Cyclopedia of Congressional Budget Law

Limited Tax Benefit

Summary

The term limited tax benefit is kind of tax expenditure, but is distinguished by the very small number of taxpayers who may receive the advantageous treatment. It is currently used, and defined, for purposes of clause 9 of rule XXI of the Rules of the House of Representatives, which requires the disclosure of earmarks that may be contained in legislation to be considered. A limited tax benefit is considered a form of earmark for the purposes of that clause. 


Clause 9 of Rule XXI

(f) For the purpose of this clause, the term “limited tax benefit” means—

(1) any revenue-losing provision that—

(A) provides a Federal tax deduction, credit, exclusion, or preference to 10 or fewer beneficiaries under the Internal Revenue Code of 1986, and

(B) contains eligibility criteria that are not uniform in application with respect to potential beneficiaries of such provision; or

(2) any Federal tax provision which provides one beneficiary temporary or permanent transition relief from a change to the Internal Revenue Code of 1986.


Section 1026 of the Line Item Veto Act of 1996

Section 1026(9) of the subpart C of the Congressional Budget Act of 1974, which was enacted as the Line Item Veto Act of 1996, defines the term for its purposes, but the definition may be applied more widely when questions arise. Even though the Act itself was found unconstitutional, the provisions it includes still may provide assistance in understanding how a term may be used.  

(9) Limited tax benefit.—(A) The term “limited tax benefit” means—

(i) any revenue-losing provision which provides a Federal tax deduction, credit, exclusion, or preference to 100 or fewer beneficiaries under the Internal Revenue Code of 1986 in any fiscal year for which the provision is in effect; and

(ii) any Federal tax provision which provides temporary or permanent transitional relief for 10 or fewer beneficiaries in any fiscal year from a change to the Internal Revenue Code of 1986.

(B) A provision shall not be treated as described in subparagraph (A)(i) if the effect of that provision is that—

(i) all persons in the same industry or engaged in the same type of activity receive the same treatment;

(ii) all persons owning the same type of property, or issuing the same type of investment, receive the same treatment; or

(iii) any difference in the treatment of persons is based solely on—

(I) in the case of businesses and associations, the size or form of the business or association involved;

(II) in the case of individuals, general demographic conditions, such as income, marital status, number of dependents, or tax return filing status;

(III) the amount involved; or

(IV) a generally-available election under the Internal Revenue Code of 1986.

(C) A provision shall not be treated as described in subparagraph (A)(ii) if—

(i) it provides for the retention of prior law with respect to all binding contracts or other legally enforceable obligations in existence on a date contemporaneous with congressional action specifying such date; or

(ii) it is a technical correction to previously enacted legislation that is estimated to have no revenue effect.

(D) For purposes of subparagraph (A)—

(i) all businesses and associations which are related within the meaning of sections 707(b) and 1563(a) of the Internal Revenue Code of 1986 shall be treated as a single beneficiary;

(ii) all qualified plans of an employer shall be treated as a single beneficiary;

(iii) all holders of the same bond issue shall be treated as a single beneficiary; and

(iv) if a corporation, partnership, association, trust or estate is the beneficiary of a provision, the shareholders of the corporation, the partners of the partnership, the members of the association, or the beneficiaries of the trust or estate shall not also be treated as beneficiaries of such provision.

(E) For purposes of this paragraph, the term “revenue losing provision” means any provision which results in a reduction in Federal tax revenues for any one of the two following periods—

(i) the first fiscal year for which the provision is effective; or

(ii) the period of the 5 fiscal years beginning with the first fiscal year for which the provision is effective.

(F) The terms used in this paragraph shall have the same meaning as those terms have generally in the Internal Revenue Code of 1986, unless otherwise expressly provided.GAO Glossary of Terms and Definition (September 2005)


References

CRS – Earmark Disclosure Rules in the House – Member and Committee Requirements (RS22866 ) May 21, 2015

 

 

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