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A paper was prepared to introduce the tax expenditures concept to GAO personnel and others who work in Federal program areas affected by tax expenditure provisions. The tax expenditures concept is found in tax reform proposals, program costs and agency budgets, surveys of alternative means of financing, or any of the multitude of areas where tax incentives are used or proposed to influence behavior ranging from national defense to home gardens. Information from publications by the Office of Management and Budget, the Congressional Budget Office, congressional committees, tax lawyers, and economists was assembled in an attempt to provide a reasonably complete and not overly technical discussion of the topic. The following is also included in the paper: a description of the criteria necessary to define the concept and to identify Internal Revenue Code provisions that create tax expenditures; information on how such provisions get into the law; a review of some of the arguments made for and against the use of tax expenditures; a review of the construction of tax expenditure budgets; and some of the problems that have not yet been resolved in the definition and uses of the concept.

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