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Taxpayers with Zero Income Tax Liability: Trends Over Time and Across Income Levels [March 10, 2017]
"An estimated 44% of U.S. households will pay no federal income tax in 2016. Some individuals or households do not pay federal income taxes because their income was below the filing threshold. Other individuals or households filing federal income tax returns pay no federal income tax due to either structural features or special provisions in the tax code. A 2011 analysis found that of nontaxable 'tax units,' about half were made nontaxable by tax expenditures (special provisions in the tax code such as credits and deductions). The other half were made nontaxable by structural features of the income tax system, namely the standard deduction and personal exemptions. Many tax units with no federal income tax liability have positive payroll tax liability. In 2016, an estimated 27% of tax units have zero or negative federal tax liability, when both income and payroll taxes are considered. For these tax units, it is possible that refunds from the income tax system offset or more than offset positive payroll tax liability. The proportion of tax units with no income or payroll tax liability in 2016 is estimated at 18%."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2017-03-10
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Tax Reform in the 114th Congress: An Overview of Proposals [March 18, 2016]
"Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. Identifying and enacting policies that will result in a simpler, fairer, and more efficient tax system remains a challenge. On December 10, 2014, the chairman of the House Committee on Ways and Means introduced a comprehensive tax reform proposal, the Tax Reform Act of 2014. The bill proposed substantial changes to both the individual and corporate income tax systems, reducing statutory tax rates for many taxpayers, while repealing dozens of credits, deductions, and other tax preferences. […] There are various policy options for achieving comprehensive tax reform. One option is a base-broadening, rate-reducing tax reform, in the spirit of the Tax Reform Act of 2014. An alternative approach would be to substantially revise or eliminate the current tax system, instead relying on an alternative tax base for revenues. Tax reform legislation introduced early in the 114th Congress has tended to take the latter approach, proposing a retail sales tax at the federal level or a flat tax. Similar proposals were introduced in the 112th and 113th Congresses, and did not advance. A cash flow tax for businesses has also been introduced in the 114th Congress. Both Congress and the Administration have indicated interest in tax reform through their respective budget processes. The budget resolution for FY2016 communicates congressional support for action on tax reform. The President's FY2017 budget proposes a number of tax policy changes, similar to the President's FY2016 budget, including substantial changes in the international tax system."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Keightley, Mark P.
2016-03-18
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Recently Expired Charitable Tax Provisions ('Tax Extenders'): In Brief [January 15, 2016]
"The Protecting Americans from Tax Hikes Act of 2015, enacted as Division Q in the Consolidated Appropriations Act, 2016 (P.L. 114-113), made permanent several temporary charitable tax provisions. Previously, these charitable tax provisions had been a part of the 'tax extenders.' Most recently before P.L. 114-113, 'tax extenders' were extended in The Tax Increase Prevention Act of 2014 (P.L. 113-295). Under P.L. 113-295, provisions that had expired at the end of 2013 were extended, for one year, through 2014. This report briefly summarizes the temporary charitable tax provisions that were made permanent in P.L. 114-113. The report also discusses the economic impact of these charitable tax provisions."
Library of Congress. Congressional Research Service
Gravelle, Jane; Sherlock, Molly F.
2016-01-15
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Selected Recently Expired Business Tax Provisions ('Tax Extenders') [November 6, 2015]
"The Tax Increase Prevention Act of 2014 (P.L. 113-295), signed into law on December 19, 2014,
made tax provisions that had expired at the end of 2013 available to taxpayers for the 2014 tax
year. The law extended most (but not all) provisions that had expired at the end of 2013. Several
bills have been considered in the 114th Congress to make some provisions permanent, including
the R&E tax credit (H.R. 880), expensing of investments (H.R. 636, S. 1399), and treatment of
built-in gains for Subchapter S corporations (H.R. 636). The Senate Finance Committee has also
reported legislation, the Tax Relief Extension Act of 2015 (S. 1946), that would retroactively
extend expired tax provisions, for two years, through 2016. This report briefly summarizes and
discusses the economic impact of selected business-related tax provisions that expired at the end
of 2014."
Library of Congress. Congressional Research Service
Gravelle, Jane; Marples, Donald; Sherlock, Molly F.
2015-11-06
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Tax Provisions That Expired in 2014 ('Tax Extenders') [September 4, 2015]
"In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as 'tax extenders.' Fifty-two temporary tax provisions expired at the end of 2014. This report provides a broad overview of the tax extenders. Congress last acted on tax extenders towards the end of the 113th Congress. The Tax Increase Prevention Act of 2014 (P.L. 113-295), signed into law on December 19, 2014, made tax provisions that had expired at the end of 2013 available to taxpayers for the 2014 tax year. The law extended most (but not all) provisions that had expired at the end of 2013. Most of the provisions in P.L. 113-295 had been included in previous 'tax extender' packages. Tax extenders legislation has also been considered in the 114th Congress. The Senate Finance Committee has reported legislation, the Tax Relief Extension Act of 2015 (S. 1946), that would retroactively extend expired tax provisions, for two years, through 2016. All provisions in S. 1946 have been included in previous 'tax extender' packages. There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it was permanent."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2015-09-04
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Energy Tax Policy: Issues in the 114th Congress [September 4, 2015]
"A number of energy tax provisions expired at the end of 2014. Expired provisions include those that support renewable electricity (the production tax credit (PTC)), provisions that support energy efficiency in both residential and commercial buildings, and tax credits for certain biofuels and other alternative fuels. Like the 113th Congress, the 114th Congress may choose to address expired energy tax provisions. The Tax Increase Prevention Act (P.L. 113-295), enacted late in the 113th Congress, temporarily extended, through 2014, most expired energy tax provisions. The Tax Relief Extension Act of 2015 (S. 1946) proposes extending expired energy tax provisions for two years, through 2016. […] Energy tax policy involves the use of one of the government's main fiscal instruments, taxes (both as an incentive and as a disincentive) to alter the allocation or configuration of energy resources and their use. In theory, energy taxes and subsidies, like tax policy instruments in general, are intended either to correct a problem or distortion in the energy markets or to achieve some economic (efficiency, equity, or even macroeconomic) objective. The economic rationale for government intervention in energy markets is commonly based on the government's perceived ability to correct for market failures. […] As a result, enacted tax policy embodies compromises between economic and political goals, which could either mitigate or compound existing distortions."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Stupak, Jeffrey M.
2015-09-04
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Federal Tax Treatment of Married Same-Sex Couples [July 30, 2015]
"This report provides an overview of the federal tax treatment of same-sex married couples, with a focus on the federal income tax. Estate tax issues are also discussed. The administration of federal tax laws for married same-sex couples changed as a result of the U.S. Supreme Court ruling in 'United States v. Windsor' in 2013, striking down Section 3 of the Defense of Marriage Act. The administration of federal tax laws was not affected by the June 26, 2015, ruling in 'Obergefell v. Hodges'. 'Obergefell' struck down state bans on same-sex marriage, holding that all states must both permit same-sex couples to marry in their states and recognize same-sex marriages that were formed in other states. While it did not change the administration of federal income tax laws, the 'Obergefell' decision may affect the number of same-sex couples who decide to marry (and hence the number of federal and state tax returns filed by married couples). Analysis of changes to individuals' state tax liabilities resulting from the 'Obergefell' decision is beyond the scope of this report; however, state tax changes may ultimately affect federal tax liabilities for those couples who itemize deductions on their federal returns. This report focuses on changes in the 'interpretation and administration' of federal tax law resulting from the Court's 'Windsor' decision. The decision itself did not amend federal tax law. This report is not intended to address all tax-related issues that may arise as a result of the federal recognition of same-sex marriages for tax purposes. Such discussion is beyond the scope of this report."
Library of Congress. Congressional Research Service
Crandall-Hollick, Margot L.; Pettit, Carol A.; Sherlock, Molly F.
2015-07-30
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Tax Reform in the 114th Congress: An Overview of Proposals [July 9, 2015]
"Many agree that the U.S. tax system is in need of reform. Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. Identifying and enacting policies that will result in a simpler, fairer, and more efficient tax system remains a challenge. On December 10, 2014, the Chairman of the House Committee on Ways and Means introduced a comprehensive tax reform proposal, the Tax Reform Act of 2014 (H.R. 1). The bill proposed substantial changes to both the individual and corporate income tax systems, reducing statutory tax rates for many taxpayers, while repealing dozens of credits, deductions, and other tax preferences. While no further action was taken on H.R. 1 in the 113th Congress, the proposal continues to inform the ongoing tax reform debate. There are various policy options for achieving comprehensive tax reform. One option is a base-broadening, rate-reducing tax reform, in the spirit of the Tax Reform Act of 2014. An alternative approach would be to substantially revise or eliminate the current tax system, instead relying on an alternative tax base for revenues. Tax reform legislation introduced early in the 114th Congress has tended to take the latter approach, proposing a retail sales tax at the federal level or a flat tax. Similar proposals were introduced in the 112th and 113th Congresses, and did not advance."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Keightley, Mark P.
2015-07-09
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Energy Tax Incentives: Measuring Value Across Different Types of Energy Resources [March 19, 2015]
"The U.S. tax code supports the energy sector by providing a number of targeted tax incentives, or tax incentives only available for the energy industry. As Congress evaluates the tax code and contemplates tax reform, there has been interest in understanding how energy tax benefits are distributed across different domestic energy resources. […] In 2013, the value of federal tax-related support for the energy sector was estimated to be $23.3 billion. Of this, $4.8 billion (20.4%) can be attributed to tax incentives supporting fossil fuels. Tax-related support for renewables was an estimated $13.4 billion in 2013 (or 57.4% of total tax-related support for energy). While the cost of tax incentives for renewables has exceeded the cost of incentives for fossil fuels in recent years, the majority of energy produced in the United States continues to be derived from fossil fuels. In 2013, fossil fuels accounted for 78.5% of U.S. primary energy production. The remaining primary energy production is attributable to nuclear electric and renewable energy resources, with shares of 10.1% and 11.4%, respectively. […] This report provides background information that might be useful as Congress continues to evaluate current energy tax policy. Specifically, the report presents a comparison of the cost of tax incentives associated with fossil and renewable energy resources, relative to amount of energy produced using each type of resource. The report also reviews other analyses that compare the cost of energy tax incentives relative to production, across different types of energy technologies."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Stupak, Jeffrey M.
2015-03-19
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Tax Provisions That Expired in 2014 ('Tax Extenders') [February 6, 2015]
"In the past, Congress has regularly acted to extend expired or expiring temporary tax provisions. Collectively, these temporary tax provisions are often referred to as 'tax extenders.' Fifty-two temporary tax provisions expired at the end of 2014. The 114th Congress may choose to further extend some or all of these provisions. This report provides a broad overview of the tax extenders. The Tax Increase Prevention Act of 2014 (P.L. 113-295), signed into law on December 19, 2014, made tax provisions that had expired at the end of 2013 available to taxpayers for the 2014 tax year. The law extended most (but not all) provisions that had expired at the end of 2013. Further, most of the provisions in P.L. 113-295 had been included in previous 'tax extender' packages. Other legislation considered in the 113th Congress would have also extended expired tax provisions. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S.2260) would have extended expired tax provisions for two years. The Jobs for America Act (H.R.4), which passed the House on September 18, 2014, would have permanently extended certain expired tax provisions. Several expired charitable-related provisions would have been made permanent as part of the America Gives More Act of 2014 (H.R. 4719), which passed the House on July 17, 2014. Several of the proposals to permanently extend certain expired provisions in the113th Congress have also been considered in the 114th Congress."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2015-02-06
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Energy Tax Policy: Issues in the 114th Congress [January 22, 2015]
"A number of energy tax provisions expired at the end of 2014. Expired provisions include those that support renewable electricity (the production tax credit (PTC)), provisions that support energy efficiency in both residential and commercial buildings, and tax credits for certain biofuels and other alternative fuels. Like the 113th Congress, the 114th Congress may choose to address expired energy tax provisions. The Tax Increase Prevention Act (P.L. 113-295), enacted late in the 113th Congress, temporarily extended, through 2014, most expired energy tax provisions. Energy tax policy may also be considered as part of comprehensive tax reform legislation in the 114th Congress. A base-broadening approach to tax reform might consider the elimination of various energy tax expenditures in conjunction with a reduction in overall tax rates. This was the approach taken in the Tax Reform Act of 2014 (H.R. 1), introduced late in the 113th Congress by then-Chairman of the House Ways and Means Committee Dave Camp. Alternative revenue sources, such as a carbon tax, may also be evaluated as part of the tax reform process. The Obama Administration has also proposed a number of changes to energy tax policy as part of its annual budget proposal. In the past, the Administration has proposed repealing a number of existing tax incentives for fossil fuels, while providing new or expanded incentives for alternative and advanced technology vehicles, renewable electricity, energy efficiency, and advanced energy manufacturing."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Stupak, Jeffrey M.
2015-01-22
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Corporate Income Tax System: Overview and Options for Reform [December 1, 2014]
"Many economists and policy makers believe that the U.S. corporate tax system is in need of reform. There is, however, disagreement over why the corporate tax system needs to be reformed, and what specific policy measures should be included in a reform. To assist policy makers in designing and evaluating corporate tax proposals, this report (1) briefly reviews the current U.S. corporate tax system; (2) discusses economic factors that may be considered in the corporate tax reform debate; and (3) presents corporate tax reform policy options, including a brief discussion of current corporate tax reform proposals. […] In 2014, the sum of all corporate tax expenditures was $154.4 billion. The significance of the corporate tax as a federal revenue source has declined over time. At its post-WWII peak in 1952, the corporate tax generated 32.1% of all federal tax revenue. In 2013, the corporate tax accounted for 9.9% of federal tax revenue. The decline in corporate revenues is a combination of decreasing effective tax rates, an increasing fraction of business activity that is being carried out by pass-through entities (particularly partnerships and S corporations, which are not subject to the corporate tax), and a decline in corporate sector profitability. […] This report discusses a number of economic considerations that may be made while evaluating various corporate tax reform proposals. These might include analyses of the likely effect on households of certain reforms (also known as incidence analysis). Policy makers might also want to consider how certain corporate tax provisions contribute to the allocation of economic resources, choosing policies that promote an efficient use of resources."
Library of Congress. Congressional Research Service
Keightley, Mark P.; Sherlock, Molly F.
2014-12-01
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Overview of the Federal Tax System [November 21, 2014]
"The major sources of federal tax revenue are individual income taxes, Social Security and other payroll taxes, corporate income taxes, excise taxes, and estate and gift taxes. This report describes the federal tax structure, provides some statistics on the tax system as a whole, and presents analysis of selected tax concepts. The federal income tax is levied on an individual's taxable income, which is adjusted gross income (AGI) less deductions and exemptions. Tax rates, based on filing status (e.g., married filing jointly or single individual) determine the level of tax liability. Tax rates in the United States are progressive, such that higher levels of income are taxed at higher rates. Once tax liability is calculated, tax credits can be used to reduce tax liability. […] Analysis of tax statistics from the federal tax system as a whole leads to three conclusions: (1) federal revenue as a percentage of GDP is in line with historical trends; (2) the U.S. fiscal position is in line with the fiscal position of other industrialized nations (revenues and expenditures as a percentage of GDP are relatively low); and (3) over the past decade, average tax rates have fallen for individuals at all income levels, but have fallen more for lower-income individuals, reducing their share of overall tax liabilities. […] This report will be updated on enactment of major changes in the federal tax system."
Library of Congress. Congressional Research Service
Marples, Donald; Sherlock, Molly F.
2014-11-21
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Selected Recently Expired Business Tax Provisions ('Tax Extenders') [November 6, 2014]
"The 113th Congress has considered legislation that would extend selected expired or expiring tax provisions. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S. 2260), which would extend most expired and soon-t o-expire tax provisions (commonly referred to as 'tax extenders') through 2015, was reported by the Senate Finance Committee on April 28, 2014. The act subsequently became an amendment to H.R. 3474 which did not advance in the Senate, as a motion to end debate on H.R. 3474 was voted down on May 15, 2014. In contrast to the Senate, the House has voted to permanently extend certain expired tax provisions as part of the Jobs for America Act (H.R. 4), which passed the House on September 18, 2014. This report briefly summarizes and discusses the economic impact of selected business-related tax provisions that expired at the end of 2013 and are being considered for extension." This report discusses three employer related benefits, two international provisions that provide exceptions from the Subpart F rules, seven special business cost recover provisions, two provisions related to regulated investment companies, and eight other business-related provisions.
Library of Congress. Congressional Research Service
Gravelle, Jane; Marples, Donald; Sherlock, Molly F.
2014-11-06
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Recently Expired Charitable Tax Provisions ('Tax Extenders'): In Brief [October 17, 2014]
"The 113th Congress has considered legislation that would extend certain expired and expiring tax provisions. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S. 2260), which was reported by the Senate Finance Committee on April 28, 2014, would extend most expired and expiring tax provisions through the end of 2015. The bill did not advance in the Senate, as a motion to end debate on H.R. 3474, the legislative vehicle for the tax extenders package, was voted down on May 15, 2014. The House has taken a different approach, voting to make permanent certain expired tax provisions. Several expired tax provisions would be permanently extended as part of the Jobs for America Act (H.R. 4), passed in the House on September 18, 2014. This legislation includes several provisions from bills passed in the House earlier in the 113th Congress. Temporary tax provisions that are regularly extended for one or two years are often referred to as 'tax extenders.' This report briefly summarizes the temporary charitable tax provisions that expired at the end of 2013 and are being considered for extension. The report also discusses the economic impact of these charitable tax provisions. Four charitable tax provisions are discussed in this report: (1) the enhanced charitable deduction for contributions of food inventory; (2) tax-free distributions from individual retirement accounts for charitable purposes; (3) basis adjustment to stock of S corporations making charitable contributions of property; and (4) special rules for contributions of capital gain real property for conservation purposes."
Library of Congress. Congressional Research Service
Gravelle, Jane; Sherlock, Molly F.
2014-10-17
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Renewable Electricity Production Tax Credit: In Brief [October 2, 2014]
"The renewable electricity production tax credit (PTC) expired on January 1, 2014. The renewable electricity PTC is a per-kilowatt-hour tax (kWh) credit for electricity generated using qualified energy resources. Whether the PTC should be extended, modified, or remain expired is an issue being considered in the second session of the 113th Congress. The PTC was initially enacted to promote the development of renewable energy resources, and it has been extended multiple times in an effort to continue advancing this policy goal. While some Members of Congress support extension or modification of the PTC, others say that the PTC should be allowed to expire. Extension of the PTC may be considered as part of 'tax extenders' legislation. The PTC for wind and closed-loop biomass was first enacted in 1992. When first enacted, the PTC was scheduled to expire on July 1, 1999. Since 1999, the PTC has been extended eight times. On three occasions, the PTC was allowed to lapse before being retroactively extended. Including the present expiration, the PTC has been allowed to lapse four times. In addition to being extended, the PTC has also been expanded over time to include additional qualifying resources. In 2013, wind, closed-loop biomass, and geothermal technologies qualified for the full credit amount of 2.3-cents per kWh. Other technologies (open-loop biomass, small irrigation power, landfill gas, trash, qualified hydropower, marine and hydrokinetic) qualify for a half-credit amount, or 1.1-cents per kWh in 2013. Credit amounts are adjusted annually for inflation."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2014-10-02
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Clean Coal Loan Guarantees and Tax Incentives: Issues in Brief [August 19, 2014]
"Coal represents a major energy resource for the United States. Coal-fired power plants provided approximately 37% of U.S. generated electricity (about 1.5 billion megawatt-hours) in 2012, while consuming over 800 million tons of coal. Power plants that use coal are also a major source of greenhouse gas emissions in the United States, contributing approximately 28% of total U.S. CO2 emissions in 2012. As part of federal efforts to reduce greenhouse gas emissions, loan guarantees and tax incentives have been made available to support private sector investment in 'clean coal.' Both loan guarantees and tax incentives were included in the Energy Policy Act of 2005 (EPACT05, P.L. [Public Law] 109-58). [...] Regarding tax incentives, Congress might consider several options: (1) maintain the status quo, which would allow existing tax incentives to phase out; (2) authorize additional funding for existing tax incentives; or (3) redesign tax incentives for clean coal or carbon capture and sequestration related technologies. Several projects that were previously allocated tax credits have been cancelled. A question for Congress is whether there is demand for tax benefits in their current form. Further, are tax incentives an effective tool for encouraging investment in clean coal technologies?"
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Folger, Peter (Peter Franklin)
2014-08-19
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Energy Tax Policy: Issues in the 113th Congress [May 8, 2014]
"The 113th Congress is considering the possible extension of several expired energy tax provisions. The Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act of 2014 (S. 2260) would temporarily extend, through 2015, most expired energy tax provisions, including the renewable energy production tax credit (PTC). Under current law, renewable energy projects that begin construction after the end of 2013 will not qualify for the PTC. Other expired energy tax provisions include those that support building energy efficiency and renewable and alternative fuels. Energy tax policy may also be considered as part of comprehensive tax reform legislation in the 113th Congress. A base-broadening approach to tax reform might consider the elimination of various energy tax expenditures in conjunction with a reduction in overall tax rates. This was the approach taken in House Ways and Means Committee Chairman Dave Camp's proposal, the Tax Reform Act of 2014. Alternative revenue sources, such as a carbon tax, may also be evaluated as part of the tax reform process. The President's FY2015 budget proposes a number of changes to energy tax policy. The Obama Administration proposes to repeal a number of existing tax incentives for fossil fuels, while providing new or expanded incentives for alternative and advanced technology vehicles, renewable electricity, energy efficiency, and advanced energy manufacturing."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2014-05-08
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Recently Expired Charitable Tax Provisions ('Tax Extenders'): In Brief [May 1, 2014]
"On April 3, 2014, the Senate Finance Committee voted to report the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S. 2260), which would extend a set of expired tax provisions through the end of 2015. These and other temporary tax provisions that are regularly extended for one or two years are often referred to as 'tax extenders.' This report briefly summarizes the temporary charitable tax provisions that expired at the end of 2013 and are being considered for extension. The report also discusses the economic impact of these charitable tax provisions. Four charitable tax provisions are discussed in this report: (1) the enhanced charitable deduction for contributions of food inventory; (2) tax-free distributions from individual retirement accounts for charitable purposes; (3) basis adjustment to stock of S corporations making charitable contributions of property; and (4) special rules for contributions of capital gain real property for conservation purposes. There are other 'tax extender' provisions that may affect tax-exempt entities discussed in other CRS [Congressional Research Service] products. Specifically, CRS Report R43510, 'Selected Recently Expired Business Tax Provisions' ('Tax Extenders') , by Jane G. Gravelle, Donald J. Marples, and Molly F. Sherlock includes a discussion of the modification of tax treatment of certain payments to controlling exempt organizations. Extender provisions related to the low-income housing tax credit, which may be relevant for tax-exempt organizations, are discussed in CRS Report R43449, 'Recently Expired Housing Related Tax Provisions ('Tax Extenders'): In Brief,' by Mark P. Keightley."
Library of Congress. Congressional Research Service
Gravelle, Jane; Sherlock, Molly F.
2014-05-01
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Selected Recently Expired Business Tax Provisions ('Tax Extenders') [April 30, 2014]
"On April 3, 2014, the Senate Finance Committee voted to report the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S. 2260), which would extend a set of expired tax provisions through the end of 2015. These and other temporary tax provisions that are regularly extended for one or two years are often referred to as 'tax extenders.' This report briefly summarizes and discusses the economic impact of selected business-related tax provisions that expired at the end of 2013 and that are being considered for extension. The provisions discussed in this report include several employer-related benefits, international provisions that provide exceptions to the Subpart F rules, special cost recovery provisions, provisions related to regulated investment companies (RICs), as well as several other business-related provisions. A complete list of the provisions discussed in this report can be found in Table 1. […] It would cost an estimated $85.3 billion to extend expired and expiring provisions through 2015, as proposed in the Chairman's Modification to the EXPIRE Act. More than half of this cost ($46.9 billion) is from the extension of business-related provisions discussed in this report. Extending the tax credit for research and experimentation expenditures for two years, through 2015, would reduce revenues by an estimated $15.4 billion between 2014 and 2024. The revenue cost of extending the exception under Subpart F for active financing income through 2015 is estimated to be $10.4 billion between 2014 and 2024. Table 1 provides information on the revenue cost of extending the business-related tax provisions discussed in this report through the end of 2015, as proposed in the EXPIRE Act."
Library of Congress. Congressional Research Service
Gravelle, Jane; Marples, Donald; Sherlock, Molly F.
2014-04-30
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Expired and Expiring Temporary Tax Provisions ('Tax Extenders') [April 7, 2014]
"Dozens of temporary tax provisions expired at the end of 2013, and several other temporary tax provisions are scheduled to expire at the end of 2014. Most of the provisions that expired at the end of 2013 have been part of past temporary tax extension legislation. Most recently, many temporary tax provisions were extended as part of the American Taxpayer Relief Act (ATRA; P.L. 112-240). Collectively, temporary tax provisions that are regularly extended by Congress--often for one to two years--rather than being allowed to expire as scheduled are often referred to as 'tax extenders.' On April 3, 2014, the Senate Finance Committee voted to report the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act. The EXPIRE Act would extend most expired and soon-to-expire provisions through 2015. An earlier proposal, S. 1859, introduced by Senator Reid on December 19, 2013, would provide a one-year extension for provisions that expired in 2013. House Ways and Means Committee Chairman Dave Camp has indicated that extenders will be addressed in the Ways and Means Committee during 2014. Chairman Camp has emphasized that extenders should be evaluated to see which provisions should be made permanent."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2014-04-07
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Renewable Electricity Production Tax Credit: In Brief [April 7, 2014]
"The renewable electricity production tax credit (PTC) expired on January 1, 2014. The renewable electricity PTC is a per-kilowatt-hour tax (kWh) credit for electricity generated using qualified energy resources. Whether the PTC should be extended, modified, or remain expired is an issue being considered in the second session of the 113th Congress. The PTC was initially enacted to promote the development of renewable energy resources, and it has been extended multiple times in an effort to continue advancing this policy goal. While some Members of Congress support extension or modification of the PTC, others say that the PTC should be allowed to expire. Extension of the PTC may be considered as part of 'tax extenders' legislation. […] The PTC has been important to the growth and development of renewable electricity resources, particularly wind. Tax incentives for renewables, however, may not be the most economically efficient way to correct for distortions in energy markets or to deliver federal financial support to the renewable energy sector. Tax subsidies reduce the average cost of electricity, increasing demand for electricity overall, countering energy efficiency and emissions reduction objectives. Subsidies delivered as non-refundable tax incentives often require those wishing to use the credit find 'tax-equity' partners to provide equity investments in exchange for tax credits. The use of tax-equity reduced the amount of the incentive that flows directly to the renewable energy sector."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2014-04-07
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Expired and Expiring Temporary Tax Provisions ('Tax Extenders') [April 3, 2014]
"There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it was permanent. The provisions that expired at the end of 2013 are diverse in purpose, including provisions for individuals, businesses, the charitable sector, energy, community assistance, and disaster relief. Among the individual provisions that expired are deductions for teachers' out-of-pocket expenses, state and local sales taxes, qualified tuition and related expenses, and mortgage insurance premiums. On the business side, under current law, the R&D [Research and Development] tax credit, the WOTC [Work Opportunity Tax Credit], the active financing exceptions under Subpart F, and increased expensing and bonus depreciation allowances will not be available for taxpayers after 2013. Expired charitable provisions include the enhanced deduction for contributions of food inventory and provisions allowing for tax-free distributions from retirement accounts for charitable purposes. The renewable energy production tax credit (PTC) expired at the end of 2013, along with a number of other incentives for energy efficiency and renewable and alternative fuels. The new markets tax credit, a community assistance program, also expired at the end of 2013."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2014-04-03
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Renewable Electricity Production Tax Credit: In Brief [April 1, 2014]
From the report: "This report provides a brief overview of the renewable electricity PTC [production tax credit]. The first section of the report describes the credit. The second section provides a legislative history. The third section presents data on PTC claims and discusses the revenue consequences of the credit. The fourth section briefly considers some of the economic and policy considerations related to the credit. The report concludes by briefly noting policy options related to the PTC."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2014-04-01
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Tax Reform in the 113th Congress: An Overview of Proposals [March 24, 2014]
"Many agree that the U.S. tax system is in need of substantial reforms. The 113th Congress continues to explore ways to make the U.S. tax system simpler, fairer, and more efficient. Identifying and enacting policies that will result in a simpler, fairer, and more efficient tax system remains a challenge. On February 26, 2014, House Ways and Means Committee Chairman Dave Camp released a comprehensive tax reform discussion draft, the Tax Reform Act of 2014. This draft proposes substantial changes to both the individual and corporate income tax systems, reducing statutory tax rates for many taxpayers, while repealing dozens of credits, deductions, and other tax preferences. The Tax Reform Act of 2014 builds on previously released discussion drafts related to international tax, financial products, and small business. Earlier in the 113th Congress, former Senate Finance Committee Chairman Max Baucus released several tax reform discussion drafts, addressing international tax, cost recovery, tax administration, and energy tax policy."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2014-03-24
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Overview of the Federal Tax System [January 23, 2014]
"The major sources of federal tax revenue are individual income taxes, Social Security and other payroll taxes, corporate income taxes, excise taxes, and estate and gift taxes. This report describes the federal tax structure, provides some statistics on the tax system as a whole, and presents analysis of selected tax concepts. The federal income tax is levied on an individual's taxable income, which is adjusted gross income (AGI) less deductions and exemptions. Tax rates, based on filing status (e.g., married filing jointly or single individual) determine the level of tax liability. Tax rates in the United States are progressive, such that higher levels of income are taxed at higher rates. Once tax liability is calculated, tax credits can be used to reduce tax liability. Tax deductions and tax credits are tools available to policymakers to increase or decrease the after-tax price of undertaking specific activities. Individuals with high levels of exemptions, deductions, and credits relative to income may be required to file under the alternative minimum tax (AMT). […] Marriage tax penalties and bonuses, while reduced following legislation enacted in 2001 and 2003, still pose an inequity in the tax system. Tax deferral, or the timing of taxes, poses problems related to the timing of taxation, specifically with respect to capital gains. Depreciation is important, as accelerated depreciation schemes or expensing can influence firm behavior. Tax liability also depends on form of business organization. Finally, the issue of whether taxes can influence firms' competitiveness is reviewed."
Library of Congress. Congressional Research Service
Sherlock, Molly F.; Marples, Donald
2014-01-23
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Tax Provisions Expiring in 2013 ('Tax Extenders') [December 31, 2013]
"Dozens of temporary tax provisions are scheduled to expire at the end of 2013 under current law. Most of the provisions set to expire in 2013 have been part of past temporary tax extension legislation. Most recently, many temporary tax provisions were extended as part of the American Taxpayer Relief Act (ATRA; P.L. 112-240). Collectively, temporary tax provisions that are regularly extended by Congress--often for one to two years--rather than being allowed to expire as scheduled are often referred to as 'tax extenders.' […] There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it was permanent. The provisions that are scheduled to expire in 2013 are diverse in purpose, including provisions for individuals, businesses, the charitable sector, energy, community assistance, and disaster relief. Among the individual provisions scheduled to expire are deductions for teachers' out-of-pocket expenses, state and local sales taxes, qualified tuition and related expenses, and mortgage insurance premiums."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2013-12-31
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Energy Tax Policy: Issues in the 113th Congress [December 19, 2013]
"The scheduled expiration of a number of energy tax incentives means energy tax policy will likely be considered by the 113th Congress. Under current law, for example, renewable energy projects that begin construction after the end of 2013 will not qualify for the renewable energy production tax credit (PTC). A number of other energy tax incentives, including provisions to support building energy efficiency and renewable fuels, are also scheduled to expire at the end of 2013. In the past, expired and expiring energy tax provisions have been extended as part of 'tax extender' legislation. Energy tax policy may also be considered as part of comprehensive tax reform legislation in the 113th Congress. A base-broadening approach to tax reform might consider the elimination of various energy tax expenditures in conjunction with a reduction in overall tax rates. Alternative revenue sources, such as a carbon tax, may also be evaluated as part of the tax reform process. The President's FY2014 budget proposes a number of changes to energy tax policy. The Obama Administration proposes to repeal a number of existing tax incentives for fossil fuels, while providing new or expanded incentives for alternative and advanced technology vehicles, renewable electricity, energy efficiency, and advanced energy manufacturing. Several energy tax reform proposals have also been put forward in tax reform discussion drafts released by Senate Finance Committee Chairman Max Baucus."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2013-12-19
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Tax Reform in the 113th Congress: An Overview of Proposals [December 17, 2013]
"Presently, the House Committee on Ways and Means and the Senate Committee on Finance are actively engaged in tax reform deliberations. The Committee on Ways and Means has released several discussion drafts outlining options for various components of tax reform, and has also formed tax reform working groups to further consider tax reform as it relates to different issue areas. The Committee on Finance has also released several tax reform discussion drafts in addition to the earlier options papers, which had provided a broad spectrum of tax reform ideas and proposals. Legislation has been introduced in the 113th Congress that would fundamentally change the U.S. federal tax system. The Fair Tax Act of 2013 (H.R. 25/S. 122) would replace most current federal taxes with a 23% national retail sales tax. Other proposals would establish a flat tax, where individuals would be taxed on wages and businesses taxed on cash flows […]. The Tax Code Termination Act (H.R. 352) would effectively repeal the current Internal Revenue Code, requiring Congress to write a new tax code that would achieve certain stated objectives. The prevailing framework for evaluating tax policy considers equity (or fairness), efficiency, and simplicity. Equity examines the distribution of the tax burden across different groups. This information can then be used to assess the 'fairness' of the tax system. A tax system that is economically efficient generally provides neutral treatment, minimizing economic distortions and maximizing output. A tax system that is simple reduces administrative and compliance costs while also promoting transparency."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2013-12-17
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Tax Provisions Expiring in 2013 ('Tax Extenders') [November 5, 2013]
"Dozens of temporary tax provisions are scheduled to expire at the end of 2013 under current law. Most of the provisions set to expire in 2013 have been part of past temporary tax extension legislation. Most recently, many temporary tax provisions were extended as part of the American Taxpayer Relief Act (ATRA; P.L. 112-240). Collectively, temporary tax provisions that are regularly extended by Congress--often for one to two years--rather than being allowed to expire as scheduled are often referred to as 'tax extenders.' […] There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis provides legislators with an opportunity to evaluate the effectiveness of tax policies prior to expiration or extension. Temporary tax provisions may also be used to provide temporary economic stimulus or disaster relief. Congress may also choose to enact tax provisions on a temporary rather than permanent basis due to budgetary considerations, as the foregone revenue from a temporary provision will generally be less than if it was permanent. The provisions that are scheduled to expire in 2013 are diverse in purpose, including provisions for individuals, businesses, the charitable sector, energy, community assistance, and disaster relief. Among the individual provisions scheduled to expire are deductions for teachers' out-of-pocket expenses, state and local sales taxes, qualified tuition and related expenses, and mortgage insurance premiums."
Library of Congress. Congressional Research Service
Sherlock, Molly F.
2013-11-05