Congress often enacts temporary tax provisions, almost all of which are tax cuts. Some are made temporary to force review when they’re scheduled to expire, or “sunset.” Some are temporary because Congress intended them to address temporary needs, such as recession, crises (financial, pandemic, etc.), or regional weather disasters. And some are temporary because proponents want them to be permanent but cannot muster the budgetary resources to offset the cost for more than a few years at a time. These temporary tax provisions are often known as the “expiring provisions,” because they are scheduled to expire or, in some years, already have.

Congress often extends expiring tax provisions for just a year or two. On occasion, however, Congress enacts longer extensions or even makes many provisions permanent. In 2015, for example, lawmakers made many prominent provisions permanent, including the research and experimentation credit (which had been temporarily renewed 16 times since 1981). At the end of 2022, lawmakers again made a group of provisions permanent, mostly notably a deduction related to medical expenses. It also extended about a dozen provisions until the end of 2025.

PROVISIONS EXPIRING IN THE FUTURE

The number of expirations was relatively small at the end of 2022 (4 items according to the Joint Committee on Taxation). The cohort scheduled to expire at the end of 2023 is also small (4 items, all related to Airport and Airway Trust Fund excise taxes). For 2024, the number is 14, many related to clean energy efforts.

The most important expirations are scheduled for the end of 2025. That’s the year when many key provisions of the 2017 Tax Cuts and Jobs Act expire. These include lower individual tax rates, the expanded Child Tax Credit, limits on the Alternative Minimum Tax, and the deduction for qualified pass-through business income, among other items.

In addition, one provision of the Tax Cuts and Jobs Act phases out gradually over time. Businesses could take 100 percent bonus depreciation on qualified investments through December 31, 2022. For 2023, that amount fell to 80 percent. The amount falls another 20 percentage points each year, reaching zero in 2027. Bonus depreciation thus technically expires at the end of 2026, but declines in value over the five previous years.

Policy Implications

Some tax provisions are temporary for good reasons. If Congress enacts tax cuts to soften the blow from disasters and recessions, it makes sense to limit their duration. Sunsetting tax breaks after several years can also inspire more congressional oversight than permanent features of the tax code may receive.

In practice, though, Congress often extends tax breaks a year or two at a time merely to meet the letter of the law governing congressional budget procedures. Budget rules often (but not always) require lawmakers to find offsetting revenue increases or spending cuts to pay for extending a tax break. Finding such offsets is easier for a temporary extension than for a permanent one.

It should be no surprise, then, that the number of expiring provisions periodically snowballs. The large number makes Congress less likely to consider their merits as individual provisions.

Budget Implications

The Congressional Budget Office must assume that these temporary-but-not-temporary laws will expire as scheduled when it compiles the budget baseline that serves as a starting point for congressional budget deliberations. Such assumptions make the baseline unrealistic, since temporary tax laws are typically extended. Moreover, because most extenders involve tax cuts, the assumption that these provisions will expire leads the Congressional Budget Office to project higher than likely revenues. There is one exception to the rule: temporary taxes whose revenue is deposited in trust funds are assumed to continue.

Updated January 2024