Rules Governing Tax Legislation

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Procedures Governing Tax Legislation

Summary of Key Rules and Procedures

  • Origination Clause of the Constitution:
    • All Bills for Raising revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.
  • Blue-Slipping:  If the House determines that a measure received from the Senate violates the Origination Clause, it may respond with a procedure known as “blue-slipping,” which is the term used to describe the act of formally returning the measure to the Senate.  In the Senate, if a Senator believes a measure before the Senate violates the Origination Clause, a Constitutional point of order may be raised and voted on by the Senate.
  • Jurisdiction:  In the House, revenue measures are referred to the Committee on Ways & Means; and in the Senate, to the Committee on Finance.
  • User Fees, such as fees to enter a park or for water or mineral rights on federal lands, are often treated as offsets to spending (“offsetting receipts”), rather than as revenues.  In such cases, legislation pertaining to the user fees may not be referred to Ways & Means or Finance, but to other committees of jurisdiction over the relevant departments.
  • Revenue Estimates and Joint Committee on Taxation:    Section 308(a)(1) of the Congressional Budget Act requires that whenever a committee of either House reports a measure providing an increase or decrease in revenues or tax expenditures, the accompanying report must contain a revenue estimate.  The Congressional Budget Office, in preparing such reports, is required to use revenue estimates provided by the nonpartisan, (House-Senate) Joint Committee on Taxation.
  • Tax Complexity:  House Rules XIII, clause 3(h), requires a tax complexity analysis to be prepared by the Joint Committee on Taxation.
  • Limitations on Earmarks:  In 2007, the House and Senate adopted rules related to congressionally directed spending items, limited tax benefits, and limited tariff benefits. Members are required to certify that they have no financial interest in the request.
    • House Rule XXI, clause 9, generally requires that measures be accompanied by a list of congressionally directed spending items, limited tax benefits, or limited tariff benefits that are included in the measure or a statement that the measure contains none.  A limited tax benefit is defined as “(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 that provides one beneficiary temporary or permanent transition relief from a change to the Internal Revenue Code of 1986.”
    • Senate Rule XLIV prohibits a vote on a motion to proceed unless the chair of the committee or the majority leader (or designee) certifies that a complete list of congressionally directed spending items, limited tax benefits, limited tariff benefits, and the name of each Senator requesting each is made available on a publicly accessible congressional website in a searchable form at least 48 hours before the vote. If the certification requirements have not been met, a point of order may lie against consideration of the measure. If a Senator proposes a floor amendment containing a limited tax benefit, the item must be printed in the Congressional Record as soon as “practicable.”
  • Enforcement of Budget Resolution Revenue Levels:  Revenue levels set in the budget resolution are enforced in two main ways: (1) by prohibiting the House or Senate from considering revenue legislation until a Budget Resolution has been agreed to, and (2) once a budget resolution has been agreed to, prohibiting the consideration of legislation that would cause federal revenues to fall below the revenue floors set in the Budget Resolution.
  • Statutory PAYGO and the Senate PAYGO rule are designed to prevent new mandatory spending and revenue legislation from increasing deficit spending.  See explanatory material on Budget Enforcement: PAYGO and Sequestration and Budget Process in a Nutshell.
  • House Super-Majority Rule for Tax Increases:  House Rule XXI includes two provisions that apply to legislation that would increase federal income tax rates.
    • The first requires that three-fifths of the House must agree to a federal income tax increase.  Specifically, the rule states: “A bill or joint resolution, amendment, or conference report carrying a Federal income tax rate increase may not be considered as passed or agreed to unless so determined by a vote of not less than three-fifths of the Members voting, a quorum being present.”
    • The second provision, House Rule XXI, clause 5(c), prohibits a retroactive federal income tax rate increase—that is, an increase that applies to a period beginning before enactment of the provision.
  • House May Consider Revenue Bills in one of 3 Ways:
    • Under suspension of the rules, which provides for no amendments, limited debate, and requires a two-thirds vote for approval.
    • Under the terms of a Special Rule reported from the House Rules Committee, requiring that the House resolve into Committee of the Whole for consideration of the measure and includes provisions setting ground rules for debate and amendment, typically either prohibiting or limiting floor amendments
    • Revenue measures may also be considered under Budget Reconciliation procedures.  See Budget Process in a Nutshell for an explanation of Budget Reconciliation, and see our webpage on the Senate’s Byrd Rule that places major restrictions on what may be included in a Reconciliation measure — the most important of which prohibits Reconciliation bills from increasing deficits beyond the 10-year budget window.  The effect of this restriction is to require, in effect, that tax cuts included in Reconciliation bills expire after 10 years, unless the tax cuts are fully paid for by repeal of tax deductions and tax credits.