Contents

• The Concept of "Tax Extenders"
• Evaluating Expiring Tax Provisions
• Reasons for Temporary Tax Provisions
• Extenders as Tax Benefits
• Tax Provisions Expiringthat Expired in 2016
• Individual
• Business
• Energy
• Recent "Tax Extender" Legislation
• The Cost of Extending Expired and Expiring Tax Provisions
• Cost of Extensions Enacted in P.L. 114-113
• Cost of Extending Provisions Expiringthat Expired in 2016

Summary

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." Most recently, in December 2015, Congress addressed tax extenders in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 (P.L. 114-113). This legislation extended all of the 52 provisions that had expired at the end of 2014. Unlike past tax extenders legislation, however, a number of provisions that had expired at the end of 2014 were made permanent. Several others were extended through 2019. Many provisions were temporarily extended for two years, through 2016.

Thirty-four temporary tax provisions are scheduled to expireexpired at the end of 2016. Most of these provisions were extended for two years as part of the PATH Act. Options related to extenders in the 114^115th Congress include (1) extending all or some of the provisions set to expire in 2016 before the expiration date; or (2) allow these provisions to expire at the end of 2016 as scheduledthat expired at the end of 2016 or (2) allowing expired provisions to remain expired. If temporary tax provisions are allowed to expirethat expired at the end of 2016 are extended, retroactive extensions may be considered in the first session of the 115^th Congressso that tax incentives and provisions are available in 2017. In the past, retroactive extensions have been common for expired temporary tax provisions.

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 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 were permanent.

The provisions set to expirethat expired at the end of 2016 are diverse in purpose. There are education- and housing-related provisions for individuals. For businesses, there are several provisions related to the territories, Indian tribes, and economic development, in addition to provisions for specific industries. There are also a number of energy-related tax provisions that are scheduled to expireexpired at the end of 2016.

As lawmakers consider whether to extend expiringexpired tax provisions beyond 2016, cost is one factor. Since many provisions were made permanent in the PATH Act, a temporary extenders package for provisions expiringthat expired in 2016 would cost less than past extender packages. There are fewer provisions to extend, and many provisions with the largest revenue cost were made permanent in the PATH Act.

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Thirty-four temporary tax provisions are scheduled to expireexpired at the end of 2016. Collectively, temporary tax provisions that are regularly extended as a group by Congress, rather than being allowed to expire as scheduled, are often referred to as "tax extenders."

There are several options for Congress to consider regarding temporary provisions. First, expiring provisions could be extended before they expire at the end of 2016. The extensions Provisions that expired at the end of 2016 could be extended. The extension could be retroactive. The extensions also could be short-term, long-term, or permanent. Second, Congress could choose to wait to take action on extenders until 2017. In 2017, a retroactive tax extender package could extend or make permanent expiring provisions. A thirdAnother option would be to allow expiringexpired provisions to expire as scheduledremain expired.

Congress may also choose to evaluate the extension of certain expiring provisions, in lieu of considering an extenders package that addresses most or all of the provisions scheduled to expire. Certain expiring energy-related provisions have received particular attention, as long-term extensions of certain energy tax benefits were provided for wind and solar, but not other technologies, in legislation enacted at the end of 2015.

In recent years, Congress has chosen to extend most, if not all, recently expired or expiring provisions as part of "tax extender" legislation. The most recent tax extender package, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 (P.L. 114-113), broke the typical practice of temporarily extending expiring provisions by making many expiring provisions permanent. Some contend that by making many temporary provisions permanent, the need to address extenders every year or two was negated.¹ Others have suggested that tax extenders might be considered in the lame duck session of the 114^th Congressaddressed as part of tax reform.²

This report begins by reviewing the concept of tax extenders, and discusses criteria for evaluating expiring tax provisions. A list of tax provisions scheduled to expirethat expired at the end of 2016 is then provided. Information on past extensions of these expiring provisions is also provided. The report also briefly discusses recent tax extender legislation. As part of that discussion, information is included on provisions that were either made permanent or extended through 2019 in the most recent tax extenders legislation. The final sections of the report discuss the cost associated with extending expiringexpired provisions.

The Concept of "Tax Extenders"

The tax code presently contains dozens of temporary tax provisions. In the past, legislation to extend some set of these expiring provisions has been referred to by some as the "tax extender" package. While there is no formal definition of a "tax extender," the term has regularly been used to refer to the package of expiring tax provisions temporarily extended by Congress. Oftentimes, these expiring provisions are temporarily extended for a short period of time (e.g., one or two years). Over time, as new temporary provisions were routinely extended and hence added to this package, the number of provisions that might be considered "tax extenders" grew.³ This trend was broken with the Consolidated Appropriations Act, 2016 (P.L. 114-113), which made permanent a number of provisions that had been part of previous tax extender packages. As a result, there are fewer "tax extender" provisions set to expirethat expired in 2016 than in recentprevious years.

Evaluating Expiring Tax Provisions

There are various reasons Congress may choose to enact temporary (as opposed to permanent) tax provisions. Enacting provisions on a temporary basis, in theory, would provide Congress with an opportunity to evaluate the effectiveness of specific provisions before providing further extension. Temporary tax provisions may also be used to provide relief during times of economic weakness or following a natural disaster. Congress may also choose to enact temporary provisions for budgetary reasons. Examining the reason why a certain provision is temporary rather than permanent may be part of evaluating whether a provision should be extended.

Reasons for Temporary Tax Provisions

There are several reasons why Congress may choose to enact tax provisions on a temporary basis. Enacting provisions on a temporary basis may provide an opportunity to evaluate effectiveness before expiration or extension. However, this rationale for enacting temporary tax provisions is undermined if expiring provisions are regularly extended without systematic review, as is the case in practice. In 2012 testimony before the Senate Committee on Finance, Dr. Rosanne Altshuler noted that

an expiration date can be seen as a mechanism to force policymakers to consider the costs and benefits of the special tax treatment and possible changes to increase the effectiveness of the policy. This reasoning is compelling in theory, but has been an absolute failure in practice as no real systematic review ever occurs. Instead of subjecting each provision to careful analysis of whether its benefits outweigh its costs, the extenders are traditionally considered and passed in their entirety as a package of unrelated temporary tax benefits.⁴

While most expiring tax provisions have been extended in recent years, there have been some exceptions. For example, tax incentives for alcohol fuels (e.g., ethanol), which can be traced back to policies first enacted in 1978, were not extended beyond 2011. The Government Accountability Office (GAO) had previously found that with the renewable fuel standard (RFS) mandate, tax credits for ethanol were duplicative and did not increase consumption.⁵ Congress may choose not to extend certain provisions if an evaluation determines that the benefits provided by the provision do not exceed the cost (in terms of foregone tax revenue).

In recent years, some tax extender packages have included all (or nearly all) expiring provisions, while other packages have left some out, effectively allowing provisions to expire as scheduled. The tax extender package in the American Taxpayer Relief Act (ATRA; P.L. 112-240) did not include several provisions that had been extended multiple times in the past.⁶ Most, but not all, expiring provisions were extended in the one-year, retroactive, tax extender bill enacted at the end of 2014, the Tax Increase Prevention Act (P.L. 113-295).⁷ The most recent tax extender package, the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 (P.L. 114-113), extended all expiring provisions. Unlike other recent extenders packages, the PATH Act included a permanent extension for many provisions. Other provisions were extended for five years, while most provisions were extended for two years, in more typical "tax extenders" practice.

Tax policy may also be used to address temporary circumstances in the form of economic stimulus or disaster relief. Economic stimulus measures might include bonus depreciation or generous expensing allowances.⁸ Disaster relief policies might include enhanced casualty loss deductions or additional net operating loss carrybacks.⁹ Other recent examples of temporary provisions that have been enacted to address special economic circumstances include the exclusion of forgiven mortgage debt from taxable income during the recent housing crisis of the late 2000s,¹⁰ the payroll tax cut,¹¹ and the grants in lieu of tax credits to compensate for weak tax-equity markets during the economic downturn (the Section 1603 grants).¹² It has been argued that provisions that were enacted to address a temporary situation should be allowed to expire once the situation is resolved.¹³

Congress may also choose to enact tax policies on a temporary basis for budgetary reasons. If policymakers decide that legislation that reduces revenues must be paid for, it is easier to find resources to offset short-term extensions rather than long-term or permanent extensions.¹⁴ Additionally, the Congressional Budget Office (CBO) assumes, under the current law baseline, that temporary tax cuts expire as scheduled. Thus, the current law baseline does not assume that temporary tax provisions are regularly extended. Hence, if temporary expiring tax provisions are routinely extended in practice, the CBO current law baseline would tend to overstate projected revenues, making the long-term revenue outlook stronger. In other words, by making tax provisions temporary rather than permanent, these provisions have a smaller effect on the long-term fiscal outlook.¹⁵

Extenders as Tax Benefits¹⁶

Temporary tax benefits are a form of federal subsidy that treats eligible activities favorably compared to others, and channels economic resources into qualified uses. Extenders influence how economic actors behave and how the economy's resources are employed. Like all tax benefits, extenders can be evaluated by looking at the impact on economic efficiency, equity, and simplicity.¹⁷ Temporary tax provisions may be efficient and effective in accomplishing their intended purpose, though not equitable. Alternatively, an extender may be equitable but not efficient. Policymakers may have to choose the economic objectives that matter most.

Economic Efficiency

Extenders often provide subsidies to encourage more of an activity than would otherwise be undertaken. According to economic theory, in most cases an economy best satisfies the wants and needs of its participants if markets allocate resources free of distortions from taxes and other factors. Market failures, however, may occur in some instances, and economic efficiency may actually be improved by tax distortions.¹⁸ Thus, the ability of extenders to improve economic welfare depends in part on whether or not the extender is remedying a market failure. According to theory, a tax extender reduces economic efficiency if it is not addressing a specific market failure.

An extender is also considered relatively effective if it stimulates the desired activity better than a direct subsidy. Direct spending programs, however, can often be more successful at targeting resources than indirect subsidies made through the tax system such as tax extenders.¹⁹

Equity

A tax is considered to be fair when it contributes to a socially desirable distribution of the tax burden. Tax benefits such as the extenders can result in individuals or businesses with similar incomes and expenses paying differing amounts of tax, depending on whether they engage in tax-subsidized activities. This differential treatment is a deviation from the standard of horizontal equity, which requires that people in equal positions should be treated equally.

Another component of fairness in taxation is vertical equity, which requires that tax burdens be distributed fairly among people with different abilities to pay. Extenders may be considered inequitable to the extent that they benefit those who have a greater ability to pay taxes. Those individuals with relatively less income and thus a reduced ability to pay taxes may not have the same opportunity to benefit from extenders as those with higher income. The disproportionate benefit of tax expenditures to individuals with higher incomes reduces the progressivity of the tax system, which is often viewed as a reduction in equity.

An example of the effect a tax benefit can have on vertical equity is illustrated by two teachers who have both incurred $250 in classroom-related expenses and are eligible to claim the above-the-line deduction for expenses. Yet the tax benefit to the two differs if they are in different tax brackets. A teacher with lower income, who may be in the 15% income tax bracket, receives a deduction with a value of $37.50 ($250 multiplied by 15%), while another teacher, in the 33% bracket, receives a deduction value of $82.50 ($250 multiplied by 33can be illustrated by considering two students claiming the above-the-line deduction for higher education expenses. Assume both students are single and have $1,000 in qualifying expenses. If one student has an income of $30,000, and the other student has an income of $60,000, the students would be in different tax brackets. The student with the lower income may fall in the 15% tax bracket, meaning the maximum value of the deduction would be $150 ($1,000 multiplied by 15%). The student with the higher income may fall in the 25% tax bracket, meaning the maximum value of the deduction would be $250 ($1,000 multiplied by 25%). Thus, the higher-income taxpayer, with presumably greater ability to pay taxes, receives a greater benefit than the lower-income taxpayer.

Simplicity

Extenders contribute to the complexity of the tax code and raise the cost of administering the tax system. Those costs, which can be difficult to isolate and measure, are rarely included in the cost-benefit analysis of temporary tax provisions. In addition to making the tax code more difficult for the government to administer, complexity also increases costs imposed on individual taxpayers. With complex incentives, individuals devote more time to tax preparation and are more likely to hire paid preparers.

Tax Provisions Expiringthat Expired in 2016

There are 34Thirty-four temporary tax provisions scheduled to expireexpired at the end of 2016.²⁰ These provisions can be categorized as primarily affecting individuals, or businesses, or being energy-related. These categorizations follow those used in past "tax extender" legislation.

Individual²¹

Four individual tax provisions are scheduled to expireexpired at the end of 2016 (see Table 1). Three of these provisions have been included in recent tax extenders packages. The above-the-line deduction for certain higher education expenses, including qualified tuition and related expenses, was first added as a temporary provision in Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA, P.L. 107-16), but has regularly been extended since.²² The other two individual extender provisions are housing-related. The provision allowing homeowners to deduct mortgage insurance premiums was first enacted in 2006 (effective for 2007).²³ The provision allowing qualified canceled mortgage debt income associated with a primary residence to be excluded from income was first enacted in 2007.²⁴ Both provisions were temporary when first enacted, but have been extended as part of the tax extenders in recent years.

The other individual provision set to expirethat expired at the end of 2016 is one that allows taxpayers over age 65 to deduct medical expenses in excess of 7.5% of adjusted gross income (AGI). For most taxpayers, an itemized deduction for unreimbursed medical expenses is allowed to the extent that such expenses exceed 10% of AGI. The threshold for the unreimbursed medical expense deduction was increased from 7.5% to 10%, effective in 2013 for most taxpayers, as part of the Patient Protection and Affordable Care Act (P.L. 111-148). However, an exception from the increase for tax years 2013 through 2016 provided that, if either the taxpayer or their spouse was age 65 or older, the 7.5% threshold would apply during this four-year period.²⁵

Three individual provisions that were previously included in the tax extenders were made permanent as part of the PATH Act. More information on provisions that were permanently extended can be found below (see Table 2).

Business²⁶

Fourteen business tax provisions are scheduled to expireexpired at the end of 2016 (see Table 1). All but one of these provisions have been included in recent tax extenders legislation. The largest of these provisions, as ranked by cost of the most recent two-year extension, are the empowerment zone tax incentives²⁷ and the credit for railroad track maintenance.²⁸ As discussed further below, however, the cost of extending expiring business-related provisions is less than in recent tax extenders packages. Many business-related extender provisions, particularly higher-cost provisions, were made permanent as part of the PATH Act.

Most of the business provisions scheduled to expire at the end of 2016 have been part of the tax code for close to a decade or longer. Several were first enacted in the 1990s, including the temporary increase in the limit on transfer or "cover-over" of rum excise tax revenues to Puerto Rico and the Virgin Islands; the Qualified Zone Academy Bond allocation of bond limitation; the Indian employment tax credit; accelerated depreciation for business property on Indian reservations; and the empowerment zone tax incentives. Several others were first enacted in the mid-2000s, including the credit for railroad track maintenance; seven-year recovery for motorsport racing facilities; the domestic production activities deduction allowable for activities in Puerto Rico; the mine rescue team training credit; expensing for mine-safety equipment; and the special expensing rules for film and television production.

The one business provision expiring at the end of 2016 that has not been extended in past tax extender legislation was enacted at the end of 2015, as part of the Consolidated Appropriations Act, 2016 (P.L. 114-113). Specifically, the provision provides that for taxable years beginning in 2016, corporate qualified timber gains are subject to an alternative tax rate of 23.8%.²⁹

Twelve business provisions that were previously part of the tax extenders were made permanent as part of the PATH Act. Five others were extended through 2019. The provisions that were made permanent tended to be those that, in the past, cost more to extend than provisions that remain part of the tax extenders (see Table 2).

Energy³⁰

Sixteen energy tax provisions are scheduled to expireexpired at the end of 2016 (see Table 1). Thirteen of these provisions were extended in the PATH Act. Of the energy tax provisions that were extended in the PATH Act, the largest, as ranked by cost of the most recent two-year extension, are the incentives for biodiesel and renewable diesel, the production tax credit (PTC) for non-windnonwind technologies,³¹ and the credit for nonbusiness energy property (also known as the credit for energy efficiency improvements to existing homes).³² Most of the energy provisions scheduled to expirethat expired at the end of 2016 have been included in past tax extender legislation.

Division P of the Consolidated Appropriations Act, 2016 (P.L. 114-113) also included extensions of certain energy tax provisions. Specifically, the Section 48 business credit rates for certain solar property and Section 25D residential energy investment credits for certain solar property were extended through 2021 (with reduced rates in 2020 and 2021). The Section 48 business and Section 25D residential energy investment credits expire at the end of 2016 for most other types of qualifying property.³³ The production tax credit (PTC) for wind property was extended through 2019 (with reduced rates in 2017, 2018, and 2019). As noted above, the PTC for non-windnonwind technologies was extended for two years, through 2016, in the PATH Act.

For most non-solarnonsolar property, the business and residential investment tax credits are scheduled to expire at the end of 2016.³⁴ Many of the components of these credits that are set to expire at the end of 2016 were first added to the code, as temporary provisions, in the Energy Policy Act of 2005 (EPACT05; P.L. 109-58) and subsequently included in tax extenders legislation.³⁵ Under the Emergency Economic Stabilization Act of 2008 (P.L. 110-343), certain temporary energy provisions were given long-term extensions, through 2016.

The PATH Act did not include permanent extensions of any expiring energy tax provisions. This is in contrast to individual, business, and charitable extenders, where a number of temporary provisions were made permanent.

Recent "Tax Extender" Legislation

The most recent "tax extenders" legislation was enacted as the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 (P.L. 114-113). The PATH Act either extended or made permanent all of the 52 temporary tax provisions that had expired at the end of 2014.³⁶ As noted in Table 1, most of the provisions set to expire in 2016 were extended as part of the PATH Act.

The PATH Act, unlike other recent tax extender legislation, provided long-term extensions (through 2019) for a number of provisions, while making many other temporary tax provisions permanent. These changes are summarized in Table 2.

Of the six individual tax provisions that expired at the end of 2014, three were made permanent in the PATH Act. The provisions that were permanently extended were (1) the above-the-line deduction for teacher classroom expenses; (2) the deduction for state and local sales taxes;³⁷ and (3) a provision providing parity for exclusion of employer-provided mass transit and parking benefits. A permanent extension of the deduction for teacher classroom expenses had been approved by the House Committee on Ways and Means earlier in the 114^th Congress. The 114^th Congress had also passed legislation to make the deduction for state and local sales taxes permanent, before this provision was included in the PATH Act.³⁸

Of the 30 business tax provisions that expired at the end of 2014, 12 were made permanent in the PATH Act, while another five5 were extended through the end of 2019. Many of these provisions had been extended multiple times. The research tax credit, for example, had been extended a total of 16 times since being enacted in 1981, before being modified and made permanent in the PATH Act.³⁹ Before being included in the PATH Act, stand-alone legislation was passed in the House in both the 113^th and 114^th Congresses that would have modified and made the research credit permanent. The exceptionsexception under Subpart F for active financing income, which was first enacted in 1997, was another long-standing temporary provision made permanent in the PATH Act. The House Committee on Ways and Means had approved stand-alone legislation to make this provision permanent in both the 113^th and 114^th Congresses.

Provisions that were made permanent in the PATH Act, particularly the business provisions, included those with the largest revenue cost. The modification and permanent extension of the research credit had an estimated revenue cost of $113.2 billion over the 10-year budget window, while the costcosts associated with making permanent the exceptions under Subpart F for active financing income and the increase in expensing limits under Section 179 waswere $78.0 billion and $77.1 billion, respectively.⁴⁰ By contrast, it would cost no more than $3 billion to make permanent any single business provision scheduled to expire at the end of 2016.

The PATH Act made permanent all four of the charitable provisions that had expired at the end of 2014 and were previously part of the tax extenders. The House had passed legislation in both the 113^th and 114^th Congresses that would have made these provisions permanent, but permanent extension was not enacted until the PATH Act.

As discussed above, the PATH Act provided a temporary extension for all energy-related provisions that expired at the end of 2016. Division P of the Consolidated Appropriations Act, 2016 (P.L. 114-113) included long-term extensions of certain tax benefits for wind and solar. However, no long -term or permanent extensions of energy-related provisions were included in the PATH Act. Some of the provisions with longer-term extensions in the P.L. 114-113 included phaseouts. Specifically, the extension of 50% first-year bonus depreciation was subject to a phase down. The 50% bonus depreciation was extended through 2017, but the amount of qualifying investment that could be expensed is set to be reduced to 40% in 2018 and 30% in 2019.⁴¹ There were also phase downs associated with the longer-term extensions of the tax credits for wind and solar. The PTC for wind was extended through 2019, although the credit amount was reduced by 20% for facilities beginning construction in 2017, 40% for facilities beginning construction in 2018, and 60% for facilities beginning construction in 2019.⁴² The 30% ITC for business solar was extended through 2019 and the deadline changed from a placed-in-service deadline to a construction start date. The business solar ITC was set to be 26% for facilities beginning construction in 2020, and 22% for facilities beginning construction in 2021, so long as these facilities are placed in service before the end of 2023.⁴³ The business solar ITC is scheduled to return to 10% in 2022. The tax credit for residential solar was extended through 2021, with a phaseout starting in 2020.term or permanent extensions of energy-related provisions were included in the PATH Act.

The Tax Increase Prevention Act of 2014 (P.L. 113-295), passed late in the 113^th Congress, made tax provisions that had expired at the end of 2013 available to taxpayers in the 2014 tax year. The act extended most (but not all) expiring tax provisions, and most of the provisions extended in P.L. 114-113 had been included in past tax extenders legislation. The cost of the tax extenders package enacted as P.L. 113-295 was estimated to be $41.6 billion over the 10-year budget window. Earlier in the 113^th Congress, the Senate Finance Committee had reported a two-year extenders package. The House had also passed legislation that would have made permanent certain expiring provisions. Ultimately, the one-year retroactive extenders legislation is what was passed by the 113^th Congress.⁴¹

The American Taxpayer Relief Act (ATRA; P.L. 112-240) extended dozens of temporary provisions that had either expired at the end of 2011, or were set to expire at the end of 2012. The provisions that had expired at the end of 2011 were extended retroactively. The cost of the tax extenders package enacted as part of ARRA was estimated to be $73.6 billion over the 10-year budget window. Several provisions that were considered "traditional extenders"—that is, they had been extended multiple times in the past—were not extended under ATRA.⁴²

44

The American Taxpayer Relief Act (ATRA; P.L. 112-240) extended dozens of temporary provisions that had either expired at the end of 2011, or were set to expire at the end of 2012. The provisions that had expired at the end of 2011 were extended retroactively. The cost of the tax extenders package enacted as part of ARRA was estimated to be $73.6 billion over the 10-year budget window. Several provisions that were considered "traditional extenders"—that is, they had been extended multiple times in the past—were not extended under ATRA.⁴⁵ The Cost of Extending Expired Cost of Extending Expired and Expiring Tax Provisions

As lawmakers consider whether to extend expiringexpired tax provisions beyond 2016, cost is one factor. Since many provisions were made permanent in the PATH Act, a temporary extenders package for provisions expiringthat expired in 2016 would cost less than past extender packages. There are fewer provisions to extend, and many provisions with the largest revenue cost were made permanent in the PATH Act.

Cost of Extensions Enacted in P.L. 114-113

In total, the extensions of expiring provisions or tax extenders in P.L. 114-113, is are estimated to reduce federal revenues by $628.8 billion between 2016 and 2025. Of that cost, nearly one-third ($202.1 billion) is attributable to extensions of provisions that were scheduled to expire in 2017 (the reduced earnings threshold for the refundable portion of the child tax credit; the American Opportunity Tax Credit; and modifications to the earned income tax credit) and the two-year moratorium on the medical device excise tax. Thus, the cost of extending the "tax extender" provisions was an estimated $426.8 billion between 2016 and 2025.

Of the total cost of the tax extenders in P.L. 114-113, $559.5 billion, or 89% of the total cost, iswas associated with permanent extensions. The estimated cost of permanent extension of "tax extender" provisions (provisions that had expired in 2014 and were made permanent in P.L. 114-113) iswas $361.4 billion.

Of the total cost of tax extenders in P.L. 114-113, a small portion, $17.7 billion (or less than 3%) was for the two-year extension of provisions that had expired in 2014 through 2016.

Cost of Extending Provisions Expiringthat Expired in 2016

As discussed above, most provisions set to expirethat expired at the end of 2016 were previously extended for two years in the PATH Act. Overall, the cost of temporary extensions of extenders provisions in the PATH Act was estimated to be $17.7 billion over the 10-year budget window (see Table 3). This estimate does not include the cost of temporarily extending provisions set to expire at the end of 2016 that were not extended in the PATH Act.

Another option, instead of a short-term extension, is to provide long-term extensions of, or make permanent, tax provisions that are currently temporary. Federal revenues would be reduced by an estimated $126.4158.0 billion over the 10-year budget window, if all temporary tax provisions scheduled to expirethat expired at the end of 2016 were made permanent (see Table 3). This, however, would remove the mechanism that short-term extensions introduce, mainly forcing policymakers to periodically reconsider extension of temporary provisions.

Appendix. List of Previous "Tax Extender" Legislation

There is no formal definition of "tax extenders" legislation. Over time, "tax extenders" legislation has come to be considered legislation that temporarily extends a group of expired or expiring provisions. Using this characterization, below is a list of what could be considered "tax extenders" legislation. Using this list, tax extenders have been addressed 17 times. The package of provisions that are included in the tax extenders has changed over time, as Congress has added new temporary provisions to the code, and as certain provisions are either permanently extended or given temporary extension in other tax legislation.

• Consolidated Appropriations Act, 2016 (P.L. 114-113)
• Tax Increase Prevention Act of 2014 (P.L. 113-295)
• American Taxpayer Relief Act of 2012 (P.L. 112-240)
• Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312)
• Emergency Economic Stabilization Act of 2008 (P.L. 110-343)
• Tax Relief and Health Care Act of 2006 (P.L. 109-432)
• Working Families Tax Relief Act of 2004 (P.L. 108-311)
• Job Creation and Worker Assistance Act of 2002 (P.L. 107-147)
• Ticket to Work and Work Incentives Improvement Act of 1999 (P.L. 106-170)
• Omnibus Consolidated and Emergency Supplemental Appropriations Act, 1999 (P.L. 105-277)
• Taxpayer Relief Act of 1997 (P.L. 105-34)
• Small Business and Job Protection Act of 1996 (P.L. 104-188)
• Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66)
• Tax Extension Act of 1991 (P.L. 102-227)
• Omnibus Budget Reconciliation Act of 1990 (P.L. 101-508)
• Omnibus Budget Reconciliation Act of 1989 (P.L. 101-239)
• Technical and Miscellaneous Revenue Act of 1988 (P.L. 100-647)

Author Contact Information

Footnotes

44.

1.	Billy House, "Republicans Split Over Renewing Alternative-Energy Tax Breaks," Bloomberg.com, October 4, 2016, http://www.bloomberg.com/politics/articles/2016-10-04/republicans-split-over-renewing-alternative-energy-tax-breaks.
2.	Nancy Ognanovich, "'Godzilla' Omnibus Seen Lumbering Forward After ElectionRebecca Kern, "Battle Lines Drawn Over Extending Energy Tax Credits," Bloomberg BNA Daily Tax Report, October 20November 16, 2016.
3.	For a history of the tax extenders, see U.S. Congress, Senate Committee on Rules and Administration, The Tax Extenders: How Congressional Rules and Outside Interests Shape Policy, committee print, prepared by Congressional Research Service, 113th Cong., 2nd sess., December 2014, S. Prt. 113-30, pp. 441-456, available at http://www.gpo.gov/fdsys/pkg/CPRT-113SPRT89394/pdf/CPRT-113SPRT89394.pdf#page=453.
4.	U.S. Congress, Senate Committee on Finance, Extenders and Tax Reform: Seeking Long-Term Solutions, Testimony of Dr. Rosanne Altshuler, 112th Cong., January 31, 2012, available at http://www.finance.senate.gov/hearings/hearing/?id=b1604e2e-5056-a032-52ff-dd661f9280f6.
5.	See U.S. Government Accountability Office, Biofuels: Potential Effects and Challenges of Required Increases in Production and Use, GAO-09-44, August 2009, http://www.gao.gov/new.items/d09446.pdf and U.S. Government Accountability Office, Opportunities to Reduce Potential Duplication in Government Programs, Save Tax Dollars, and Enhance Revenue, GAO-11-318SP, March 2011, http://www.gao.gov/assets/320/315920.pdf.
6.	In addition to not including an extension of tax incentives for ethanol, ATRA did not include two charitable provisions, the enhanced deduction for donations of computer equipment and the enhanced deduction for book inventory to schools, which had first been enacted in 1997 and 2005, respectively. Other energy-related provisions that had been part of past tax extender packages but were not extended in ATRA included (1) the suspension of 100%-of-net-income limitation on percentage depletion for oil and gas from marginal wells, first enacted in 1997; (2) the production tax credit (PTC) for refined coal, first enacted in 2004; and (3) the provisions that allowed for expensing of "brownfield" environmental remediation costs, first enacted in 1997. The estate tax look-through rule for regulated investment company (RIC) stock, first enacted in 2004, was also not extended.
7.	The credit for electric-drive motorcycles and three-wheeled vehicles were not included in P.L. 113-295. The provision was modified and extended in P.L. 114-113. Two other energy-related provisions were not extended past their January 1, 2014, termination date: the placed-in-service date for partial expensing of certain refinery property and the credit for energy efficient appliances.
8.	For a discussion of bonus depreciation in the context of tax extenders, see CRS Report R43432, Bonus Depreciation: Economic and Budgetary Issues, by [author name scrubbed]. For background on these policies, see CRS Report RL31852, The Section 179 and Bonus Depreciation Expensing Allowances: Current Law and Issues for the 114th Congress, by [author name scrubbed].
9.	For more information, see CRS Report R42839, Tax Provisions to Assist with Disaster Recovery, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].
10.	For more information, see CRS Report RL34212, Analysis of the Tax Exclusion for Canceled Mortgage Debt Income, by [author name scrubbed] and [author name scrubbed].
11.	For more information, see CRS Report R42103, Extending the Temporary Payroll Tax Reduction: A Brief Description and Economic Analysis, by [author name scrubbed] and [author name scrubbed].
12.	For more information, see CRS Report R41635, ARRA Section 1603 Grants in Lieu of Tax Credits for Renewable Energy: Overview, Analysis, and Policy Options, by [author name scrubbed] and [author name scrubbed].
13.	This point was made in U.S. Congress, Senate Committee on Finance, Extenders and Tax Reform: Seeking Long-Term Solutions, Testimony of Dr. Rosanne Altshuler, 112th Cong., January 31, 2012, available at http://www.finance.senate.gov/hearings/hearing/?id=b1604e2e-5056-a032-52ff-dd661f9280f6 and U.S. Congress, House Committee on Ways and Means, Subcommittee on Select Revenue Measures, Framework for Evaluating Certain Expiring Tax Provisions, Testimony of Donald B. Marron, 112th Cong., June 8, 2012, available at httphttps://waysandmeans.house.gov/uploadedfiles/marronUploadedFiles/Marron.pdf.
14.	U.S. Congress, House Committee on Ways and Means, Subcommittee on Select Revenue Measures, Framework for Evaluating Certain Expiring Tax Provisions, Testimony of Donald B. Marron, 112th Cong., June 8, 2012, available at httphttps://waysandmeans.house.gov/uploadedfiles/marronUploadedFiles/Marron.pdf.
15.	U.S. Congress, Senate Committee on Finance, Extenders and Tax Reform: Seeking Long-Term Solutions, Testimony of Dr. Rosanne Altshuler, 112th Cong., January 31, 2012, available at http://www.finance.senate.gov/hearings/hearing/?id=b1604e2e-5056-a032-52ff-dd661f9280f6.
16.	This section is adapted from out-of-print CRS Report RL32367, Certain Temporary Tax Provisions that Expired in December 2009 ("Extenders"), by [author name scrubbed] (available to congressional clients upon request).
17.	Using these "criteria for good tax policy" to evaluate tax extenders was discussed in U.S. Congress, House Committee on Ways and Means, Subcommittee on Select Revenue Measures, Framework for Evaluating Certain Expiring Tax Provisions, Testimony of Dr. Jim White, 112th Cong., June 8, 2012, available at httphttps://waysandmeans.house.gov/uploadedfiles/whiteUploadedFiles/White.pdf.
18.	Market failure occurs when the marginal benefit of an action does not equal the marginal cost. For example, polluting forms of energy production cause social costs that are not taken into account by the producer; hence, there is an argument for taxing this type of energy or, alternatively, subsidizing less-polluting firms.
19.	Stanley S. Surrey, "Tax Incentives as a Device for Implementing Government Policy: A Comparison with Direct Government Expenditures," Harvard Law Review, vol. 83, no. 4 (February 1970), pp. 705-738.
20.	The Joint Committee on Taxation's list of provisions expiring at the end of 2016 includes 36 items. However, their list treats expiring components of the energy credit as three separate items. The Congressional Budget Office's list of provisions scheduled to expire at the end of 2016 includes 33 items. Their list combines the expiring energy credit components into one item (as is done in this report), but excludes the temporary increase in the limit on the amount of rum excise tax transferred or "covered over" to Puerto Rico and the United States Virgin Islands.
21.	More information on individual tax extender provisions can be found in CRS Report R43688, Selected Recently Expired Individual Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed] and [author name scrubbed] and CRS Report R43449, Recently Expired Housing Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed].
22.	For more information, see CRS Report R41967, Higher Education Tax Benefits: Brief Overview and Budgetary Effects, by [author name scrubbed].
23.	For more information, see CRS Report R43449, Recently Expired Housing Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed].
24.	Ibid.
25.	Overall, this provision was estimated to increase federal revenue by $15.2 billion over the 10-year budget window. The estimated revenue increase for 2017 was $2.5 billion, and the estimated revenue increase for 2018 was $3.7 billion. See U.S. Congress, Joint Committee on Taxation, General Explanation of Tax Legislation Enacted in the 111th Congress, March 2011, JCS-2-11.
26.	More information on business-related tax extenders can be found in CRS Report R43510, Selected Recently Expired Business Tax Provisions ("Tax Extenders"), by [author name scrubbed], [author name scrubbed], and [author name scrubbed] and CRS Report R43541, Recently Expired Community Assistance-Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed].
27.	For more information, see CRS Report R43541, Recently Expired Community Assistance-Related Tax Provisions ("Tax Extenders"): In Brief, by [author name scrubbed] and CRS Report R41639, Empowerment Zones, Enterprise Communities, and Renewal Communities: Comparative Overview and Analysis, by [author name scrubbed].
28.	For more information, see CRS Report R43510, Selected Recently Expired Business Tax Provisions ("Tax Extenders"), by [author name scrubbed], [author name scrubbed], and [author name scrubbed].
29.	This treatment for corporate timber gains, enacted for one year in P.L. 114-113, had an estimated revenue cost of $35 million.
30.	For more information on energy tax policy, including information on energy-related tax extenders, see CRS Report R43206, Energy Tax Policy: Issues in the 114th Congress, by [author name scrubbed] and [author name scrubbed].
31.	For more information, see CRS Report R43453, The Renewable Electricity Production Tax Credit: In Brief, by [author name scrubbed].
32.	For more information, see CRS Report R42089, Residential Energy Tax Credits: Overview and Analysis, by [author name scrubbed] and [author name scrubbed].
33.	There is a permanent 10% tax credit for business solar and geothermal investments under Section 48. For more information on business energy investment tax credits, see CRS In Focus IF10479, The Energy Credit: An Investment Tax Credit for Renewable Energy, by [author name scrubbed]. More information on the Section 25D tax credit for individual investments in renewable energy property can be found in CRS Report R42089, Residential Energy Tax Credits: Overview and Analysis, by [author name scrubbed] and [author name scrubbed].
34.	For businesses, there is a permanent 10% credit for geothermal property. The business energy credit is set to expire for hybrid solar lighting systems, geothermal heat pumps, small wind, combined heat and power, fuel cell, and stationary microturbine power plant property. The residential energy efficient property credit is set to expire for fuel cell plants, small wind energy property, and geothermal heat pump property.
35.	The expiration date for five-year cost recovery for certain energy property is linked to the expiration date of the energy credit, as provided in IRC Section 48.
36.	For more information, see CRS Report R43898, Tax Provisions that Expired in 2014 ("Tax Extenders"), by [author name scrubbed].
37.	For more information, see CRS Report RL32781, Federal Deductibility of State and Local Taxes, by [author name scrubbed] and [author name scrubbed].
38.	For more information on legislation that would have made extender provisions permanent that was either approved by the House Committee on Ways and Means, or passed the House, in the 114th Congress, see Table 3 in CRS Report R43898, Tax Provisions that Expired in 2014 ("Tax Extenders"), by [author name scrubbed].
39.	For more information, see CRS Report RL31181, Research Tax Credit: Current Law and Policy Issues for the 114th Congress, by [author name scrubbed].
40.	For more information on the expensing limits under Section 179, see CRS Report RL31852, The Section 179 and Bonus Depreciation Expensing Allowances: Current Law and Issues for the 114th Congress, by [author name scrubbed].
41.	Extending 50% expensing or bonus depreciation through the budget window would cost an estimated $247.7 billion between 2018 and 2027. See Congressional Budget Office, An Update to the Budget and Economic Outlook, Detailed Revenue Projections, June 2017.
42.	Extending the PTC for wind beyond 2019 would cost an estimated $6.9 billion in the 2018 to 2027 budget window (with no cost before 2022). See Congressional Budget Office, An Update to the Budget and Economic Outlook, Detailed Revenue Projections, June 2017.
43.	Extending the construction start date for the business solar ITC would cost an estimated $7.4 billion in the 2018 to 2027 budget window (with no cost before 2024). See Congressional Budget Office, An Update to the Budget and Economic Outlook, Detailed Revenue Projections, June 2017.
For more information on tax extender legislation in the 113th Congress, see CRS Report R43898, Tax Provisions that Expired in 2014 ("Tax Extenders"), by [author name scrubbed].
4245.	For more information, see CRS Report R43124, Expired and Expiring Temporary Tax Provisions ("Tax Extenders"), by [author name scrubbed].