In 2009, congressional debate focused primarily on stimulating the economy, health care reform, and climate change. These issues are not only interrelated, but are also intimately linked with the taxation of businesses. For example, in February, Congress enacted the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ). Two of the act's business tax provisions provided for a temporary increase of small business expensing and temporary "bonus" depreciation limits, while other provisions allow a delayed recognition of cancelation of debt income and five-year carryback of net operating losses for small businesses. The act also modified several renewable energy provisions, including the Renewable Energy Production Tax Credit, the Investment Tax Credit, and tax credit for Alternative Fueling Property. Congressional debate in 2010 has focused on extending selected expired tax provisions and reforming health care. In particular, the Tax Extenders Act of 2009, H.R. 4213 , passed the House on December 9, 2009, and the Senate on March 10, 2010. In addition, the debate on health care reform is ongoing and the President's Fiscal Year 2011 Budget Proposal calls for the modification of selected business taxes, the removal or restriction of several oil and gas tax provisions, and reforming international taxation. As the year progresses, it is anticipated that congressional deliberations will consider the extension of several expiring business tax provisions, energy taxation, tax shelters, and international taxation, while continuing to examine opportunities for economic stimulus. The United States has what tax analysts sometimes term a "classical" system for taxing corporate income. That is, it imposes a tax on corporate profits—the corporate income tax—that is separate and generally in addition to the individual income taxes that corporate stockholders pay on their corporate-source capital gains and dividends. The corporate income tax applies a 35% rate to most corporate taxable income, although reduced rates ranging from 15% to 34% apply to corporations earning smaller amounts of income. The base of the tax is corporate profits as defined by the tax code—generally gross revenue minus interest, wages, the cost of purchased inputs, and an allowance for depreciation. Since 1980, federal corporate tax revenue has generally varied between 1% and just over 2% of gross domestic product (GDP). Congressional Budget Office (CBO) data show that corporate tax receipts registered an "uptick" in FY2005 and FY2007—rising to 2.3% and 2.7% of GDP, respectively—before reverting to a historically normal 2.1% in 2008 and falling to 1.0% in 2009. CBO projects corporate tax revenue as a percentage of GDP to remain at this level through 2010, reflecting reduced corporate profits due to the economic recession, before trending upward beginning in 2011. CBO data show a similar trend regarding corporate tax receipts as a share of total taxes, with an "uptick" in FY2005 and FY2007 from 12.9% to 14.4% of total federal revenues, before reverting to a 12.1% in 2008 and then dramatically falling to 6.6% in 2009. CBO, again, projects the percentage of total revenue from corporate tax revenue to remain depressed through 2010. Not all businesses are subject to the corporate income tax, however. Income earned by partnerships is "passed through" and taxed to the individual partners under the individual income tax without imposition of a separate level of tax at the partnership level. Also, businesses that have no more than 100 stockholders and meet certain other requirements ("S" corporations), as well as certain other "pass through entities," are not subject to the corporate income tax, but are taxed in the same manner as partnerships. As Congress debates business tax policy, several policy questions are commonly raised. These questions highlight three criteria that tax policy experts find informative for the evaluation of tax policy options. In general terms the criteria are equity, economic efficiency, and administrability. The policy questions are as follows. What would be the impact of the investment incentives on the economy's capital stock? Does the reduced tax burden increase the supply of capital and saving, thus increasing long-run growth? Or, is the economy's supply of capital relatively fixed, meaning the investment incentives simply interfere with the efficient allocation of investment? Were the enacted business tax cuts effective in stimulating the economy in the short run, thus aiding recovery from the 2001 recession? Or, do planning lags and other factors make business tax cuts ineffective as a fiscal stimulus, meaning the relation between the business tax cuts and economic recovery was serendipitous? What is the effect of the business tax cuts on the overall fairness of the tax system? Do the reductions accrue primarily to relatively high-income stockholders and corporate creditors, or will any reductions on tax progressivity be outweighed by positive employment effects? How will the business tax cuts affect U.S. economic competitiveness? Have provisions such as the domestic production deduction helped revitalize domestic manufacturing, or do the deduction and other competitiveness provisions interfere with the efficient and flexible participation of U.S. businesses in the world economy? The President's Fiscal Year 2011 Budget Proposal proposes to modify selected business taxes, remove or restrict several coal, oil, and gas tax provisions, and reform international taxation. Taken as a whole, the Joint Committee on Taxation estimated that these provisions would increase the overall level of business taxation relative to current law. The President's budget contains proposals to raise selected general business taxes, while lowering other general business taxes. On net, the budget proposes to increase the level of business taxation. The most prominent of these business tax proposals, in terms of revenue, is the repeal of last-in first-out (LIFO) inventory accounting (estimated to raise $75.3 billion over 10 years). Under LIFO, a firm records the last units purchased as the first units sold. Given that prices generally rise over time because of inflation, this method records the sale of the most expensive inventory first and thereby decreases profit and reduces taxes. In addition, the President's budget proposes to codify the "economic substance doctrine" ($7.2 billion), tax carried interest as ordinary income ($28.6 billion), and reinstate a series of superfund taxes ($19.2 billion). Additionally, the President's budget contains several provisions that would general business tax receipts. The most prominent of these proposals, in terms of revenue, is to make the Research and Experimentation tax credit permanent ($70.5 billion). The budget also proposes to eliminate capital gains taxation on small businesses ($7.9 billion). The President's budget proposes to repeal or modify a number of coal, oil, and gas provisions. Among the provisions proposed for repeal are the Section 199 production activities deduction, percentage depletion, and expensing of intangible drilling costs. Taken together, these provisions in the President's Budget Proposal are estimated to raise approximately $40 billion over the 2010-2020 budget window. Additionally, general provisions, such as the repeal of LIFO, modification of the tax rules for dual-capacity taxpayers and the reinstatement of the superfund taxes, are expected to also impact the coal, oil, and gas industries. The President's budget proposes changes to rules on deferral, foreign tax credits, and transfer pricing. The deferral proposal would eliminate a U.S. person's ability to currently deduct interest expenses that are related to deferred foreign-source income; instead the deduction for those expenses would be deferred until the foreign-source income is subject to U.S. tax. The remainder of the deductions could be carried forward ($35.5 billion). The foreign tax credit proposals would prorate foreign taxes over the taxpayer's entire foreign income, including deferred income and address issues inappropriate separation of creditable foreign taxes from the associated foreign income ($53.7 billion). In effect this would negate the ability of taxpayers to cherry-pick repatriations from high-tax countries—and reinvest low-tax country profits offshore—to maximize the foreign tax credit. Finally the proposals related to transfer pricing are intended to tax any excessive returns generated by the transfer of intangible assets to affiliates in low-tax countries ($12.4 billion). One aspect of the congressional debate over health care reform is the effect on small business. Specifically, there is concern over the effect of a "pay or play" mandate to require firms to provide health insurance for their employees or pay a penalty. Current proposals have exemptions for small businesses, and also propose to provide subsidies for purchasing insurance. Economic theory suggests that health insurance costs (and any penalties) will be passed on to labor income, but that may be more difficult for employers of lower-wage workers. Furthermore, average wages are generally lower for small firms (except for the smallest). Both the House bill ( H.R. 3962 , passed on November 14, 2009) and the Senate bill ( H.R. 3590 ) would exempt small businesses from penalties. The House bill would apply no penalties to firms with $500,000 or less in payroll, and the Senate bill would exempt firms with 50 or fewer employees. As a result, very few smaller businesses would be affected. The proposals also provide temporary credits to subsidize small employers' contributions to health insurance for lower-income employees. The size of the subsidies depends on the size of the firm and the firm's average employee compensation. The credits are the same in the two bills (except that the Senate bill allows a smaller credit for nonprofits), and would be as much as 50% of the employer's cost. The subsidy for taxable firms is provided as a nonrefundable income tax credit and would not benefit firms with no income tax liability; the Senate bill has a separate 35% credit against payroll taxes for nonprofits. The Tax Extenders Act of 2009 is expected to provide businesses with tax relief through the one year extension of multiple tax provisions that expired at the end of 2009. The House- and Senate-passed versions of H.R.