2001 Tax Cut: Description, Analysis, and Background

Report for Congress
2001 Tax Cut:
Description, Analysis,
and Background
Updated December 9, 2002
David L. Brumbaugh, Jane G. Gravelle,
Steven Maguire, and Louis Alan Talley
Government and Finance Division
Bob Lyke
Domestic Social Policy Division

Congressional Research Service ˜ The Library of Congress

2001 Tax Cut: Description, Analysis, and Background
Summary
A major tax cut was enacted in June 2001 as the Economic Growth and Tax
Relief Reconciliation Act (EGTRRA; P.L. 107-16; H.R. 1836). This report
summarizes the provisions of the bill, analyzes effects, and considers the
development of the legislation. To comply with Senate procedural rules, the Act
included a “sunset” provision that rescinds its tax cuts at the end of calendar year
2010. During 2002, the House (but not the Senate) passed several bills making all
or some of EGTRRA’s tax cuts permanent. There are indications that Congress will
return to this issue in 2003.
In early 2001, tax cuts were a principal focus of policymakers. In February,
President Bush sent Congress the outlines of a proposal to cut taxes by an estimated
$1.6 trillion over 10 years; the proposal is based on a plan the President set forth
during the 2000 presidential campaign. The principal elements of the plan were a cut
in marginal individual income tax rates; a tax cut for many married couples; an
increased child credit; elimination of the estate and gift tax; a permanent research and
experimentation tax credit; a charitable contribution deduction for non-itemizers; and
several tax benefits for health care and education.
In March, tax cuts similar to the President’s proposal began moving through the
House of Representatives. On March 8, the House approved H.R. 3, containing a cut
in marginal tax rates; on March 29, the House approved H.R. 6, containing tax cuts
for married couples and an increase in the child credit; and on April 4, the House
approved H.R. 8, which would phase out the estate and gift tax. On May 2, the
House approved H.R. 10, containing tax reductions related to pensions and
retirement. On May 15, the Senate Finance Committee approved an omnibus bill
including elements of all of these proposals, plus education tax benefits. The bill was
reported as an amended version of H.R. 1836, the Economic Growth and Tax Relief
Reconciliation Act of 2001 that was passed by the House on May 16; the bill was
approved by the Senate with further amendments on May 23.
The principal differences between the House, Senate, and Administration plans
were a larger tax-rate cut in the President’s and House plans than in the Senate bill;
a retroactive component in the House and Senate bills designed to provide near-term
economic stimulus; effective dates in the Senate bill that were generally somewhat
later than those in the President’s proposal and the House bills; pension provisions
in the House and Senate plans, but not in the President’s; and health provisions in the
President’s plan but generally not in the House or Senate proposals.
On May 26, the House and Senate both approved a conference version of
EGTRRA. The bill’s reduction in marginal individual income tax rates is smaller
than proposed by the House or the President and larger than proposed by the Senate,
but is closer to the Senate bill than the other proposals. Beyond the rate cuts, the
bill’s major elements are: tax cuts for married couples, phase-out of the estate and
gift tax, an increase in the child tax credit, more generous individual retirement
account (IRA) and pension provisions, tax benefits for education, and a number of
other items. President Bush signed the tax cut bill on June 7.

Contents
Revenue Effects...............................................2
Distributional Effects...........................................3
Side-by-Side Comparison.......................................4

2001 Tax Cut: Description, Analysis, and
Background
A major tax cut, the Economic Growth and Tax Relief Reconciliation Act
(EGTRRA), was enacted in June 2001. This report summarizes the provisions of the
bill, analyzes effects, and considers the development of the legislation.
The broad shape of the President’s plan and the tax cuts passed by the House,
Senate, and Conference Committee are perhaps more marked by their similarities
than their differences. The centerpiece of each plan is a cut in the statutory marginal
tax rates that apply to individuals’ taxable incomes, although the precise details vary
among the proposals. Beyond the rate cuts, each phases out the estate tax; expands
the child tax credit; and provides tax cuts for two-earner married couples.
The details of the plans, however, are far from identical, as the side-by-side
chart that follows makes apparent. Some of the major differences are:
!a larger marginal individual tax-rate cut in the President’s and House-passed
plans than in the Senate bill (in this respect, the Conference bill follows the
Senate more closely than the other two plans);
!a retroactive component in the House, Senate, and Conference bills that is
designed to provide near-term economic stimulus;
!retention of the gift tax in the Senate and Conference bills, but not the
President’s plan or House-passed measure;
!pension provisions in the House, Senate, and Conference plans, but not the
President’s; health provisions in the President’s plan but not the House,
Senate, or Conference proposals; education provisions in the Conference,
Senate and President’s plans, but not the House; and extension of expiring tax
provisions in the President’s plan, but – with some exceptions – not the
House, Senate, or Conference bills;
!effective dates, “phase-in,” and “sunset” provisions that differ among the
plans.
The tax cuts in the Conference Committee bill are scheduled to expire
(“sunset”) at the end of calendar year 2010. This provision was included to ensure
the bill’s compliance with the “Byrd rule” applying to congressional consideration
of budget legislation. During 2002, the House (but not the Senate) passed a number
of bills that would rescind EGTRRA’s sunset provisions and make its tax cuts
permanent. There are indications that Congress will take up the issue of EGTRRA’s
permanence again in 2003.

Revenue Effects
The relative size of the respective tax cuts is difficult to gauge, for several
reasons. First, revenue estimates for the tax cuts that passed the House that are
consistent with the Senate and Conference bills and the President’s proposal are not
available; the House tax cuts were passed in several different bills, and revenue
estimates were calculated for each bill separately without taking into account the
impact of the other House-passed measures. Because the costs of the different tax
cuts interact, the estimates for the different House bills cannot be simply added and
compared with the President’s plan or the Senate bill, the estimates for which do take
into account interacting effects.
Another difficulty is posed by “phase-ins” – that is, each proposal contains
numerous provisions that become fully effective only over a number of years. Thus,
the total 10-year revenue loss estimates for the proposals differ, depending on how
rapidly the particular plan’s provisions are phased in. To illustrate, the President’s
plan is estimated to reduce revenue by $1,775.3 billion over 10 years ($1.8 trillion
after rounding), while the Senate bill’s revenue loss is estimated at $1,347.2 billion
($1.3 trillion). In part, the larger size of the President’s proposal is a result of its
more rapid phase-in of important elements such as its rate cuts and estate and gift tax
repeal.
An added issue in gauging the size of the Conference bill’s tax cut is its
scheduled expiration at the end of calendar year 2010. Because of the sunset
provision, the $1.3 trillion revenue loss estimated for the period FY2001 through
FY2011 is smaller than it would be if the tax cuts did not expire: FY2011 includes
part of calendar year 2011 when the tax cuts are scheduled to no longer apply. The
expiration provision, together with the phase in of important provisions also hampers
getting an idea of the long-run, annual impact of the bill. One important provision
of the bill – repeal of the estate tax – is not fully effective until calendar year 2010
and due to lags in filing will not be fully reflected in revenue reductions until
FY2011. A solution to this might be to rely on the revenue estimate for FY2011. At
the same time however, revenue estimates for FY2011 reflect the impact of the bill’s
general sunset provisions and are therefore smaller than will likely result from the
annual impact of permanent changes in the tax code. The side-by-side comparison
in this report presents the Joint Tax Committee’s revenue estimates after each item
for FY2010 and the FY2001-FY2011 total.
How large are the tax cuts compared to the economy? The dollar value of
economic variables 10 years in the future is extremely uncertain, as are the actual
revenue reductions that will occur from the tax cuts. However, based on economic
projections by the Congressional Budget Office and the Joint Committee on
Taxation’s revenue estimates, the estimated revenue loss from the Conference
committee bill is 1.3% of gross domestic product (GDP) or 6.3% of the revenue
collections otherwise expected to occur.

Distributional Effects
This analysis compares the distributional effects of the proposals, using
estimates made by a private group, Citizens for Tax Justice. This is the only
organization that has provided consistent estimates or provided the underlying
information necessary to calculate the tax as a percentage of income, a relative
distribution measure, and that also includes the impact of repealing the estate tax –
an important element of the proposals.
Two types of distributional measures are shown, one absolute (indicating the
total amount of dollars received by each income group) and the other relative
(measuring the tax cut as a percentage of income).¹ The absolute measure indicates
that most of the tax cut is received by the highest income classes, and that benefits
in the President’s proposal (an early version) and the House proposal are more
concentrated in the higher classes than is the Senate proposal, while the conference
proposal falls in between. This effect occurs primarily because of differences in the
rate cuts, which are largest at higher income levels in the President’s proposal and the
House bills and smallest in the Senate proposal.
The tax cut as a percentage of income – the relative measure – provides
information about the effect on progressivity. Ideally, the percentage change in after
tax income should be used to show the degree to which changes in taxes make
incomes more or less even. Using taxes as a percentage of pre-tax income reduces
the percentage change at higher income levels, but nevertheless provides a reasonable
depiction of the distributional effects. While the tax cut is relatively even handed in
the middle income classes, the highest income individuals would receive much larger
tax cuts relative to income. This effect is in part due to the estate and gift tax repeal;
about half of the tax cut for the top 1% comes from the estate tax repeal. Without
that tax cut, the percentage change in taxes as a percent of income would be 2.79%
for the President’s and House plan, 1.79% for the Senate plan, and 2.57% for the
conference plans. All four measures, therefore, increase differentials in after-tax
income. The average tax cut as a percent of income (shown in the totals row for the
last four columns) indicates that, in the long run, the conference plan is the largest,
with an average cut of 2.43% of income.
Note that some measures of distribution compare the percentage change in tax
liability. These measures do not, however, provide information about progressivity
for two reasons. First, percentage changes in tax liability can be very large if initial
tax liability is small and they will differ substantially depending on what is chosen
as the base (e.g. income taxes, or all federal taxes). A proportional cut in an already
progressive tax will reduce progressivity (in the sense that incomes are distributed
less equally). For a cut in a progressive tax to be distributionally neutral, cuts must
be smaller at the top than at the bottom, but the extent of that difference depends on
existing progressivity.

¹For more information on these different measures, see CRS Report RL30779, Across the
Board Tax Cuts: Economic Issues, by Jane G. Gravelle.

Note also that, while the tax cuts at the top arise mostly from rate cuts, or
reductions in estate taxes, which benefit all taxpayers in those groups, most of the
middle class tax cut is directed towards particular groups: families with children and
married couples. Citizens for Tax Justice finds, for example, that in the President’s
plan, the average tax cut is $500, but the average tax cut for families with children
is $1,114, the average tax cut for single parents is $326, and the average tax cut for
singles is $283. Some of these differences reflect differences in average incomes;
however, the vast majority of single individuals with no children will receive no
more than $300 (the new 10% rate bracket), because there is no tax reduction in the
15% rate bracket, and singles do not receive benefits focused on children or joint
returns.
Table 1: Distributional Effects of the President’s Tax Plan, the House
Proposals (H.R. 3, H.R. 6, & H.R. 8), the Senate Proposal and the
Conference Proposal at 2001 Income Levels
Income Share of Cut Percent of Income ^Confer-^Confer-
Class^Pres^{ident Hous}^e*^Senate^ence^Pres^ident^H^ous^e^*^S^enate^ence
^L^o^w^e^s^t^20%^0.8%^0.8%^1.0%^0.9%^0.51%^0.55%^0.70%^0.71%
^S^econ^d^20%^3.5^4.0^5.7^5.3^1.03^1.18^1.77^1.82
^T^hⁱ^r^{d 20%}^8.4^9.1^8.9^8.5^1.48^1.60^1.63^1.74
^F^o^u^r^t^h^20%^15.7^15.3^14.7^14.5^1.69^1.64^1.65^1.82
^N^e^x^t^15%^18.9^19.0^24.8^23.7^1.56^1.58^2.14^2.29
^N^e^x^t^4%^7.8^6.7^9.8^9.5^1.12^0.96^1.48^1.59
^T^{op 1%}^45.0^45.0^35.0^37.6^4.88^4.87^3.97^4.76
^T^o^t^a^l^100.0^100.0^100.0^100.0^2.08^2.08^2.17^2.43
^Source:^C^itizen^s^f^o^{r T}^a^x^J^u^s^{tice an}^{d C}^R^S^calcu^lation^s^bas^e^{d on}^th^{eir data.}
^*^R^ef^lects^H.R^.^{3 (rate cu}^ts^{), H.R}^.^{6 (m}^arriag^{e pen}^a^lty^an^{d ch}^{ild credit) an}^{d H.R}^.^{8 (es}^t^ate^an^d^gⁱ^f^t^tax⁾^,^bu^tⁿ^o^t
^H^.^R^.^{10 (IR}^A^s^an^{d pen}^sⁱ^oⁿ^s^{). H}^.^R^.^{10 w}^o^u^l^{d m}^a^k^e^t^h^{e s}ⁱ^ze^o^f^c^u^t^s^slⁱ^g^h^t^l^y^l^a^rg^{er, bu}^t^w^o^u^l^{d probabl}^yⁿ^o^t
^af^f^{ect th}^{e dis}^t^ribu^tion^v^e^ry^m^u^ch^.
Side-by-Side Comparison
Table 2 presents a side-by-side comparison of the principal provisions of the
President’s proposal and the House, Senate, and conference committee versions. It
is not intended to be comprehensive but does contain the main features of each plan.
The table presents item-by-item revenue estimates prepared by the Joint Committee
on Taxation. As noted above, however, the estimates for the House bills and other
plans are not comparable. In addition, the itemized revenue estimates for the House
tax cuts cannot be aggregated.

Table 2. Comparison of Main Provisions
Current LawPresident’s ProposalHouse Senate Conference
^I^ndi^vi^dual^Iⁿ^c^o^m^e^T^a^x^R^a^t^e^s^,^P^e^r^s^onal^E^x^e^m^ptⁱ^o^ns^,^{and I}^t^e^mⁱ^z^e^d^D^e^duc^tⁱ^ons
^T^a^x^ra^te^{s a}^pplic^a^b^le^to^P^h^a^s^e^d^-ⁱ^{n r}^e^duc^{tion in}^P^h^a^s^e^d^-ⁱ^{n r}^e^duc^{tion in}^P^h^a^s^e^d^-ⁱ^{n r}^e^duc^{tion of}^P^h^a^s^e^d^{in r}^e^duc^{tion of}
^indivⁱ^dua^ls^’^ta^x^a^ble^inc^o^m^e^indivⁱ^dua^{l inc}^o^m^e^ta^x^ra^te^s^indivⁱ^dua^{l inc}^o^m^e^ta^x^ra^te^s^indivⁱ^dua^{l inc}^o^m^e^ta^x^indivⁱ^dua^{l inc}^o^m^e^ta^x
^a^r^e^:^15%^{, 28%}^{, 31%}^{, 36%}^,^ov^e^r^the^pe^rⁱ^{od 2002-}^6.^ov^e^r^the^pe^rⁱ^{od 2002-}^{6. (}^H^.R^.^ra^te^{s, g}^e^ne^ra^lly^ov^e^r^the^r^a^te^s^ov^e^r^the^pe^rⁱ^od
^a^{nd 39.6%}^.³⁾^pe^rⁱ^{od 2002-}^7.^2001-^6.
^R^a^te^s^w^{ould be}^{: 10%}^{, 15%}^,^R^a^te^s^w^{ould be}^{: 10%}^{, 15%}^,^R^a^te^s^w^{ould be}^{: 10%}^,^R^a^te^s^a^r^e^:^10%^{, 15%}^,
^25%^{, a}^{nd 33%}^.^25%^{, a}^{nd 33%}^.^15%^{, 25%}^{, 28%}^{, 33%}^{, a}ⁿ^d^25%^{, 28%}^{, 33%}^{, a}ⁿ^d
^36%^.^35%^.
^{No re}^troa^c^tiv^ity^.^T^h^e^initia^{l pha}^se^{-in of}^the
^low^e^s^t^r^a^te^w^{ould be}^gⁱⁿ^10%^r^a^te^w^{ould a}^pply^10%^r^a^te^a^pplie^s
^re^troa^c^tiv^e^l^y^;^a^12%^ra^te^r^e^tr^oa^c^tiv^e^l^y^{to 2001.}^re^troa^c^tiv^e^l^y^{to Ja}^n.,
^Estim^a^t^e^d^re^v^e^nue^loss:^w^{ould a}^pply^{in c}^a^l^e^nda^r^y^e^a^r^s^{2001. T}^h^e^pha^s^e^{in of}
^{$118.9 billion in FY}^2010;^2001a^{nd 2002; 11%}^w^ould^In^{creases t}^h^{e i}ⁿ^co^m^e^othe^r^r^a^te^c^u^ts^be^gⁱ^ns
^{$877.2 billion ov}^e^r^{10 y}^e^a^r^s^.^a^pply^{in 2003-}^{5; 10%}^w^ould^thr^e^s^{hold a}^t^w^h^ic^{h ite}^mⁱ^z^e^d^J^u^{l. 1, 2001.}
ⁱ^{ki/CRS-RL30973}^ap^p^l^y^t^h^ereaf^t^e^r.^de^duc^tions^be^gⁱ^{n to be}
^g/w^lim^ite^{d, e}^f^f^e^c^tiv^e^{in 2009.}^P^h^{ases o}^u^t^t^h^{e i}ⁿ^co^m^e
^s^.or^Estim^a^t^e^d^re^v^e^nue^loss:^{$121.7 billion in FY}^2010;^R^e^pe^a^l^s^the^pha^s^e^{out of}^lim^{it on ite}^mⁱ^z^e^d^de^duc^tions^ov^e^r^2006-
^le^ak^{$958.3 billion ov}^e^r^{11 y}^e^a^r^s^.^pe^r^s^ona^{l e}^x^e^m^ptions^,^10.
^e^f^f^e^c^tiv^e^{in 2009.}
^://wiki^P^h^{ases o}^u^t^t^h^e
^h^ttp^Estim^a^t^e^d^re^v^e^nue^loss:^r^e^s^t^rⁱ^c^{tion on pe}^r^s^ona^l
^{$104.9 billion in FY}^2010;^e^x^e^m^ptions^ov^e^r^2006-
^{$842.0 billion ov}^e^r¹¹^9.
^y^ears.
^Estim^a^t^e^d^re^v^e^nue^loss:
^{$118.5 in 2010; $874.9}
^{billion ov}^e^r^{11 y}^e^a^r^s.

Current LawPresident’s ProposalHouse Senate Conference
^M^a^rri^ed^Cou^p^l^es
^T^a^{x rat}^e^b^r^acket^{s an}^d^P^r^ov^ide^s^a^ta^x^de^duc^{tion to}^In^{creases t}^h^{e st}^an^d^a^rd^P^h^{ases i}ⁿ^anⁱⁿ^{crease i}ⁿ^P^h^{ases i}ⁿ^anⁱⁿ^{crease i}ⁿ
^s^t^a^nda^r^d^de^duc^{tion pr}^ov^ide^tw^o-^e^a^r^ne^r^m^a^r^rⁱ^e^d^c^ouple^s^de^duc^{tion f}^o^r^c^ouple^s^to^the^s^t^a^nda^r^d^de^duc^{tion f}^o^r^the^s^t^a^nda^r^d^de^duc^tion
^m^a^r^rⁱ^a^g^e^“^bonus^e^s^”^f^o^r^e^qua^{l to 10%}^of^the^fⁱ^r^s^t^tw^ic^e^tha^t^of^sing^le^{s, e}^f^f^e^c^tiv^e^c^ouple^s^{to tw}^ic^e^tha^t^of^f^o^r^c^ouple^s^{to tw}^ic^e^tha^t
^c^ouple^s^w^{ith dis}^p^a^r^a^t^e^{$30,000 e}^a^r^ne^{d by}^the^low^e^r^-^{in 2002; br}^oa^de^ns^the^15%^sⁱ^ng^le^s^;^pha^s^e^-ⁱ^{n w}^ould^of^sⁱ^ng^le^s^;^pha^s^e^-ⁱ^{n w}^ill
ⁱⁿ^co^m^e^{s an}^d^m^a^rri^age^pa^{id s}^pous^e^{up to a}^m^a^xⁱ^m^u^m^r^a^te^br^a^c^k^e^t^f^o^r^c^ouple^s^to^oc^c^u^r^ov^e^r^2006-^{10. P}^h^a^s^e^s^oc^c^u^r^ov^e^r^2005-^9.
^“^p^eⁿ^a^ltie^s^”^f^o^{r c}^ouple^s^w^ith^de^duc^{tion of}^{$3,000. P}^h^a^s^e^d^tw^ic^e^tha^t^of^sing^le^{s, f}^u^lly^{in ov}^e^r^2006-^{10 a}^P^h^a^s^e^s^{in ov}^e^r^2005-^{8 a}
^sim^ila^{r inc}^o^m^e^{s. Ea}^rne^d^{in ov}^e^r^2002-^2006.^e^f^f^e^c^tiv^e^{in 2009; inc}^r^e^a^s^e^s^br^oa^de^ning^of^the^15%^br^oa^de^ning^of^the^15%
ⁱⁿ^co^m^e^t^a^{x cred}ⁱ^t^(E^IT^{C) can}^t^h^{e E}^I^T^C^earn^e^dⁱⁿ^co^m^e^r^a^te^br^a^c^k^e^t^f^o^r^c^ouple^s^to^r^a^te^br^a^c^k^e^t^f^o^r^c^ouple^s
^re^{sult in a}^m^a^rria^g^e^pe^na^lty^.^Es^tim^a^t^e^d^r^e^v^e^nue^los^s^:^$14.2^a^m^{ount f}^o^r^c^ouple^s^{, e}^f^f^e^c^tiv^e^tw^ic^e^tha^t^of^sing^le^s.^{to tw}^ic^e^tha^t^of^sing^le^s.
^{billion in FY}^{2010; $102.7}^{in 2002; inc}^r^e^a^s^e^s^the^A^M^T^In^{creases t}^h^{e p}^h^a^se-o^u^t^P^h^{ases i}ⁿ^anⁱⁿ^{crease i}ⁿ
^ov^e^r^{10 y}^e^a^r^s^.^e^x^e^m^{ption a}^m^{ount f}^o^r^r^a^ng^e^of^the^EI^T^C^f^o^r^the^pha^s^e^-^{out r}^a^ng^e^of
^c^ouple^s^{, e}^f^f^e^c^tiv^e^{in 2006.}^c^ouple^s^{, e}^f^f^e^c^tiv^e^{in 2002.}^the^EI^T^C^ov^e^r^2002-^8.
^Estim^a^t^e^d^re^v^e^nue^loss:^Estim^a^t^e^d^re^v^e^nue^loss:^Estim^a^t^e^d^re^v^e^nue^loss:
^{$36.4 billion in FY}^2010;^{$10.3 billion in FY}^2010;^{$9.2 billion in FY}^2010;
^{$223.3 billion ov}^e^r^{10 y}^e^a^r^s^.^{$72.2 billion ov}^e^r^{10 y}^e^a^r^s^.^{$59.8 billion ov}^e^r¹⁰
^y^ears.
ⁱ^{ki/CRS-RL30973}
^g/w^Ch^ild^Ta^x^Cr^e^d^it
^s^.or^{$500 ta}^x^c^r^e^d^{it f}^o^r^each^chⁱ^l^d^Iⁿ^c^r^e^a^s^e^s^the^c^r^e^d^{it to $1,000.}^In^{creases t}^h^{e cred}ⁱ^t^t^o^$¹^,⁰⁰⁰^In^{creases t}^h^{e cred}ⁱ^t^t^o^In^{creases t}^h^{e cred}ⁱ^t^t^o
^le^ak^unde^r^{17. P}^h^a^s^e^d^out^In^{creases t}^h^{e p}^h^a^se-o^u^t^ov^e^r^the^pe^rⁱ^{od 2001-}^2006,^{$1,000 ov}^e^r^the^pe^rⁱ^od^{$1,000 ov}^e^r^the^pe^rⁱ^od
^be^gⁱ^nning^w^{ith inc}^o^m^e^s^of^thr^e^s^{hold to $200,000 f}^o^r^{but r}^e^ta^ins^c^u^r^r^e^{nt pha}^s^e^-^out^2001-^{2011. Ma}^k^e^s^the^2001-^{2011. Ma}^k^e^s^the
^://wiki^{$110,000 f}^o^r^c^ouple^s^aⁿ^d^c^ouple^s^a^{nd s}ⁱ^ng^le^s^.^P^h^a^s^e^d^thr^e^s^{hold. Ex}^te^nds^c^r^e^d^{it r}^e^f^unda^ble^{to the}^c^r^e^d^{it r}^e^f^unda^ble^{to the}
^h^ttp^{$75,000 f}^o^r^sⁱ^ng^le^s^.^C^r^e^d^{it is}^{in ov}^e^r^the^pe^rⁱ^{od 2002-}^6.^re^f^unda^bility^{to f}^a^m^ilie^s^w^ith^e^x^te^{nt of}^15%^of^e^a^r^ne^d^e^x^te^{nt of}^10%^of
^re^f^unda^ble^only^f^o^{r f}^a^m^ilie^s^le^{ss tha}ⁿ^{3 c}^h^ildre^{n. Cre}^d^itⁱⁿ^co^m^eⁱⁿ^{excess o}^f^inc^o^m^e^ov^e^r^$10,000
^w^{ith thre}^e^{or m}^o^re^c^h^ildre^n.^C^r^e^d^{it w}^{ould of}^f^s^e^t^the^A^M^T^;^w^{ould of}^f^s^e^t^the^A^M^T^;^{$10,000. C}^r^e^d^{it w}^ould^f^o^r^2001-^{4; 15%}^of
^R^e^f^{und r}^e^duc^e^d^by^A^M^T^;^r^e^f^{und w}^{ould not be}^r^e^duc^e^d^r^e^f^{und w}^{ould not be}^r^e^duc^e^d^o^f^f^s^et^t^h^{e A}^M^T^;^ref^uⁿ^d^inc^o^m^e^ov^e^r^$10,000,
^a^f^te^r^{2001 a}^m^{ount of}^c^r^e^d^it^by^the^A^M^T^.^by^the^A^M^T^.^w^{ould not be}^r^e^duc^e^d^by^inde^x^e^{d f}^o^r^inf^l^a^tion,
^r^e^duc^e^d^by^A^M^T^.^the^A^M^T^.^f^o^r^{2005 a}^{nd the}^r^e^a^f^te^r^.
^Es^tim^a^t^e^d^r^e^v^e^nue^los^s^:^$31.9^Es^tim^a^t^e^d^r^e^v^e^nue^los^s^:^$23.9
^{billion in FY}^{2010; $210.7}^{billion in FY}^{2011; $175.9}^Estim^a^t^e^d^re^v^e^nue^loss:^Credⁱ^t^o^f^f^s^et^{s t}^h^{e A}^M^T^;
^{billion ov}^e^r^{10 y}^e^a^r^s.^{billion ov}^e^r^{11 y}^e^a^r^s.^{$25.4 billion in FY}^2010;^r^e^f^{und not r}^e^duc^e^d^by
^{$193.0 billion ov}^e^r¹¹^the^A^M^T^.
^y^ears.
^Estim^a^t^e^d^re^v^e^nue^loss:
^{$25.2 billion in}
^FY^{2010; $171.8 billion}
^ov^e^r^{11 y}^e^a^r^s^.

Current LawPresident’s ProposalHouse Senate Conference
^Esta^{te a}ⁿ^d^{Gift Ta}^x
^Ma^rg^ina^l^ta^x^ra^te^{s ra}^ng^ing^T^h^e^e^s^ta^te^a^{nd g}ⁱ^f^t^ta^x^w^ould^T^h^e^e^s^ta^te^a^{nd g}ⁱ^f^t^ta^x^w^ould^T^h^e^e^s^ta^te^ta^x^w^{ould be}^T^h^e^e^s^ta^te^ta^x^g^r^a^dua^lly
^f^r^om^37%^{to 60%}^a^pply^to^be^pha^s^e^{d out ov}^e^r^the^pe^rⁱ^od^be^pha^s^e^{d out ov}^e^r^the^pe^rⁱ^od^grad^u^a^l^l^y^rep^eal^ed^o^v^{er t}^h^e^rep^eal^ed^o^v^{er t}^h^{e p}^e^ri^o^d
^e^s^ta^te^s^ov^e^r^{675,000; e}^s^ta^te^s^2002-^{2009. A}^{ll r}^a^te^s^a^r^e^2002-²⁰¹¹⁽^H^.^R^.⁸⁾^{. T}^h^e^r^a^te^pe^rⁱ^{od 2002-}^{2011. Es}^ta^te^2002-^{10. R}^a^te
^a^bov^e^the^f^iling^thre^shold^r^e^duc^e^d^r^a^pidly^dur^ing^the^r^e^duc^tions^a^r^e^{not a}^s^r^a^{pid a}^s^an^d^gi^f^t^t^a^{x r}^a^t^e^{s ar}^e^r^e^duc^tions^a^r^e^the^s^a^m^e
^m^a^y^cl^ai^m^{a cred}ⁱ^t^eq^u^a^l^t^o^pha^s^e^{out pe}^rⁱ^{od, but not}^{in the}^pr^e^s^ideⁿ^t’^s^pr^opos^a^l^,^r^e^duc^e^d^m^o^r^e^g^r^a^dua^lly^a^s^{in the}^Se^na^te^bill.
^the^ta^x^due^{on the}^thr^e^s^hold^be^low^the^c^a^p^ita^{l g}^a^{ins ta}^x^a^{nd the}^hig^h^e^s^{t ra}^te^f^a^lls^unde^r^this^pr^opos^a^l^dur^ing^Ho^w^e^ver,^t^h^{e ap}^p^lⁱ^cab^l^e
^a^m^{ount. T}^h^e^ta^x^a^ble^rate.^be^low^the^{top inc}^o^m^e^ta^x^pha^s^e^{out tha}ⁿ^the^othe^r^tw^o^credⁱ^tⁱ^sⁱⁿ^creased^m^o^re
^thr^e^s^{hold is}^s^c^he^dule^d^to^r^a^te^{. H}^.^R^.^{8 w}^{ould a}^l^s^o^pr^opos^a^l^s^.^H^o^w^e^v^e^r^,^the^s^l^ow^ly^thaⁿ^unde^r^the
^inc^r^e^a^s^e^{to $1 m}^{illion by}^ch^an^{ge t}^h^{e u}ⁿⁱ^fⁱ^ed^credⁱ^t^t^o^a^pplic^a^b^le^c^r^e^d^{it is}^Se^na^te^{bill. In a}^ddition,
^2006.^aⁿ^e^x^e^m^{ption be}^gⁱ^nningⁱⁿ^grad^u^a^l^l^yⁱⁿ^creased^t^o^$⁴^the^gⁱ^f^t^ta^x^{is re}^ta^ine^d^a^t
^2002.^m^{illion by}^{2010. A}^{top g}ⁱ^f^t^the^{top inc}^o^m^e^ta^x^ra^te
^ta^x^r^a^te^of^40%^w^{ould be}^of^35%^.
^m^a^inta^ine^d^a^f^te^{r re}^pe^a^l^of
^the^e^s^ta^te^ta^x^.
^S^a^m^e^b^a^{sis ru}^{les as}
^A^sset^s^t^r^an^sf^erred^at^d^eat^h^T^h^e^“^s^te^p-^up”^{in the}^ba^sⁱ^s^of^S^a^m^e^b^a^{sis ru}^{les as}^P^r^e^s^ideⁿ^t’^s^pr^opos^a^l
^recei^{ve a “st}^e^p^p^e^d^-^u^p^”^b^a^si^s.^a^sse^{ts w}^{ould be}^lim^ite^{d to}^S^a^m^e^b^a^{sis ru}^{les as}^P^r^e^s^ideⁿ^t’^s^pr^opos^a^l^aⁿ^d^a^{nd H}^ous^e^a^{nd Se}^na^te
ⁱ^{ki/CRS-RL30973}^{$1.3 m}^{illion plus $3 m}^illion^P^r^e^s^ideⁿ^t’^s^pr^opos^a^l^.^House^bill.^plaⁿ^s^.
^g/w^f^o^{r a}^sse^{ts tra}ⁿ^sf^e^rre^{d to a}
^s^.or^s^u^r^v^iv^ing^s^pous^e^.^T^h^{e f}^e^d^e^ral^credⁱ^t^f^o^r
^le^ak^E^s^t^a^t^e^{s m}^a^y^al^so^cl^ai^m^a^T^h^{e f}^e^d^e^ral^credⁱ^t^f^o^{r st}^at^e^T^h^{e f}^e^d^e^ral^credⁱ^t^f^o^{r st}^at^e^st^at^{e d}^eat^h^t^a^{xes i}^s
^://wiki^credⁱ^t^f^o^{r st}^at^{e d}^eat^h^t^a^xes^r^a^ng^ing^f^r^om^.8%^{to 16%}^of^de^a^t^{h ta}^x^e^s^w^{ould be}^r^e^duc^e^d^{in pr}^opor^{tion to the}^r^e^duc^tion^T^h^{e f}^e^d^e^ral^credⁱ^t^f^o^{r st}^at^e^de^a^t^{h ta}^x^e^s^w^{ould be}^r^e^duc^e^d^de^a^t^{h ta}^x^e^s^w^{ould be}^r^e^duc^e^d^ov^e^r^the^2002-^r^e^duc^e^d^ov^e^r^the^2002-^{2004 pe}^rⁱ^{od a}ⁿ^d
^h^ttp^a^d^juste^d^ta^x^a^ble^e^s^ta^te^v^a^lue^.^{in e}^s^ta^te^a^{nd g}ⁱ^f^t^ta^x^ra^te^s.^pr^opor^tiona^te^ly^.^{2004 pe}^rⁱ^{od a}^{nd r}^e^pl^aced^rep^l^aced^wⁱ^t^h^a
^w^{ith a}^de^duc^{tion in 2005.}^de^duc^{tion in 2005.}
^Estim^a^t^e^d^re^v^e^nue^loss:
^Estim^a^t^e^d^re^v^e^nue^loss:^Estim^a^t^e^d^re^v^e^nue^loss:^{$23.5 billion in FY}²⁰¹⁰
^{$73.4 billion in FY}²⁰¹⁰^Estim^a^t^e^d^re^v^e^nue^loss:^{$22.6 billion in FY}²⁰¹⁰^{($53.9 billion in}
^{($78.9 billion in FY}^2011);^{$35.0 billion in FY}²⁰¹⁰^{($27.0 billion in FY}^2011);^FY^{2011); $138.0 billion}
^{$305.9 billion ov}^e^r^{10 y}^e^a^r^s^.⁽^{$51.8 in FY}²⁰¹¹⁾^{; $185.6}^{$134.4 billion ov}^e^r¹⁰^ov^e^r^{11 y}^e^a^r^s^.

^{billion ov}^e^r^{10 y}^e^a^r^s.^y^ears.

Current LawPresident’s ProposalHouse Senate Conference
^I^ndi^vi^dual^R^e^tⁱ^r^e^m^eⁿ^t^A^c^c^o^unt^s⁽^I^R^A^s⁾^{and P}^e^nsⁱ^o^ns
^IRAs
^I^ndivⁱ^dua^ls^c^aⁿ^c^ontrⁱ^bute^up^No^ch^an^{ge f}^o^{r IRA}^s^T^h^e^dolla^{r lim}^{it f}^o^{r IRA}^T^h^e^lim^{it f}^o^{r IRA}^c^ontrib-^T^h^e^lim^{it f}^o^{r IRA}
^{to $2,000 a}^nnua^lly^{to I}^R^A^s^.^gen^e^ral^l^y^.^S^ee,^h^o^w^ever,^t^h^e^c^ontrⁱ^butions^inc^r^e^a^s^e^d^to^{utions is inc}^r^e^a^s^e^d^to^c^ontrⁱ^butions^is
^C^ontrⁱ^butions^a^r^e^de^duc^tible^ch^an^{ges f}^o^{r ch}^ari^t^a^b^l^e^{$5,000 ov}^e^r^2002-^{2004 a}^{nd is}^{$5,000 ov}^e^r^2002-²⁰¹¹ⁱⁿ^creased^t^o^$⁵^,⁰⁰⁰
^f^o^r^pe^r^s^ons^{not pa}^r^tic^ipa^ting^c^ontrⁱ^butions^a^{nd f}^o^r^inde^x^e^{d a}^f^te^r^w^a^r^ds^.^a^{nd is}^inde^x^e^{d a}^f^te^r^w^a^r^ds^.^ov^e^r^2002-^{8 a}ⁿ^d
ⁱⁿ^em^p^l^o^y^{er p}^l^an^s;ⁱⁿ^co^m^e^e^duc^a^{tion, be}^low^.^Estim^a^t^e^d^re^v^e^nue^{loss f}^o^r^Estim^a^t^e^d^re^v^e^nue^{loss f}^o^r^inde^x^e^{d the}^r^e^a^f^te^r^.
^lim^its^a^pply^{to de}^duc^tions^by^IRA^prov^ision:^{$5.3 billion in}^IRA^prov^{ision: $3.3 billion}^Estim^a^t^e^d^re^v^e^nue^loss
^plaⁿ^pa^rtic^ipaⁿ^ts.^FY^{2010; $34.2 billion ov}^e^r^{in FY}^{2010; $17.7 billion}^f^o^r^I^R^A^pr^ov^is^{ion: $4.5}
^{10 y}^e^a^r^s^.^ov^e^r^{10 y}^e^a^r^s^.^{billion in FY}^2010;
^{$25.1 billion ov}^e^r¹⁰
^Pe^ns^ions^y^ears.
^T^a^x^{on e}^m^ploy^e^r^No^ch^an^ge.^Inc^r^e^a^s^e^s^dolla^{r lim}^{its on}^P^r^ov^{isions sim}^ila^{r to the}^P^r^ov^{isions inc}^r^e^a^s^ing
^c^ontrⁱ^butions^{to qua}^lif^ie^d^vari^et^y^o^f^retⁱ^r^em^en^t^p^l^an^s:^House^{bill, but w}^{ith slow}^e^r^dolla^{r lim}^{its f}^o^llow^the
^pe^ns^{ion pla}ⁿ^s^is^g^e^ne^r^a^lly^lim^its^{on c}^ontrⁱ^bs^{. to de}^fⁱ^ne^d^pha^s^e^-ⁱ^ns^{in s}^o^m^e^c^a^s^e^s^;^House^bill.
^de^f^e^r^r^e^{d (}^pos^tpone^d)^until^be^ne^f^{it pla}ⁿ^s^rⁱ^s^e^f^r^om^$35K^the^lim^{it on c}^ontrⁱ^butions
ⁱ^{ki/CRS-RL30973}^dis^t^rⁱ^bute^d^{, c}^onf^e^r^rⁱ^ng^the^e^quiv^a^le^{nt of}^a^ta^x^{to $40K}^{; lim}^its^{on de}^fⁱ^ne^d^be^ne^f^{it pa}^y^m^eⁿ^ts^rⁱ^s^e^f^r^om^{to de}^fⁱ^ne^{d be}^ne^f^{it pla}ⁿ^s^w^{ill not inc}^r^e^a^s^e^e^x^c^e^p^{t f}^o^r⁴⁰¹⁽^K⁾^a^{nd s}ⁱ^m^ila^r^p^l^an^{s can}^el^ect^ed^t^o^b^e
^g/w^e^x^e^m^{ption. T}^h^e^be^ne^f^{it is}^$140K^{to $160K}^{; lim}^its^on^inf^l^a^tion.^t^r^eat^ed^{as Ro}^t^h^IRA^s^);
^s^.or^subje^c^t^{to lim}^{its, re}^stric^tions,^e^lig^ible^c^o^m^p^eⁿ^sa^{tion rise}^to^e^f^f^e^c^tiv^e^{in 2006.}
^le^ak^a^{nd r}^e^g^u^la^tions^.^$200K^{; lim}^its^{on 401(}^k⁾^aⁿ^d⁴⁰¹⁽^K⁾^a^{nd s}ⁱ^m^ila^r^plaⁿ^s
^lik^e^plaⁿ^s^rⁱ^s^e^{to $15K}^{; lim}^its^co^u^l^d^b^e^t^r^eat^ed^{as Ro}^t^h^Follow^s^the^Se^na^teⁱⁿ
^://wiki^{on SI}^MP^L^E^s^rⁱ^s^e^{to $10K}^.^I^R^A^s⁽^c^ontrⁱ^butions^not^al^l^o^wⁱⁿ^g^{a cred}ⁱ^t^f^o^r
^h^ttp^Lⁱ^m^{its the}ⁿ^inde^x^e^{d f}^o^rⁱⁿ^f^l^atⁱ^oⁿ^.^Ot^h^e^{r i}ⁿ^{creases i}ⁿ^de^duc^tible^{, pa}^y^m^eⁿ^ts^not^ta^x^a^ble⁾^I^R^A^a^{nd 401(}^K⁾^c^ontrⁱ^butions^,
^lim^{its w}^{ould a}^l^{so oc}^c^u^r.^s^uns^e^tting^{in 2006.}
^C^r^e^d^{it f}^o^r^c^ontrⁱ^butions^to
⁴⁰¹⁽^K⁾^a^{nd s}ⁱ^m^ila^r^plaⁿ^s^I^R^A^s^{, 401(}^K⁾^a^{nd s}ⁱ^m^ila^r^N^u^m^e^r^ous^othe^r
^co^u^l^d^b^e^t^r^eat^ed^{as Ro}^t^h^IRA^s^p^l^an^{s ai}^m^e^d^at^l^o^w^e^r^prov^{isions (sim}^ila^{r to}
⁽^c^ontrⁱ^butions^{not de}^duc^tible^inc^o^m^e^pe^r^s^ons^{; s}^uns^e^t^sⁱⁿ^the^H^ous^e^a^{nd Se}^na^te
^{but pa}^y^m^eⁿ^ts^{not ta}^x^a^ble⁾^.^2006.^prov^{isions) re}^la^ting^to
^e^x^pa^nding^porta^bility^,
^T^h^{ere are n}^u^m^ero^u^s^o^t^h^e^r^N^u^m^e^r^ous^othe^r^pr^ov^is^ions^e^a^s^ing^bur^de^ns^of^aⁿ^ti-
^prov^{isions re}^la^ting^to^(sim^ila^{r to the}^House^dis^c^rⁱ^mⁱ^na^{tion r}^u^le^s^,
^e^x^pa^nding^porta^bility^{, e}^a^s^ing^prov^{isions) re}^la^ting^to^a^{nd s}ⁱ^m^p^lif^yⁱ^ng^r^u^le^s^.
^bur^de^ns^of^aⁿ^ti-^e^x^pa^nding^porta^bility^,
^dis^c^rⁱ^mⁱ^na^{tion r}^u^le^s^,^aⁿ^d^e^a^s^ing^bur^de^ns^of^aⁿ^ti-^Estim^a^t^e^d^re^v^e^nue^loss
^sim^p^lif^yⁱ^ng^rule^s.^dis^c^rⁱ^mⁱ^na^{tion r}^u^le^s^,^aⁿ^d^of^pe^ns^{ion pr}^ov^is^ions^:
^sim^p^lif^yⁱ^ng^rule^s.^{$2.2 billion in FY}^2010;
^Estim^a^t^e^d^re^v^e^nue^{loss of}^{$24.5 billion ov}^e^r¹⁰
^pe^ns^{ion pr}^ov^is^ions^{: $2.5}^Estim^a^t^e^d^re^v^e^nue^{loss of}^y^ears.

^{billion in FY}^{2010; $17.4}^pe^ns^{ion pr}^ov^is^ions^{: $2.2}
^{billion ov}^e^r^{10 y}^e^a^r^s.^{billion in FY}^{2010; $22.6}
^{billion ov}^e^r^{10 y}^e^a^r^s.

Current LawPresident’s ProposalHouse Senate Conference
^C^h^arⁱ^t^abl^e^C^o^nt^rⁱ^butⁱ^o^ns
^T^a^xp^ay^{ers w}^h^oⁱ^t^e^mⁱ^{ze t}^h^ei^r^P^e^r^m^its^non-^ite^mⁱ^z^e^r^s^to^N^o^H^ous^e^-^pa^s^s^e^{d pr}^ov^is^ion.^T^a^x^p^a^y^e^r^s^c^aⁿ^de^duc^{t the}^N^o^pr^ov^is^ions^.

^de^duc^tions^c^aⁿ^de^duc^t^de^duc^{t c}^h^a^r^ita^ble^f^a^{ir m}^a^rk^e^t^v^a^lue^of^se^lf^-
^c^h^a^r^ita^ble^c^ontrⁱ^butions^c^ontrⁱ^butions^{. (}^P^ha^s^e^{d in ov}^e^r^creat^ed^art^w^o^r^ks.
^s^ubje^c^t^{to a}^lim^ita^{tion of}^50%^2002-²⁰⁰⁶⁾^.
^o^f^ad^j^u^st^ed^gro^{ss i}ⁿ^co^m^e^.^Ef^f^e^c^tiv^e^{upon e}ⁿ^a^c^t^m^e^nt.
^Noⁿ^-ⁱ^t^e^mⁱ^{zers are n}^o^t
^pe^rm^itte^{d a}ⁿ^a^dditiona^l^A^llow^s^c^o^r^por^a^tions
^de^duc^{tion f}^o^r^c^h^a^r^ita^ble^a^dditiona^{l de}^duc^tion
^c^ontrⁱ^butions^.^(gen^eral^l^y^eq^u^a^l^t^o^oⁿ^e^-h^al^f
^or^dina^r^y^inc^o^m^e^tha^t^w^ould
^Wⁱ^t^h^d^r^aw^al^{s f}^r^o^m^IRA^s^are^A^llow^s^pe^r^s^ons^ov^e^r^{59 ½}^h^a^{ve b}^een^reco^gnⁱ^zed^f^r^o^m
^g^e^ne^ra^lly^inc^l^ude^{d in ta}^x^a^ble^t^a^x-f^r^{ee w}ⁱ^t^h^d^r^aw^al^{s f}^r^o^m^s^a^le⁾^f^o^r^c^ontrⁱ^butions^of
ⁱⁿ^co^m^e^.^Wⁱ^t^h^d^r^aw^al^{s b}^e^f^o^re^IRA^s^f^o^{r ch}^aritab^l^e^book^inv^e^ntor^y^{to s}^c^hools^,
⁵⁹^{½ are su}^b^j^ect^t^o^an^c^ontrⁱ^butions^{, be}^gⁱ^nningⁱⁿ^libra^rie^s^{, a}^{nd lite}^ra^c^y
^a^dditiona^{l 10%}^ta^x^.^2002.^pr^og^r^a^m^s^.
^Corpora^{tions a}^r^e^pe^rm^itte^{d to}
ⁱ^{ki/CRS-RL30973}^de^duc^{t c}^h^a^r^ita^ble^In^{creases t}^h^{e co}^rp^o^r^at^e^Ef^f^e^c^tiv^e^{upon e}ⁿ^a^c^t^m^e^nt.
^g/w^c^ontrⁱ^butions^{, s}^ubje^c^t^{to a}^c^{ontribution lim}^ita^{tion to}
^s^.or^lim^{it of}^10%^of^ne^{t inc}^o^m^e^.^15%^of^ta^x^a^ble^inc^o^m^e^,^be^gⁱ^nning^{in 2002.}
^le^ak^For^c^ontrⁱ^butions^of^pr^ope^r^t^y^,
^://wiki^ta^x^p^a^y^e^r^{s m}^a^y^de^duc^{t the}^f^a^ir^m^a^rk^e^t^v^a^lue^of^c^a^p^ita^{l g}^aⁱⁿ^Es^tim^a^t^e^d^r^e^v^e^nue^los^s^:^$15.7^{billion in FY}^{2011; $90.0}
^h^ttp^pr^ope^r^t^y^{but f}^o^r^or^dina^r^y^{billion ov}^e^r^{10 y}^e^a^r^s.
^inc^o^m^e^pr^ope^r^t^y^{– inc}^l^uding
^sel^f^-creat^ed^art^w^o^r^{ks –}^can
^g^e^ne^r^a^lly^only^de^duc^{t the}ⁱ^r
^ba^sⁱ^s^{in the}^pr^ope^r^t^y^.

Current LawPresident’s ProposalHouse Senate Conference
^E^duc^atⁱ^oⁿ
^Educ^{ation I}^RAs
^A^u^t^h^o^rⁱ^{zes t}^a^x-exem^p^t^A^llow^s^a^c^c^ounts^a^l^s^o^{to be}^N^o^pr^ov^is^ion.^A^llow^s^a^c^c^ounts^a^l^s^o^{to be}^S^a^m^e^{as t}^h^{e S}^eⁿ^a^t^e
^s^a^vⁱ^ng^s^a^c^c^ounts^f^o^r^qua^lif^ie^d^u^s^ed^f^o^{r q}^u^a^lⁱ^fⁱ^e^d^el^em^en^t^a^ry^us^e^d^f^o^r^qua^lif^ie^d^am^en^d^m^en^t^wⁱ^t^h^several
^hig^h^e^r^e^duc^a^{tion e}^x^pe^ns^e^s^.^a^{nd s}^e^c^onda^r^y^e^duc^a^tion^e^l^e^m^eⁿ^ta^r^y^a^{nd s}^e^c^onda^r^y^m^odifⁱ^c^a^tions^{. D}^o^e^s
^Di^st^ri^b^u^tⁱ^oⁿ^s^{are excl}^u^d^e^d^e^x^pe^ns^e^s^{, inc}^l^uding^f^o^r^e^duc^a^{tion e}^x^pe^ns^e^s^,^{not inc}^l^ude^e^x^c^l^us^ion
^f^r^om^inc^o^m^e^of^be^ne^fⁱ^cⁱ^a^r^y^pr^iv^a^t^e^a^{nd r}^e^lig^ious^s^c^hoolsⁱⁿ^cl^u^dⁱⁿ^g^p^rⁱ^v^at^{e an}^d^f^o^r^e^m^ploy^e^r
^s^t^ude^nt.⁽^e^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾^.^r^e^lig^ious^s^c^hools^.^c^ontrⁱ^butions^.
^R^a^is^e^s^a^nnua^{l c}^ontrⁱ^bution
^Lⁱ^m^its^a^nnua^{l c}^ontrⁱ^butions^lim^{it to $1,000 in 2002,}^R^a^is^e^s^a^nnua^{l c}^ontrⁱ^bution
^{to $500 pe}^r^be^ne^fⁱ^cⁱ^a^r^y^{$2,000 in 2003, $3,000 in}^lim^{it to $2,000.}
^{2004, $4,000 in 2005, a}ⁿ^d
^{$5,000 in 2006 a}ⁿ^d⁽^E^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾
^t^h^ereaf^t^e^r.
^Ex^te^nds^e^x^c^l^us^{ion to}
^e^m^ploy^e^r^c^ontrⁱ^{bution to}
ⁱ^{ki/CRS-RL30973}^e^duc^a^{tion I}^R^A^of^e^m^ploy^e^e^,^s^pous^e^,^or^line^a^l
^g/w^de^s^c^e^nde^{nt, lim}^ite^{d to $500}
^s^.or^pe^r^be^ne^fⁱ^cⁱ^a^r^y^.
^le^ak
^Qualifie^{d Tuition Sav}^ings
^://wiki^Plans^A^llow^s^dis^t^rⁱ^butions^f^r^om^N^o^pr^ov^is^ion.^A^llow^s^dis^t^rⁱ^butions^f^r^om^S^a^m^e^{as t}^h^{e S}^eⁿ^a^t^e
^h^ttp^A^llow^s^qua^lif^ie^{d tuition}^a^c^c^ounts^{to be}^e^x^c^l^ude^{d f}^r^om^a^c^c^ounts^{to be}^e^x^c^l^ude^d^am^en^d^m^en^t^wⁱ^t^h^several
^savin^g^{s p}^l^an^{s to}^b^e^tax-^inc^o^m^e^of^be^ne^fⁱ^cⁱ^a^r^y^f^r^om^inc^o^m^e^of^be^ne^fⁱ^cⁱ^a^r^y^m^odifⁱ^c^a^tions^{. I}^m^pos^e^s
^e^x^e^m^{pt. D}ⁱ^s^t^rⁱ^butions^f^r^om^s^t^ude^{nt, s}^ubje^c^t^{to lif}^e^tim^e^s^t^ude^nt.^10%^pe^na^lty^ta^x^on
^a^c^c^ounts^a^r^e^ta^x^a^ble^to^lim^it.^dis^t^rⁱ^butions^{not us}^e^d
^s^t^ude^{nt unde}^r^a^nnuity^r^u^le^s^.^A^l^l^o^w^s^p^rⁱ^v^at^{e h}ⁱ^gh^er^f^o^r^qua^lif^ie^{d hig}^h^e^r
^A^l^l^o^w^s^p^rⁱ^v^at^{e h}ⁱ^gh^er^e^duc^a^tiona^{l institutions to}^e^duc^a^{tion e}^x^pe^ns^e^s^.

^P^l^aⁿ^s^m^u^s^t^be^e^s^ta^blis^he^{d by}^e^duc^a^tiona^{l institutions to}^e^s^ta^{blish pre}^p^aⁱ^{d tuition}
^st^at^{e go}^vern^m^eⁿ^t^s.^e^s^ta^{blish pre}^p^aⁱ^{d tuition}^s^a^vⁱ^ng^s^plaⁿ^s^unde^r^s^a^m^e
^s^a^vⁱ^ng^s^plaⁿ^s^unde^r^s^a^m^e^ru^les.
^ru^les.
⁽^E^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹
⁽^E^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾^excep^t^f^o^{r excl}^u^sⁱ^oⁿ^o^f
^dis^t^rⁱ^butions^f^r^om^pr^iv^a^t^e
^{institution pla}ⁿ^{s, a}^f^te^r
²⁰⁰³⁾

Current LawPresident’s ProposalHouse Senate Conference
^Em^ploy^e^r^Educ^ation
^Assistaⁿ^c^e
^Ex^te^nds^c^u^r^r^e^{nt la}^w^thr^oug^h^N^o^pr^ov^is^ion.^Ex^te^nds^lim^ite^{d e}^x^c^l^us^ion^Sa^m^e^a^s^Se^na^te
^A^llow^s^lim^ite^{d e}^x^c^l^usion^D^e^c^.^{31, 2002.}^{to g}^r^a^dua^te^le^v^e^{l c}^ourse^s^am^en^d^m^en^t^.
^e^v^eⁿ^if^e^duc^a^{tion is}^{not job-}⁽^e^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾^.
^r^e^la^te^{d or}^pr^e^p^a^r^e^s^f^o^r^ne^w
^career.
^M^a^{kes excl}^u^sⁱ^oⁿ
^Do^{es n}^o^t^co^{ver grad}^u^a^t^e^-l^evel^p^e^rm^an^en^t^.
^co^u^r^ses.
^Ex^pir^e^s^D^e^c^.^{31, 2001.}
^Iⁿ^te^r^e^s^t^{on H}ⁱ^ghe^r^Educ^ation
^Loans
^A^llow^s^lim^ite^{d a}^bov^e^-^the^-^line^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^R^e^pe^a^l^s^r^e^s^t^rⁱ^c^{tion on}^Sa^m^e^a^s^Se^na^te
^de^duc^{tion f}^o^r^fⁱ^r^s^{t 60 m}^onths^num^be^r^of^m^onths^on^am^en^d^m^en^t^excep^t^d^o^e^s
^of^inte^re^{st pa}^y^m^eⁿ^ts.^inte^re^{st pa}^y^m^eⁿ^ts.^{not inc}^l^ude^optiona^{l ta}^x
ⁱ^{ki/CRS-RL30973}^R^a^is^e^s^inc^o^m^e^pha^s^e^-^out^credⁱ^t^.

^g/w^ra^ng^e^s^f^o^{r e}^lig^ibility^.
^s^.or
^le^ak⁽^B^{oth e}^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾
^://wiki^A^llow^s^optiona^{l ta}^x^c^r^e^d^it
^h^ttp^of^{up to $500 f}^o^r^fⁱ^r^s^{t 60}^m^onths^of^inte^r^e^s^t
^p^a^y^m^en^t^s^(ef^f^ectⁱ^v^{e af}^t^e^r
²⁰⁰⁸⁾^.

Current LawPresident’s ProposalHouse Senate Conference
^Bonds^for^Sc^{hool Fac}^ilitie^s
^In^t^e^rest^oⁿ^st^at^{e o}^r^l^o^cal^No^p^r^o^vⁱ^sⁱ^oⁿ^.^In^{creases t}^h^{e arb}ⁱ^t^r^age^Sa^m^e^a^s^Se^na^te
^g^o^v^e^rⁿ^m^e^nta^l^bonds^is^ta^x^-^reb^a^t^e^excep^tⁱ^oⁿ^f^o^{r sm}^al^l^am^en^d^m^en^t^.
^exem^p^t^.^Issu^{ers m}^u^{st reb}^a^te^issue^r^{s by}^{$5 m}^illion
^arbⁱ^t^r^{age earn}ⁱⁿ^g^s,^wⁱ^t^h^so^m^e⁽^e^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾
^excep^tⁱ^oⁿ^s^.
^Inte^re^{st on priv}^a^t^e^a^c^tiv^ity^A^llow^s^bonds^is^s^u^e^d^by^f^o^r^-^A^llow^s^bonds^is^s^u^e^d^by
^bonds^is^ta^x^a^ble^w^{ith s}^o^m^e^prof^{it e}ⁿ^tity^pursuaⁿ^{t to}^f^o^r-prof^{it e}ⁿ^tity^pursuaⁿ^{t to}
^excep^tⁱ^oⁿ^s^,^am^oⁿ^g^t^h^em^pa^r^t^ne^r^s^{hip a}^g^r^e^e^m^eⁿ^{t w}^ith^pa^r^t^ne^r^s^{hip a}^g^r^e^e^m^eⁿ^{t w}^ith
^e^x^e^m^{pt f}^a^c^ility^bonds^.^public^s^c^hools^{to be}^c^l^a^s^sⁱ^fⁱ^e^d^public^s^c^hools^{to be}
^a^s^e^x^e^m^{pt f}^a^c^ility^bonds^c^l^a^ssifⁱ^e^d^a^s^e^x^e^m^{pt f}^a^c^ility
⁽^e^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾^.^bonds⁽^e^f^f^e^c^tiv^e^a^f^te^r
²⁰⁰¹⁾
^D^e^duc^{tion for}^Hⁱ^ghe^r
^Educ^{ation Ex}^pe^ns^e^s
ⁱ^{ki/CRS-RL30973}^No^t^al^l^o^w^e^d^excep^t^as^bus^ine^s^s^or^pr^of^e^s^sⁱ^ona^l^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^A^llow^s^optiona^{l a}^bov^e^-^the^-^line^de^duc^{tion f}^o^{r tuition}^Sa^m^e^a^s^Se^na^te^am^en^d^m^en^t^excep^t
^g/w^e^x^pe^ns^e^a^{nd f}^e^e^s^{. L}ⁱ^m^ite^{d to}^de^duc^{tion lim}^ite^{d to}
^s^.or^{$3,000 in 2002 a}^{nd 2003}^{$4,000 in 2004 a}ⁿ^d
^le^ak^A^llow^s^ta^x^c^r^e^d^{its f}^o^{r tuition}^a^{nd to $5,000 in 2004 a}ⁿ^d^2005.

^a^{nd f}^e^e^s^{: H}^ope^Sc^hola^r^s^h^ip^2005.
^://wiki⁽^{up to $1,500)}^a^{nd L}ⁱ^f^e^tim^e
^h^ttp^L^e^a^r^ning⁽^{up to $1,000;}^{$2,000 a}^f^te^r²⁰⁰²⁾^.^A^llow^s^hig^h^e^r^inc^o^m^e^pha^s^e^-^{out r}^a^ng^e^s^f^o^r
^e^lig^ibility^thaⁿ^w^ould
^e^ithe^r^ta^x^c^r^e^d^it.
⁽^E^f^f^e^c^tiv^e^a^f^te^r^{2001 a}ⁿ^d
^be^f^o^r^e²⁰⁰⁶⁾^.

Current LawPresident’s ProposalHouse Senate Conference
^D^e^duc^{tion for}^C^l^as^s^r^oom^and
^Tr^{aining Ex}^pe^ns^e^s
^A^llow^s^de^duc^{tion f}^o^r^A^llow^s^“^a^bov^e^-^the^-^line^”^{No prov}^ision.^A^llow^s^a^bov^e^-^the^-^line^N^o^pr^ov^is^ion.
^unr^eⁱ^m^bur^s^e^{d e}^m^ploy^e^e^de^duc^{tion f}^o^r^non-^ite^mⁱ^z^e^r^s^de^duc^{tion up to $500 f}^o^r
^e^x^pe^nse^s^{, lim}^ite^{d to ta}^x^p^a^y^e^r^s^{up to $400 f}^o^r^e^l^e^m^eⁿ^ta^r^y^e^l^e^m^eⁿ^ta^r^y^a^{nd s}^e^c^onda^r^y
^w^{ho ite}^mⁱ^z^e^a^{nd s}^ubje^c^t^to^a^{nd s}^e^c^onda^r^y^s^c^hool^s^c^{hool t}^each^{ers an}^d^o^t^h^e^r
²^%^ad^j^u^st^ed^gro^{ss i}ⁿ^co^m^e^t^each^{ers an}^d^o^t^h^e^{r p}^e^rs^onne^l^pe^r^s^onne^{l w}^{ho inc}^u^r
^f^l^oor^{. Som}^e^tr^aⁱ^ning^w^{ho ha}^v^e^c^l^a^s^s^r^oom^aⁿ^d^pr^of^e^s^sⁱ^ona^{l de}^v^e^lopm^eⁿ^t
^e^x^pe^ns^e^s^m^a^y^qua^lif^y^f^o^r^the^tr^aⁱ^ning^e^x^pe^ns^e^s⁽^e^f^f^e^c^tiv^e^e^x^pe^nse^s^re^la^te^{d to the}ⁱ^r
^Lⁱ^f^e^tⁱ^m^{e L}^earnⁱⁿ^g^Credⁱ^t^.^a^f^te^r²⁰⁰¹⁾^.^su^b^j^ect^area.
^A^llow^s^ta^x^c^r^e^d^{it f}^o^{r 50%}
^of^c^l^a^s^s^r^oom^m^a^te^rⁱ^a^l
^e^x^pe^ns^e^s^{; lim}^ite^{d to $250}
^each^y^ear.
^Estim^a^t^e^d^re^duc^{tion in}^Estim^a^t^e^d^re^duc^{tion in}^Estim^a^t^e^d^re^duc^{tion in}
^r^e^v^e^nue^of^a^{ll e}^duc^a^tion^r^e^v^e^nue^of^a^{ll e}^duc^a^tion^r^e^v^e^nue^of^a^{ll e}^duc^a^tion
ⁱ^{ki/CRS-RL30973}^prov^isions:^{$1.6 billion in}^FY^{2010; $10.7 billion ov}^e^r^prov^isions:^{$3.6 billion in}^FY^{2010; $35.5 billion ov}^e^r^prov^{ision: $3.1 billion}^{in FY}^{2010; $29.4}
^g/w^{10 y}^e^a^r^s^.^t^eⁿ^y^ears.^{billion ov}^e^r^te^{n y}^e^a^r^s.

^s^.or
^le^ak
^://wiki
^h^ttp

Current LawPresident’s ProposalHouse Senate Conference
^He^al^t^h^{and L}^o^ng^-^T^e^r^m^C^a^r^e
^Tax^Cre^d^{it for He}^alth
^In^su^raⁿ^c^e
^A^llow^s^r^e^f^unda^ble^ta^x^c^r^e^d^it^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion^N^{o pr}^ov^is^ion.
^A^llow^s^de^duc^{tion f}^o^r^f^o^{r p}^u^r^ch^{ase o}^f^h^eal^t^h
^unr^eⁱ^m^bur^s^e^{d m}^e^dic^a^l^ins^u^r^a^nc^e^f^o^r^indivⁱ^dua^ls^not
^e^x^pe^ns^e^s⁽ⁱ^nc^luding^he^a^lth^pa^rtic^ipa^ting^{in e}^m^ploy^e^r^-
^insura^nc^e^pre^m^ium^s^{), lim}^ite^d^s^pons^or^e^d^or^public
^t^o^t^a^xp^ay^{ers w}^h^oⁱ^t^e^mⁱ^{ze an}^d^prog^ra^m^s^{. Cre}^d^{it lim}^ite^{d to}
^s^ubje^c^t^to^{$1,000 pe}^r^indivⁱ^dua^{l (}^$2,000
⁷^{½ % ad}^j^u^st^ed^gro^{ss i}ⁿ^co^m^e^pe^r^f^a^m^ily⁾^{up to 90%}^of
^f^l^oor^.^p^r^emⁱ^u^m^(ef^f^ectⁱ^v^{e af}^t^e^r
^{2001; pha}^s^e^d-^{in be}^f^o^r^e
²⁰⁰³⁾^.
^Fle^xⁱ^ble^Spe^{nding Ac}^c^ounts
^A^llow^s^FSA^s^{to be}^f^unde^{d on}^A^llow^s^{up to $500 in unus}^e^d^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.
ⁱ^{ki/CRS-RL30973}^pr^e^-^ta^x^ba^sⁱ^s^.^B^a^la^nc^e^s^unus^e^d^a^t^e^{nd of}^y^e^a^r^a^r^e^b^a^l^aⁿ^{ces t}^o^b^e^carri^ed^o^v^{er t}^o^ne^x^t^y^e^a^r^{, rolle}^{d ov}^e^r^into
^g/w^f^o^r^f^e^ite^{d to e}^m^ploy^e^r^.^qua^lif^ie^{d re}^tire^m^eⁿ^{t pla}ⁿ^or
^s^.or^m^e^dic^a^l^s^a^vⁱ^ng^s^a^c^c^{ount, or}
^le^ak^dis^t^rⁱ^bute^d^{to e}^m^ploy^e^e
⁽^e^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾^.
^://wiki^Ar^c^h^e^r^M^e^dic^a^{l Sav}^ings
^h^ttp^Ac^c^ounts
^A^llow^s^ta^x^-^e^x^e^m^{pt MSA}^s^f^o^r^Re^pe^a^l^{s te}^rm^ina^{tion da}^te^f^o^r^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.
^s^e^lf^-^e^m^p^loy^e^{d or}^e^m^ploy^e^e^sⁿ^e^w^en^ro^l^l^{ees an}^d^cap^oⁿ
^of^s^m^a^{ll e}^m^ploy^e^r^s^w^{ith hig}^h^num^be^r^of^pa^r^tic^ipaⁿ^ts^.
^de^duc^tible^insura^nc^e^.^Ne^w^Ma^k^e^s^a^c^c^ounts^g^e^ne^r^a^lly
^eⁿ^rollm^eⁿ^{ts g}^e^ne^ra^lly^a^v^a^ila^ble^{to a}ⁿ^y^one^w^{ith hig}^h
^pr^ohibite^{d a}^f^te^r^2002.^de^duc^tible^insura^nc^e^aⁿ^d
^inc^r^e^a^s^e^s^c^{ontribution lim}^its
⁽^e^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾^.
^Pe^r^s^{onal Ex}^e^m^{ption for}
^Family^Care^giv^e^r
^A^llow^s^e^x^e^m^{ption if}^A^llow^s^a^dditiona^{l pe}^r^s^ona^l^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.

^indivⁱ^dua^{l qua}^lif^ie^s^a^s^a^e^x^e^m^{ption f}^o^{r f}^a^m^ily
^de^pe^nde^nt.^m^e^m^b^{ers n}^eedⁱⁿ^{g l}^oⁿ^g^-t^erm
^c^a^r^e⁽^e^f^f^e^c^tiv^e^a^f^te^r²⁰⁰¹⁾^.

Current LawPresident’s ProposalHouse Senate Conference
^D^e^duc^{tion for}^Long-^te^r^m
^Ca^{re In}^su^raⁿ^c^e
^A^llow^s^de^duc^{tion f}^o^r^A^llow^s^a^bov^e^-^the^line^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.
^unr^eⁱ^m^bur^s^e^{d m}^e^dic^a^l^de^duc^{tion f}^o^r^long^-^t^e^r^m^c^a^r^e
^e^x^pe^ns^e^s⁽ⁱ^nc^luding^long^-ⁱⁿ^su^ran^{ce p}^r^emⁱ^u^m^s
^t^e^rm^{care i}ⁿ^su^ran^c^e⁽^e^f^f^e^c^tiv^e^a^f^te^r^{2001 but}
^pre^m^ium^s^{), lim}^ite^{d to}^pha^s^e^d-^{in be}^f^o^r^e²⁰⁰⁷⁾^.
^t^a^xp^ay^{ers w}^h^oⁱ^t^e^mⁱ^{ze an}^d
^su^b^j^ect^t^o⁷^{½ % ad}^j^u^st^ed^Estim^a^t^e^d^re^duc^{tion in}
^g^r^os^s^inc^o^m^e^f^l^oor^.^re^v^e^nue^{: $13.5 billion in}
^FY^{2011; $100.4 billion ov}^e^r
^{10 y}^e^a^r^s^.
^H^e^{alth I}ⁿ^s^u^r^anc^e^D^e^duc^tion
^{for Se}^lf-Employ^e^d
^If^a^ta^x^p^a^y^e^r^{is not e}^lig^ible^to^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^A^llow^s^100%^de^duc^tion^N^o^pr^ov^is^ion.
^p^a^rtⁱ^cⁱ^p^at^{e i}ⁿ^an^em^p^l^o^y^er-^f^o^{r he}^a^{lth insura}^nc^e
ⁱ^{ki/CRS-RL30973}^su^b^sⁱ^dⁱ^zed^h^eal^t^h^p^l^an^,^a^de^duc^{tion is}^a^llow^e^{d f}^o^r^60%^p^r^emⁱ^u^m^evenⁱ^f^t^a^xp^ay^er^{is e}^lig^ible^{to pa}^rtic^ipa^t^e
^g/w^of^pr^e^m^ium^s^{in 2001, 70%}ⁱⁿ⁽^{but doe}^s^not)^{in e}^m^ploy^e^r^-
^s^.or^{2002, a}^{nd 100%}^{in 2003 a}ⁿ^d^su^b^sⁱ^dⁱ^zed^h^eal^t^h^p^l^an^.
^le^ak^t^h^ereaf^t^e^r.^Ef^f^e^c^tiv^e^a^f^te^r^2001.
^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:
^://wiki^{$0.9 billion ov}^e^r^{10 y}^e^a^r^s.
^h^ttp^Research^an^d^Ex^p^eri^m^eⁿ^t^ati^oⁿ^{(R&E) Tax}^Credⁱ^t
^A^20%^ta^x^c^r^e^d^{it a}^pplie^{s to}^T^h^e^R^&^{E c}^r^e^d^{it w}^{ould be}^N^o^pr^ov^is^ion.^T^h^e^R^&^{E c}^r^e^d^{it w}^{ould be}^N^o^pr^ov^is^ion.

^qua^lif^ie^{d r}^e^s^e^a^r^c^h^e^x^pe^ns^e^s^m^a^d^e^p^e^rm^an^en^t^;ⁿ^o^ch^an^ge^m^a^de^pe^r^m^aⁿ^eⁿ^{t. T}^h^e
^a^bov^e^a^ba^s^e^a^m^{ount link}^e^d^{in ra}^te^s.^a^lte^rna^tiv^e^ra^te^{s w}^{ould be}
^t^o^{a f}ⁱ^rm^{’s research}ⁱⁿ^t^h^eⁱⁿ^creased^t^o^{a ran}^g^{e o}^f³^%
^pa^{st. A}ⁿ^a^lte^rna^tiv^e^,^thre^e^-^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:^$⁸^.²^{to 5%}^.
^tie^re^{d c}^r^e^d^{it is a}^v^a^ila^ble^w^ith^{billion in FY}^{2010; $47.3}
^lo^w^e^{r rates ran}^gⁱⁿ^g^f^r^o^m^{billion ov}^e^r^{10 y}^e^a^r^s.^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:
^2.65%^{to 3.75%}^{. T}^h^e^c^r^e^d^it^{$8.3 billion in FY}^2010;
^is^s^c^he^dule^d^{to e}^x^pir^e^a^f^te^r^{$47.8 billion ov}^e^r^{10 y}^e^a^r^s^.
^J^une^{30, 2004.}

Current LawPresident’s ProposalHouse Senate Conference
^Adoptⁱ^{on T}^a^x^Credi^t^{and E}^m^pl^oy^{er Adopt}ⁱ^{on Assi}^st^{ance P}^r^og^ram^s
^T^a^xp^ay^{ers are al}^l^o^w^e^d^{a t}^a^x^P^r^ov^ide^s^tha^t^the^a^{doption ta}^x^In^{creases t}^h^{e ad}^o^p^tⁱ^oⁿ^t^a^x^P^r^ov^ide^s^a^{$10,000 ta}^x^T^h^e^pr^ov^is^ions^of^the
^c^r^e^d^{it f}^o^{r qua}^lif^ie^{d a}^doption^c^r^e^d^{it f}^o^r^c^h^ildr^e^{n w}^ithout^c^r^e^d^{it to $10,000 f}^o^r^c^h^ildr^eⁿ^credⁱ^t^f^o^{r t}^a^xp^ay^{ers w}^h^o^House^a^{nd Se}^na^te^bills
^e^x^pe^ns^e^s^{. A}^dopte^d^c^h^ildr^eⁿ^sp^eci^alⁿ^eed^{s i}^s^t^o^b^e^m^a^d^e^w^{ith or}^w^{ithout s}^p^e^cⁱ^a^l^ne^e^d^s^.^a^{dopt a}^c^h^{ild w}^{ith s}^p^e^cⁱ^a^l^w^e^{re sim}^{ilar an}^d
^m^u^s^t^be^unde^r^a^g^e^{18 or}^p^e^rm^an^en^t^(t^h^e^sp^eci^alⁿ^eed^s^In^{creases t}^h^{e p}^h^a^se-o^u^t^f^o^rⁿ^eed^s.^A^credⁱ^t^u^p^t^o^g^e^ne^ra^lly^re^ta^ine^d^{. T}^h^e
^phy^sⁱ^c^a^lly^or^m^e^nta^lly^a^{doption pr}^ov^is^{ion is}^a^l^r^e^a^d^y^ei^t^h^{er t}^h^{e ad}^o^p^tⁱ^oⁿ^credⁱ^t^o^r^{$10,000 is}^pr^ov^ide^d^f^o^r^$10,000
ⁱⁿ^cap^ab^l^e^o^f^cariⁿ^{g f}^o^r^{a p}^e^rm^an^en^t^p^a^rt^o^f^t^h^{e IRC).}^a^m^ounts^r^ecei^ved^f^r^o^m^an^qua^lif^ie^{d a}^doption^c^r^e^d^it/e^x^c^{lusion f}^o^r
^the^m^se^lv^e^s^{. T}^h^e^r^e^{is no lim}^it^In^{creases t}^h^{e cred}ⁱ^t^t^o^$⁸^,⁵⁰⁰^e^m^ploy^e^r^a^{doption a}^s^sⁱ^s^t^aⁿ^c^e^e^x^pe^ns^e^s^f^o^r^a^{ll othe}^r^sp^eci^alⁿ^eed^{s ch}ⁱ^l^d^ren
^{on the}^num^be^r^of^c^h^ildr^eⁿ^f^o^{r ch}ⁱ^l^d^ren^wⁱ^t^h^sp^eci^al^pr^og^r^a^m^f^r^om^{$75,000 to}^a^doptions^{. Em}^ploy^e^r^w^{ithout r}^e^g^a^r^d^to
^tha^t^m^a^y^be^a^dopte^d^{. T}^h^e^ne^e^d^s^a^{nd to $7,500 f}^o^r^{$150,000. T}^h^e^a^doption^a^{doption a}^s^sⁱ^s^t^aⁿ^c^e^qua^lif^ie^{d a}^doption
^c^r^e^d^{it is}^{$6,000 f}^o^r^dom^e^s^tic^a^doptions^of^non-^s^p^e^cⁱ^a^l^c^r^e^d^{it w}^{ould be}^a^llow^e^d^pr^og^r^a^m^s^m^a^y^pr^ov^ide^up^e^x^pe^ns^e^s⁽^unde^r^the
^sp^eci^alⁿ^eed^{s ch}ⁱ^l^d^ren^(an^d^aⁿ^eed^{s ch}ⁱ^l^d^ren^.^a^g^aⁱ^{nst the}^a^lte^rna^tiv^e^{to $10,000 to e}^m^ploy^e^e^s^Se^na^te^a^m^e^ndm^eⁿ^t)^w^a^s
^pe^r^m^aⁿ^eⁿ^{t pa}^r^t^of^the^I^R^C⁾^.^mⁱ^nim^u^m^ta^x^.^{Both the}^c^r^e^d^it^w^{ho a}^{dopt s}^p^e^cⁱ^a^l^ne^e^d^s^re^ta^ine^d^{but is not}
^T^h^e^c^r^e^d^{it a}^m^{ount is}^$5,000^f^o^r^non-^s^p^e^cⁱ^a^l^ne^e^d^s^c^h^ildr^e^{n a}^{nd m}^a^y^e^f^f^e^c^tiv^e^{until 2003.}
^f^o^r^a^{ll othe}^r^a^doptions⁽^a^nd^c^h^ildr^e^{n a}^{nd the}^e^m^ploy^e^r^r^e^im^bur^s^e^a^doption^T^h^e^s^e^a^m^ounts^a^r^e^not
^w^{ill ex}^pⁱ^{re af}^{ter Decem}^b^e^r^a^{doption pr}^og^r^a^m^w^{ould be}^e^x^pe^ns^e^s^f^o^r^a^{ll othe}^r^a^v^a^ila^ble^{until the}
^{31, 2001)}^{. T}^h^e^c^r^e^d^{it m}^a^y^be^m^a^de^a^pe^r^m^aⁿ^eⁿ^{t pa}^r^t^of^the^c^h^ildr^e^{n up to $10,000.}^a^{doption is}^fⁱ^na^liz^e^d^.
^carri^ed^f^o^rw^ard⁵^y^ears.^A^ta^x^c^ode^{. Q}^u^a^lif^ie^{d e}^x^pe^ns^e^s^A^m^ounts^r^ecei^ved^unde^r^aⁿ^F^u^rt^h^e^r,^t^h^{e agreem}^en^t
ⁱ^{ki/CRS-RL30973}^pha^s^e^-^{out of}^be^ne^f^its^oc^c^u^r^s^f^o^{r ta}^x^p^a^y^e^r^{s w}^{ith inc}^o^m^e^s^pa^{id or inc}^u^rre^{d in ta}^x^a^ble^y^e^a^r^s^be^gⁱ^nning^{on or}^be^f^o^r^e^e^m^ploy^e^r^pr^og^r^a^m^a^r^e^not^inc^l^uda^ble^{in the}^prov^ide^s^a^c^o^{st of}^liv^ing^a^d^justm^e^{nt f}^o^{r inf}^l^a^tion.
^g/w^ov^e^r^{$75,000. T}^h^e^c^r^e^d^{it w}^ill^Decem^b^e^{r 3}¹^,^{2001, w}^ould^em^p^l^o^y^{ee’s gro}^{ss i}ⁿ^co^m^e^.^T^h^{e ad}^o^p^tⁱ^oⁿ^t^a^{x cred}ⁱ^t
^s^.or^be^subje^c^t^{to the}^a^lte^rna^tiv^e^re^m^a^{in subje}^c^t^{to c}^u^rre^{nt la}^w^T^h^e^pha^s^e^-^{out f}^o^r^{both the}^a^{nd e}^m^ploy^e^r^a^doption
^le^ak^mⁱ^nim^u^m^ta^x^lim^ita^{tions a}^f^te^r^dolla^{r lim}^its.^a^{doption c}^r^e^d^{it or}^f^o^r^assi^st^an^{ce p}^r^o^g^ram
^{2001. Em}^ploy^e^r^s^m^a^y^of^f^e^r^a^m^ounts^f^r^om^e^m^ploy^e^r^pr^ov^is^ions^a^r^e^m^a^de^a
^://wiki^an^ad^o^p^tⁱ^oⁿ^assi^st^an^ce^pr^og^r^a^m^s^is^r^a^is^e^d^f^r^om^pe^r^m^aⁿ^eⁿ^{t pa}^r^t^of^the
^h^ttp^pr^og^r^a^m^{to e}^m^ploy^e^e^s^tha^t^pr^ov^ide^s^r^e^im^bur^s^e^m^e^nts^{in a}^{$75,000 to $150,000. A}ⁿ^a^d^justm^e^{nt f}^o^{r inf}^l^a^{tion is}^Iⁿ^te^rⁿ^a^l^R^e^v^e^nue^C^ode⁽ⁿ^o^t^e,^h^o^w^ever,^t^h^{e y}^ear
^lik^e^a^m^{ount a}^v^a^ila^ble^unde^r^pr^ov^ide^d^f^o^r^{both the}^c^r^e^d^it^{2010 s}^uns^e^t^pr^ov^is^ions
^the^ta^x^c^r^e^d^{it prog}^ra^m^.^T^h^e^a^{nd e}^m^ploy^e^r^a^s^de^s^c^rⁱ^be^{d in the}^body
^e^m^ploy^e^r^a^{doption a}^s^sⁱ^s^t^aⁿ^c^e^reim^b^u^r^sem^eⁿ^t^f^o^{r f}^u^tu^re^of^{this re}^port).
^pr^og^r^a^m^e^x^pir^e^s^a^f^te^r^y^ears.^T^h^{e cred}ⁱ^t^w^o^u^l^d^b^e
^Decem^b^e^{r 3}¹^,^2001.^a^llow^e^{d a}^g^aⁱ^{nst the}^Estim^a^t^e^d^re^v^e^nue^loss:
^a^lte^rna^tiv^e^mⁱ^nim^u^m^ta^x^.^.^{$432 m}^{illion in}
^FY^{2010; $3.135 billion}
^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:^ov^e^r^{11 y}^e^a^r^s^.

^{$432 m}^{illion in FY}^2010;
^{$3.1 billion ov}^e^r^{11 y}^e^a^r^s.

Current LawPresident’s ProposalHouse Senate Conference
^D^e^pe^nde^nt^C^a^r^e^C^r^e^dⁱ^t
^A^ta^x^c^r^e^d^{it is a}^llow^e^{d tha}^t^is^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^T^h^e^m^a^xⁱ^m^u^m^c^r^e^d^{it r}^a^te^is^Sa^m^e^a^s^Se^na^te
^g^e^ne^r^a^lly^e^qua^{l to 30%}^ofⁱⁿ^creased^t^o⁴⁰^%^an^d^t^h^e^am^en^d^m^en^t^excep^t
^qua^lif^ie^{d e}^m^ploy^m^e^nt-^r^e^la^te^d^inc^o^m^e^thr^e^s^{hold a}^bov^e^ma^xⁱ^mu^{m c}^r^e^dⁱ^tⁱ^s³⁵^%
^exp^eⁿ^s^{es f}^o^{r t}^h^{e care o}^f^a^w^h^ic^{h the}^c^r^e^d^{it is re}^duc^e^d^a^{nd inc}^o^m^e^thr^e^s^hold
^de^pe^nde^{nt. T}^h^e^r^a^te^is^is^inc^r^e^a^s^e^d^{to $20,000.}^ab^o^v^{e w}^hⁱ^c^h^t^h^{ere i}^s
^r^e^duc^e^d⁽^{but not be}^low^20%⁾^T^h^e^lim^{it on qua}^lif^ie^d^r^e^duc^{tion is}^$15,000.
^f^o^{r i}ⁿ^crem^en^t^s^o^fⁱⁿ^co^m^e^exp^eⁿ^s^{es i}^sⁱⁿ^creased^t^o
^a^bov^e^{$10,000. T}^h^e^a^m^ount^{$3,000 f}^o^r^{1 de}^pe^nde^{nt a}ⁿ^d
^of^qua^lif^ie^{d e}^x^pe^ns^e^s^m^a^y^not^{to $6,000 f}^o^r^{2 or}^m^o^r^e
^exceed^$²^,^{400 f}^o^r¹^de^pe^nde^nts^.^T^h^e^c^h^aⁿ^g^e^s
^de^pe^nde^{nt a}^{nd $4,800 f}^o^r²^w^{ould be}^e^f^f^e^c^tiv^e^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:
^or^m^o^r^e^de^pe^nde^nts^.^be^gⁱ^nning^{in 2003.}^{$0.9 billion in FY}^2010;
^{$7.6 billion ov}^e^r¹⁰
^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:^y^ears.
^{$0.5 billion in FY}^2010;
^{$5.4 billion ov}^e^r^{10 y}^e^a^r^s.
ⁱ^{ki/CRS-RL30973}
^g/w
^s^.or^Em^p^l^oy^{er Ch}ⁱ^l^d^{Care Tax}^Credⁱ^t
^le^ak
^A^llow^s^a^de^duc^{tion f}^o^r^N^o^pr^ov^is^ion.^N^o^pr^ov^is^ion.^A^llow^s^a^ta^x^c^r^e^d^{it e}^qua^{l to}^Sa^m^e^a^s^Se^na^te
^://wiki^or^dina^r^y^a^{nd ne}^c^e^s^s^a^r^y^bus^ine^s^s^e^x^pe^ns^e^s^of^a^s^sⁱ^s^ting^25%^of^e^x^pe^nditur^e^s^f^o^r^c^h^{ild c}^a^r^e^f^a^c^ilitie^{s a}ⁿ^d^pr^ov^is^ion.
^h^ttp^em^p^l^o^y^{ees o}^b^t^aiⁿ^chⁱ^l^d^care.^ope^r^a^ting^or^c^ontr^a^c^t^c^o^s^t^s^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:
^Ex^pe^nditure^{s f}^o^{r c}^h^{ild c}^a^r^e^o^f^chⁱ^l^d^{care p}^r^o^g^ram^s^{$0.2 billion in FY}^2010;
^f^a^c^ilitie^{s a}^r^e^c^a^p^ita^liz^e^d^aⁿ^d⁽^10%^f^o^r^r^e^s^our^c^e^aⁿ^d^{$1.4 billion ov}^e^r¹⁰
^reco^vered^o^v^{er t}ⁱ^m^{e t}^h^ro^u^g^h^ref^e^{rral ex}^p^eⁿ^d^itu^res),^y^ears.

^de^duc^{tion f}^o^r^de^pr^e^cⁱ^a^tion.^lim^ite^{d to $150,000 a}^y^e^a^r^.
^E^s^tⁱ^m^at^ed^reven^u^e^co^st^:
^{$0.2 billion in FY}^2010;
^{$1.5 billion ov}^e^r^{10 y}^e^a^r^s.