"Sequestration" is a process of automatic, largely across-the-board spending reductions to meet or enforce certain budget policy goals. It was first established by the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, Title II of P.L. 99-177 , 2 U.S.C. 900-922) to enforce deficit targets. In the 1990s, sequestration was used to enforce statutory limits on discretionary spending and a pay-as-you-go (PAYGO) requirement on direct spending and revenue legislation. After effectively expiring in 2002, sequestration was reestablished by the Statutory Pay-As-You-Go Act of 2010 ( P.L. 111-139 ) to enforce a modified PAYGO requirement on direct spending and revenue legislation. Most recently, under the Budget Control Act of 2011 (BCA, P.L. 112-25 ), sequestration was tied to enforcement of new statutory limits on discretionary spending and achievement of the budget goal established for the Joint Select Committee on Deficit Reduction. A sequestration was triggered by the Joint Committee's failure to achieve its goal and was originally scheduled to occur on January 2, 2013, to affect spending for FY2013. Congress enacted legislation that delayed the effective date of this sequester until March 1, 2013 (American Taxpayer Relief Act of 2012, P.L. 112-240 ). In general, sequestration entails the permanent cancellation of budgetary resources by a uniform percentage. This uniform percentage reduction is applied to all "programs, projects, and activities" (PPAs) within a budget account. However, the current sequestration procedures, as in previous iterations of such procedures, provide for exemptions and special rules. That is, certain programs and activities are exempt from sequestration, and certain other programs are governed by special rules regarding the application of a sequester. This report provides an overview of those exemptions and special rules, which are generally found in Sections 255 and 256 of BBEDCA, as amended (2 U.S.C. 905 and 906). While the report makes references to the sequestration currently in effect, triggered by failure of the Joint Committee process under the BCA, it discusses exemptions and special rules in general and should not be viewed as a comprehensive examination of the current or any future sequestration under either the BCA or the Statutory PAYGO Act. As noted above, sequestration is tied to certain budget goals established in the Budget Control Act of 2011, as well as in the Statutory PAYGO Act of 2010. To provide some context for the exemptions and special rules applicable to these sequestration procedures, brief descriptions of the budget goals that may be enforced by sequestration are provided below. Readers also may wish to consult the following CRS reports: CRS Report R41965, The Budget Control Act of 2011 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] CRS Report R42949, The American Taxpayer Relief Act of 2012: Modifications to the Budget Enforcement Procedures in the Budget Control Act , by [author name scrubbed] CRS Report R42972, Sequestration as a Budget Enforcement Process: Frequently Asked Questions , by [author name scrubbed] CRS Report R42675, The Budget Control Act of 2011: Budgetary Effects of Proposals to Replace the FY2013 Sequester , by [author name scrubbed] CRS Report R42051, Budget Control Act: Potential Impact of Sequestration on Health Reform Spending , by [author name scrubbed] CRS Report R42994, The Budget Control Act, Sequestration, and the Foreign Affairs Budget: Background and Possible Impacts , by [author name scrubbed] CRS Report R43021, Proposed Cuts to Air Traffic Control Towers Under Budget Sequestration: Background and Considerations for Congress , by [author name scrubbed] CRS Report R43065, Sequestration at the Federal Aviation Administration (FAA): Air Traffic Controller Furloughs and Congressional Response , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] CRS Report R42506, The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit , by [author name scrubbed] and [author name scrubbed] CRS Report R41157, The Statutory Pay-As-You-Go Act of 2010: Summary and Legislative History , by [author name scrubbed] The Budget Control Act of 2011 (BCA) was enacted on August 2, 2011. It provided for increases in the debt limit and established procedures designed to reduce the federal budget deficit. The BCA has two primary components that can trigger a sequestration of discretionary and/or mandatory (or direct) spending: Title I of the BCA established discretionary spending limits, or caps, for each of FY2012-FY2021. If Congress appropriates more than allowed under these spending limits in any given year, the automatic reduction process of sequestration would cancel the excess amount. For FY2012 and FY2013, the spending limits were divided into "security" and "nonsecurity" categories, with security defined broadly to include the Departments of Veterans Affairs (VA), Homeland Security (DHS), and State, in addition to the Department of Defense and certain other activities. For FY2014 and subsequent years, no distinction was made between security and nonsecurity, and Title I of the law established a single discretionary spending limit for each year. Title IV of the BCA established a bipartisan Joint Select Committee on Deficit Reduction. Failure by Congress to enact legislation by January 15, 2012, developed by the Joint Committee and reducing the deficit by at least $1.2 trillion, would trigger a series of automatic spending reductions intended to achieve that level of savings over the FY2013-FY2021 period. These automatic reductions include sequestration of mandatory spending for each of FY2013-FY2021, a one-year sequestration of discretionary spending for FY2013, and lower discretionary spending limits for each of FY2014-FY2021. Spending reductions would be divided equally between security and nonsecurity. However, these terms are redefined , so that "security" consists only of budget function 050 (effectively, the Department of Defense), and "nonsecurity" includes all other government spending (including the VA, DHS, and State). The distinction between security and nonsecurity ( as redefined ) remains for each of FY2014-FY2021. The security-nonsecurity distinction is significant because sequestration is imposed within these categories. In other words, if Congress appropriated more than allowed for either category in a given year, the excess spending would be canceled in the category where the breach occurred. As noted above, security was defined broadly under Title I and spending was divided between the two categories originally for FY2012 and FY2013. However, under the automatic procedures triggered by failure of the Joint Committee, security is defined more narrowly and the separate security and nonsecurity categories remain in effect for each year through FY2021. Because the Joint Committee did not, in fact, develop legislation to achieve the specified level of deficit reduction ($1.2 trillion) by the deadline set in the BCA, and Congress did not subsequently enact such legislation by January 15, 2012, the automatic budget enforcement procedures provided by the law were triggered. The first fiscal year these procedures were intended to affect was FY2013; sequestration for that fiscal year (as outlined in the second bullet above) was originally scheduled to happen on January 2, 2013. Legislation was enacted, however, that delayed this sequester until March 1, 2013, and also reduced the total amount to be sequestered by $24 billion (American Taxpayer Relief Act of 2012, P.L. 112-240 ). Under the law as amended, BCA now requires a cancellation of budgetary resources equal to $85 billion in FY2013, equally divided between defense (i.e., the narrow definition of security) and nondefense. On March 1, 2013, President Obama signed the sequestration order triggered by failure of the Joint Committee process under the BCA, and the Office of Management and Budget (OMB) issued a report containing the percentages by which budgetary resources must be reduced in order to achieve the necessary spending reductions in FY2013. OMB calculated that, in order to cancel the requisite $85 billion, annualized spending levels for each nonexempt account must be reduced by the percentages shown below in Table 1 . OMB noted that the spending reductions for FY2013 must be achieved over a seven-month period rather than the full fiscal year, thus making the effective percentage reductions higher than those shown in the table. According to OMB, the effective reductions are approximately 13% for nonexempt defense spending and 9% for nonexempt nondefense spending. Since the FY2013 appropriations process was still ongoing as of March 1, OMB generally based its calculations on the assumption that discretionary programs would be funded at the annualized level provided under the continuing appropriations resolution for FY2013 that was in effect on March 1 ( P.L. 112-175 ), plus amounts provided in the Hurricane Sandy supplemental appropriations ( P.L. 113-2 ), plus any funding enacted as advance appropriations for FY2013. In determining the amount of mandatory spending subject to sequestration, OMB used the current law baseline amounts in the President's FY2013 budget, adjusted for any relevant legislation enacted since transmittal of the budget in February 2012. Readers are referred to the OMB report for an explanation of the methodology used in making calculations, and to the report's appendix for an itemized list of budget accounts that include spending subject to sequestration, the dollar amounts that are subject to sequestration, the percentage by which they are reduced, and the dollar amount of the reduction.