Americans for Tax Reform expressed qualified support for the permanent tax extender agreement reached Tuesday on Capitol Hill.

The agreement dramatically lowers the tax revenue baseline, makes permanent all of the “must pass” tax extenders that often drive bad policy, and secures full expensing of business purchases for small employers.

But the deal also phases down 50 percent “bonus depreciation” over the next five years, fails to immediately kill the wind production tax credit, and increases spending in the form of permanently expanded refundable credits.

The biggest win of this bill is that it will make conservative tax reform easier by permanently lowering the current-law revenue baseline. This means that conservative reformers can design a pro-growth tax system less destructive of liberty and which steals less money from the American people.

Highlights of the bill include:

Permanent tax relief. The bill permanently reduces taxes. This is expected to reduce the current law tax revenue baseline. That’s real money in the hands of businesses and families. A lower revenue baseline means pro-growth tax reform is easier to write.

Dozens of Tax Extenders Made Permanent. This bill makes many tax extenders permanent. These tend to be the ones that are the most politically popular and which drive tax extender packages.

Common sense, middle class tax extenders made permanent. These include the state and local tax deduction, IRA contributions to charities, and transit benefit parity.

Small business tax extenders made permanent. These include a new $500,000 limit on expensing of business equipment, 15 year depreciation life for restaurants and leasehold improvements, fairness for Subchapter-S corporations, and a 100 percent capital gains exclusion for small business start-ups.

Permanent Research and Experimentation credit. The oldest and most politically charged extender is for research and experimentation expenses. This is made permanent, along with an exception for active financing of overseas lending. These two extenders, along with a look-through provision for controlled foreign corporations (extended five years) alone drove most of the politics of extenders. The extenders package of the future will be handled in a far more serene manner.

Reining in the IRS. This extenders package provides a number of restrictions on IRS abuse. The most notable is a prohibition on any IRS attempt to impose gift tax on contributions to 501(c)(4) non-profits like Americans for Tax Reform.

There’s also a streamlined process for startup non-profits to get tax status quickly. This is important for conservatives in light of the Lois Lerner affair.

Helping prevent identity theft on tax returns. The bill provides a number of process changes that should help prevent a repeat of the 2015 tax season, when a record number of taxpayers found that fraudulent returns had already been filed on their behalf by identity thieves.

It also beefs up anti-fraud provisions related to refundable tax credits, even as the bill makes those refundable tax credits permanent.

Expansion of tax free savings. The bill expands 529 college savings plans to permit money to be used to buy computers and similar equipment, while making 529s easier to manage. It also expands ABLE accounts, which are 529s for persons with disabilities.

Finally, the bill permits rollovers into SIMPLE IRA plans often operated by small businesses.

Delay of Obamacare tax hikes. The bill delays by two years the Cadillac plan excise tax and the industry tax on health insurance. It also suspends for two years the medical device tax.

It’s important to note that delay of the Cadillac plan tax was a major priority of organized labor. In two years, they will again have to be cooperative on taxpayer priorities if they want another delay.

The bill, however, does contain two problematic provisions:

Bonus depreciation draw down. 50 percent bonus depreciation becomes 30 percent bonus depreciation over the next five years. Under this provision, businesses can expense (as opposed to slowly deduct, or “depreciate”) some of their business investment costs, with the rest being subject to the usual depreciation rules.

This bill extends the 50 percent level in 2015, 2016, and 2017. In 2018, it drops to 40 percent. In 2019, it drops to 30 percent. After that, bonus depreciation is scheduled to expire.

ATR has called bonus depreciation the “crown jewel” of the extenders package because it gets us very close to ideal tax policy on business investments, namely immediate and full expensing. Back sliding here is the opposite of tax reform.

Wind PTC not killed, but phased out. The worst tax policy in the extenders package is the Wind Production Tax Credit, or Wind PTC. Instead of being allowed to expire in 2015, it is extended for several more years.

These two provisions–the phasedown of bonus depreciation and the new lease on life for Wind PTC–give ATR a great deal of pause in evaluating a bill we are supportive of overall.