840 1,980 2,130 2,280 2,450 2,620 2,810 3,010 22,400

165 Exclusion of interest on veterans 

 housing bonds 10 10 10 10 10 10 10 10 20 20 20 130

General purpose fiscal assistance: 

166 Exclusion of interest on public 

 purpose State and local bonds 20,960 22,070 23,720 26,120 28,990 32,480 36,020 39,420 42,690 45,750 48,680 345,940

167 Build America Bonds 0 0 0 0 0 0 0 0 0 0 0 0

168 Deductibility of nonbusiness State and 

 local taxes other than on owner-

 occupied homes 45,720 47,490 51,180 55,300 59,490 63,620 67,910 72,140 76,540 81,120 85,490 660,280

Interest: 

169 Deferral of interest on U.S. savings 

 bonds 1,030 1,020 1,010 1,000 990 980 970 960 950 940 930 9,750

Addendum: Aid to State and local governments: 

Deductibility of: 

38
Total from individuals

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2015-24

Property taxes on owner-occupied 

 homes 31,590 33,120 35,520 38,190 40,980 43,830 46,730 49,550 52,400 55,340 58,450 454,110

Nonbusiness State and local taxes 

 other than on owner-occupied 

 homes 45,720 47,490 51,180 55,300 59,490 63,620 67,910 72,140 76,540 81,120 85,490 660,280

Exclusion of interest on State and local bonds for: 

Public purposes 20,960 22,070 23,720 26,120 28,990 32,480 36,020 39,420 42,690 45,750 48,680 345,940

Energy facilities 10 10 20 20 20 20 20 30 30 30 30 230

Water, sewage, and hazardous 

 waste disposal facilities 330 350 380 410 460 510 570 620 680 720 770 5,470

Small-issues 120 130 140 150 170 190 210 230 250 270 290 2,030

Owner-occupied mortgage subsidies 910 950 1,030 1,130 1,250 1,400 1,560 1,700 1,850 1,980 2,110 14,960

Rental housing 740 780 840 920 1,020 1,140 1,270 1,390 1,500 1,610 1,710 12,180

Airports, docks, and similar facilities 550 580 620 680 760 850 940 1,030 1,120 1,200 1,270 9,050

Student loans 370 390 420 460 510 580 640 700 760 810 860 6,130

Private nonprofit educational facilities 1,660 1,740 1,870 2,060 2,290 2,570 2,850 3,110 3,370 3,610 3,850 27,320

Hospital construction 2,520 2,650 2,850 3,140 3,490 3,910 4,330 4,740 5,130 5,500 5,860 41,600

Veterans' housing 10 10 10 10 10 10 10 10 20 20 20 130

See Table 1 footnotes for specific table information

39
Provision 2015 2016 2015-24

128 Exclusion of employer contributions for medical insurance premiums and medical care 206,430 216,080 2,673,780

58 Mortgage interest expense on owner-occupied residences 69,480 75,260 1,068,910

70 Capital gains (except agriculture, timber, iron ore, and coal) 85,360 93,030 1,047,140

62 Exclusion of net imputed rental income 78,810 82,420 956,320

146 Defined contribution employer plans 68,040 73,910 917,390

5 Deferral of income from controlled foreign corporations (normal tax method) 64,560 67,780 811,980

72 Step-up basis of capital gains at death 63,440 66,670 801,340

168 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes 47,490 51,180 660,280

145 Defined benefit employer plans 44,640 46,260 621,050

124 Deductibility of charitable contributions, other than education and health 44,280 47,380 606,750

61 Capital gains exclusion on home sales 36,930 39,560 513,160

166 Exclusion of interest on public purpose State and local bonds 31,070 35,190 485,110

59 Deduction for property taxes on real property 33,120 35,520 454,110

51 Exclusion of interest on life insurance savings 13,100 17,730 317,420

149 Self-Employed plans 25,480 28,020 395,950

159 Social Security benefits for retired workers 27,080 28,300 324,860

69 Treatment of qualified dividends 26,320 26,810 312,390

76 Accelerated depreciation of machinery and equipment (normal tax method) -12,260 4,770 306,810

121 Child credit 23,900 24,070 236,380

147 Individual Retirement Accounts 17,240 18,270 219,750

80 Deduction for US production activities 14,500 15,230 178,740

1 Exclusion of benefits and allowances to armed forces personnel 13,570 14,110 145,210

130 Medical Savings Accounts / Health Savings Accounts 4,770 5,660 116,490

131 Deductibility of medical expenses 7,080 7,660 113,110

63 Exception from passive loss rules for $25,000 of rental loss 8,330 8,820 105,020

141 Exclusion of workers' compensation benefits 9,990 10,090 104,480

160 Social Security benefits for disabled workers 8,310 8,580 88,790

64 Credit for low-income housing investments 7,980 7,890 88,020

129 Self-employed medical insurance premiums 6,660 6,970 81,530

162 Exclusion of veterans death benefits and disability compensation 6,380 6,860 79,960

7 Expensing of research and experimentation expenditures (normal tax method) 7,110 7,040 75,550

2 Exclusion of income earned abroad by U.S. citizens 5,990 6,280 75,290

110 Deductibility of charitable contributions (education) 5,120 5,480 69,400

135 Deductibility of charitable contributions (health) 5,010 5,350 68,530

100 Lifetime Learning tax credit 15,660 15,690 61,210

73 Carryover basis of capital gains on gifts 7,750 7,420 59,280

4 Inventory property sales source rules exception 3,960 4,290 58,480

132 Exclusion of interest on hospital construction bonds 3,730 4,230 58,330

98 HOPE tax credit 0 0 51,290

161 Social Security benefits for spouses, dependents and survivors 4,390 4,530 51,130

120 Exclusion of employee meals and lodging (other than military) 4,370 4,490 49,810

122 Credit for child and dependent care expenses 4,510 4,590 49,290

109 Parental personal exemption for students age 19 or over 4,460 4,540 48,630

136 Tax credit for orphan drug research 1,450 1,750 38,870

99 Lifetime Learning tax credit 2,430 2,460 38,850

155 Additional deduction for the elderly 2,730 2,930 38,440

78 Graduated corporation income tax rate (normal tax method) 3,890 3,860 38,300

106 Exclusion of interest on bonds for private nonprofit educational facilities 2,450 2,780 38,300

97 Exclusion of scholarship and fellowship income (normal tax method) 3,090 3,200 36,290

55 Exclusion of interest spread of financial institutions 2,540 2,720 34,060

65 Accelerated depreciation on rental housing (normal tax method) 1,080 1,330 32,350

158 Earned income tax credit 5,030 5,090 29,970

150 Premiums on group term life insurance 2,320 2,420 28,000

104 Qualified Tuition Programs 1,950 2,100 27,870

50 Exemption of credit union income 1,760 2,170 25,390

153 Special ESOP rules 1,810 1,910 22,710

164 Exclusion of GI bill benefits 1,580 1,700 22,400

56 Exclusion of interest on owner-occupied mortgage subsidy bonds 1,340 1,530 20,990

60 Deferral of income from installment sales 1,660 1,770 20,000

8 Credit for increasing research activities 3,620 3,090 19,160

15 New technology credit 2,570 2,540 18,150

(in millions of dollars)

FISCAL YEAR 2015-2024 PROJECTED REVENUE EFFECT

Table 3. INCOME TAX EXPENDITURES RANKED BY TOTAL

40
Provision 2015 2016 2015-24

102 Deductibility of student-loan interest 1,770 1,760 17,810

57 Exclusion of interest on rental housing bonds 1,100 1,240 17,090

3 Exclusion of certain allowances for Federal employees abroad 1,240 1,300 15,580

84 Exclusion of reimbursed employee parking expenses 2,800 2,910 32,910

46 Capital gains treatment of certain income 1,140 1,250 14,030

10 Excess of percentage over cost depletion, fuels 790 910 13,630

148 Low and moderate income savers credit 1,240 1,290 13,010

89 Exclusion of interest for airport, dock, and similar bonds 820 920 12,680

116 Employer provided child care exclusion 940 1,000 12,500

111 Exclusion of employer-provided educational assistance 800 840 10,160

169 Deferral of interest on U.S. savings bonds 1,020 1,010 9,750

85 Exclusion for employer-provided transit passes 720 770 9,530

126 Exclusion of parsonage allowances 740 780 9,440

105 Exclusion of interest on student-loan bonds 550 620 8,580

53 Tax exemption of certain insurance companies owned by tax-exempt organizations 690 730 8,460

37 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities 490 560 7,670

142 Exclusion of public assistance benefits (normal tax method) 640 660 7,570

118 Assistance for adopted foster children 560 590 7,330

77 Expensing of certain small investments (normal tax method) -1,980 -740 7,280

36 Excess of percentage over cost depletion, nonfuel minerals 610 620 6,620

40 Tax incentives for preservation of historic structures 600 610 6,540

114 Qualified school construction bonds 490 650 6,340

9 Expensing of exploration and development costs, fuels 290 450 6,220

163 Exclusion of veterans pensions 460 480 5,580

20 Exclusion of utility conservation subsidies 430 450 5,330

71 Capital gains exclusion of small corporation stock 220 380 5,290

34 Advanced nuclear power production credit 80 220 5,210

139 Distributions from retirement plans for premiums for health and long-term care insurance 400 440 5,080

19 Tax credits for clean-fuel burning vehicles 580 740 4,870

92 New markets tax credit 1,040 1,050 4,740

44 Expensing of certain multiperiod production costs 350 370 4,570

16 Energy investment credit 1,490 1,320 4,180

157 Deductibility of casualty losses 340 360 4,160

39 Expensing of multiperiod timber growing costs 350 360 4,090

94 Credit to holders of Gulf Tax Credit Bonds. 240 270 3,790

134 Credit for employee health insurance expenses of small business. 630 630 3,700

119 Adoption credit and exclusion 340 310 3,670

125 Exclusion of certain foster care payments 390 380 3,560

137 Special Blue Cross/Blue Shield deduction 280 380 3,550

151 Premiums on accident and disability insurance 310 320 3,310

31 30% credit for residential purchases/installations of solar and fuel cells 1,140 1,120 3,210

140 Exclusion of railroad retirement system benefits 320 320 3,160

79 Exclusion of interest on small issue bonds 180 210 2,840

43 Expensing of certain capital outlays 220 210 2,630

95 Recovery Zone Bonds 130 150 2,050

87 Exclusion of interest on bonds for Financing of Highway Projects and rail-truck transfer facilities 220 210 1,760

144 Exclusion of military disability pensions 140 140 1,500

115 Work opportunity tax credit 510 270 1,490

38 Capital gains treatment of certain timber income 110 120 1,400

13 Capital gains treatment of royalties on coal 110 120 1,400

47 Income averaging for farmers 130 140 1,390

90 Exemption of certain mutuals' and cooperatives' income 120 120 1,340

26 Amortize all geological and geophysical expenditures over 2 years 100 120 1,130

107 Credit for holders of zone academy bonds 160 130 1,060

49 Expensing of reforestation expenditures 80 90 1,040

113 Discharge of student loan indebtedness 90 90 1,010

25 Natural gas distribution pipelines treated as 15-year property 170 170 980

101 Education Individual Retirement Accounts 60 70 890

82 Tonnage tax 70 70 880

35 Expensing of exploration and development costs, nonfuel minerals 80 80 830

23 Credit for investment in clean coal facilities 180 110 820

21 Credit for holding clean renewable energy bonds 70 70 700

96 Tribal Economic Development Bonds 40 50 640

68 Exceptions from imputed interest rules 40 50 620

152 Income of trusts to finance supplementary unemployment benefits 30 40 600

74 Ordinary income treatment of loss from small business corporation stock sale 50 50 500

41
Provision 2015 2016 2015-24

41 Industrial CO2 capture and sequestration tax credit 80 110 460

54 Small life insurance company deduction 30 40 430

154 Additional deduction for the blind 30 30 420

45 Treatment of loans forgiven for solvent farmers 40 40 400

42 Deduction for endangered species recovery expenditures 20 30 380

123 Credit for disabled access expenditures 30 30 370

108 Exclusion of interest on savings bonds redeemed to finance educational expenses 30 30 340

14 Exclusion of interest on energy facility bonds 20 30 330

88 Investment credit for rehabilitation of structures (other than historic) 30 30 300

32 Qualified energy conservation bonds 30 30 300

30 Credit for energy efficient appliances 120 110 270

48 Deferral of gain on sale of farm refiners 20 20 250

91 Empowerment zones 40 30 200

81 Special rules for certain film and TV production 100 60 200

52 Special alternative tax on small property and casualty insurance companies 10 10 180

165 Exclusion of interest on veterans housing bonds 10 10 170

143 Exclusion of special benefits for disabled coal miners 30 30 170

127 Indian employment credit 30 30 130

12 Exception from passive loss limitation for working interests in oil and gas properties 10 10 100

117 Employer-provided child care credit 10 10 100

28 Credit for construction of new energy efficient homes 60 20 80

156 Tax credit for the elderly and disabled 10 10 60

18 Bio-Diesel and small agri-biodiesel producer tax credits 30 20 60

83 Deferral of tax on shipping companies 0 0 0

17 Alcohol fuel credits 0 0 0

167 Build America Bonds 0 0 0

138 Tax credit for health insurance purchased by certain displaced and retired individuals 0 0 0

112 Special deduction for teacher expenses 0 0 0

103 Deduction for higher education expenses 0 0 0

86 Tax credit for certain expenditures for maintaining railroad tracks 0 0 0

66 Discharge of mortgage indebtedness 0 0 0

29 Credit for energy efficiency improvements to existing homes 0 0 0

11 Alternative fuel production credit 0 0 0

6 Deferred taxes for financial firms on certain income earned overseas 0 0 0

33 Advanced Energy Property Credit 60 0 -30

27 Allowance of deduction for certain energy efficient commercial building property 20 0 -120

67 Discharge of business indebtedness -110 -80 -130

22 Deferral of gain from dispositions of transmission property to implement FERC restructuring policy -230 -210 -1,020

93 Expensing of environmental remediation costs -180 -170 -1,500

24 Temporary 50% expensing for equipment used in the refining of liquid fuels -1,600 -1,320 -6,970

133 Refundable Premium Assistance Tax Credit -1,780 -3,070 -71,710

75 Accelerated depreciation of buildings other than rental housing (normal tax method) -8,480 -8,530 -102,110

42
2014

Provision Present Value

of Revenue Loss

5 Deferral of income from controlled foreign corporations (normal tax method) 42,510

7 Expensing of research and experimentation expenditures (normal tax method) 2,680

9 Expensing of exploration and development costs - fuels 290

21 Credit for holding clean renewable energy bonds 0

35 Expensing of exploration and development costs - nonfuels 90

39 Expensing of multiperiod timber growing costs 100

44 Expensing of certain multiperiod production costs - agriculture -40

43 Expensing of certain capital outlays - agriculture -30

49 Expensing of reforestation expenditures 30

51 Deferral of income on life insurance and annuity contracts 1/ 16,850

65 Accelerated depreciation on rental housing 12,720

75 Accelerated depreciation of buildings other than rental -11,380

76 Accelerated depreciation of machinery and equipment 12,090

77 Expensing of certain small investments (normal tax method) 320

107 Credit for holders of zone academy bonds 0

64 Credit for low-income housing investments 5,380

104 Deferral for state prepaid tuition plans 3,320

145 Defined benefit employer plans 22,250

146 Defined contribution employer plans 68,990

147 Exclusion of IRA contributions and earnings 1,510

147 Exclusion of Roth earnings and distributions 4,060

147 Exclusion of non-deductible IRA earnings 330

149 Exclusion of contributions and earnings for Self-Employed plans 4,200

166 Exclusion of interest on public-purpose bonds 12,890

Exclusion of interest on non-public purpose bonds 4,260

169 Deferral of interest on U.S. savings bonds 240

1/ The estimate represents only the impact of taxing income earned with respect to annuities. 

Table 4. PRESENT VALUE OF SELECTED TAX EXPENDITURES

FOR ACTIVITY IN CALENDAR YEAR 2014

(in millions of dollars)

43