They  represent revenue the federal government forgoes from these tax  provisions. More Than Two- Thirds of Corporate Tax Expenditures Are Also Used by Individuals

Estimated corporate revenue losses in 2011, which totaled $181.4 billion,  were approximately the same size as the amount of corporate income tax  revenue the federal government collected that year. Of the 80 tax expenditures used by corporations,  56 were also used by individuals, as shown in figure 3. Modifying any of  these 56 tax expenditures as part of broader corporate tax reform would  likely affect both corporate and individual taxpayers to some degree. Corporate Tax Expenditures Span Many Budget Functions; One-Third of Corporate-Only Tax Expenditures Share a Similar Purpose with Federal Spending Programs

		Corporate Tax Expenditures Span Many Budget Functions, and Estimated Corporate Revenue Losses Are Concentrated in Two Budget Functions

Corporate tax expenditures span a majority of federal mission areas, but  their relative size differs across budget functions. The 80 corporate tax  expenditures had estimated revenue losses in 12 of the 18 budget  functions in 2011, as shown in table 2. Of the $181 billion in estimated  corporate tax revenue losses, 81 percent was concentrated in the  international affairs and housing and commerce budget functions. For example, seven corporate-only tax  expenditures are aimed at encouraging or supporting the production of  specific energy sources or the development of technology or  infrastructure for certain energy sectors. These tax expenditures also  have broader purposes such as promoting domestic energy production  and energy security. Other corporate-only tax expenditures provide support for certain types of  entities, such as insurance companies or credit unions. Applying an even broader national purpose, such as  encouraging domestic energy production, could further increase the  number of federal spending programs, as well as other federal activities,  such as federal regulations and tax expenditures, which may share a  similar purpose. Treasury  provided technical comments which we incorporated; IRS had no  comments on the report. Appendix I: Objectives, Scope, and Methodology

This report: (1) describes trends in the number of corporate tax  expenditures and aggregate corporate revenue losses since 1986; (2)  describes the use of corporate tax expenditures in 2011; and (3)  compares the size of corporate tax expenditures to federal spending by  budget function and, for tax expenditures used only by corporations,  identifies spending programs with similar purposes. Fiscal Year 2011 Analysis of Treasury Tax Expenditure Estimates and Internal Revenue Service Data on Number of Recipients

For 2011, we analyzed those tax expenditures with only estimated  corporate revenue losses and those with both corporate and individual  revenue losses.those that Treasury reported had estimated revenue losses for  corporations in 2011; we describe any tax expenditures that Treasury  estimated lost only corporate tax revenue as corporate-only tax  expenditures. To identify the reported  purpose of corporate-only tax expenditures, we reviewed their legislative  histories and prior work by GAO, the Congressional Research Service  (CRS), including the CRS’s 2010 tax expenditure compendium, and the  Congressional Budget Office (CBO) that discussed the intended purpose  or rationale of the tax expenditure. The list of nontax programs we identified that appear to share a similar  specific reported purpose has not been reviewed by the agencies  responsible for them. The federal spending programs and activities identified may also have  multiple reported purposes, and only a component of the program or  activity may appear to specifically share a similar reported purpose to  the tax expenditure.
Why GAO Did This Study

Tax expenditures--special exemptions and exclusions, credits, deductions, deferrals, and preferential tax rates claimed by corporations, individuals, or both--support federal policy goals but result in revenue forgone by the federal government. Congress and the administration are reexamining tax expenditures used by corporations as part of corporate tax reform. GAO was asked to examine issues related to corporate tax expenditures. This report: (1) describes trends in the number of corporate tax expenditures and estimated corporate revenue losses since 1986; (2) describes the use of corporate tax expenditures in 2011; and (3) compares the size of corporate tax expenditures to federal spending by budget function and, for tax expenditures used only by corporations, identifies spending programs with similar purposes. To address these objectives, GAO analyzed Department of the Treasury estimates of tax expenditure revenue losses from 1986 to 2011 and Internal Revenue Service 2010 data and interviewed agency officials. GAO also reviewed the legislative history and relevant studies to determine the reported purpose of corporate-only tax expenditures, and searched federal program lists to identify federal spending programs that appear to share a reported specific purpose similar to corporate-only tax expenditures. The programs identified as related were not reviewed by the agencies responsible for the programs.

What GAO Found

Estimated tax revenue that the federal government forgoes resulting from corporate tax expenditures increased over the past few decades as did the total number of corporate tax expenditures. In 2011, the Department of the Treasury estimated 80 tax expenditures resulted in the government forgoing corporate tax revenue totaling more than $181 billion. Many of these tax expenditures are broadly available to both corporate and individual taxpayers. More than twothirds or 56 of the 80 tax expenditures used by corporations in 2011 were also used by individual taxpayers, such as other types of businesses not organized as corporations. Modifying any of these 56 tax expenditures as part of broader corporate tax reform would likely affect both corporate and individual taxpayers to some degree.
Corporate tax expenditures span a majority of federal mission areas, but their relative size differs across budget functions. The 80 corporate tax expenditures had estimated revenue losses in 12 of the 18 budget functions in 2011. Of the $181 billion in estimated corporate tax revenue losses, 81 percent was concentrated in the international affairs and housing and commerce budget functions, exceeding federal outlays in those budget functions. The 24 tax expenditures used only by corporations in 2011 provide support intended to encourage certain activities, such as energy production, or provide support for certain entity types, such as credit unions. A corporate tax expenditure may have multiple purposes: one narrowly focused on a specific activity or entity as well as broader or additional purposes pursuing national priorities or other activities. For example, 7 of the 24 corporate-only tax expenditures are aimed at encouraging or supporting specific energy sources and technologies, and these tax expenditures may also have broader national purposes such as promoting domestic energy production and energy security. In examining their narrowly focused reported purposes, one-third of the 24 corporate-only tax expenditures appear to share a similar purpose with at least one federal spending program.

What GAO Recommends

GAO made no recommendations in this report. Treasury provided technical comments that were incorporated, as appropriate; IRS had no comments.