State Agency - NASACT



TOPIC: Business Tax Credits/Incentive ProgramsOFFICE: AuditorSTATE: OKDATE: 2/6/2015QUESTION / ISSUE: If your state offers business tax credits or business tax incentive programs, does your office perform audits of these programs? If so, what type of audit is performed?Are procedures in place to monitor and measure economic impact on an ongoing basis, and evaluate whether tax incentives are achieving the state’s goals as intended? If so, what procedures are performed and who is responsible for performing those procedures?StateCommentsAlabamaOur office does not perform any audits of the business tax credits or incentive programs.KansasHere are some recent(ish) audits that may be on-point for your current project:Eco-DevoDECEMBER 2014Economic Development: Determining Which Economic Development Tools are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas, Part 3 FEBRUARY 2014Economic Development: Determining Which Economic Development Tools are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas, Part 2 2013Economic Development: Determining Which Economic Development Tools are Most Important and Effective in Promoting Job Creation and Economic Growth in Kansas, Part 1? incentivesMARCH 2010Kansas Tax Revenues, Part III: Reviewing Property Tax Exemptions 2010Kansas Tax Revenues, Part II: Reviewing Sales Tax Exemptions 2010Kansas Tax Revenues, Part I: Reviewing Tax Credits does offer business tax incentive programs and?the Michigan OAG has completed performance audits of?certain programs on a selective basis. We are not charged with the?ongoing responsibility to monitor the effectiveness of these programs. Accordingly,?our performance audit approach?has?been to assess?whether the entity administering the credits has a process in place to evaluate the effectiveness of the program. I've included?links to?the two recent?performance audits?of tax credit programs and one follow up report for your review. ?Renaissance Zone Program - Released January 2013 Economic Growth Authority (MEGA)?Tax Credit Program - Released April 2010 Report to Finding 2 of the MEGA Tax Credit Program audit - Released July 2011 Office of State Auditor performs cost-benefit analyses of certain state Department of Economic Development programs under Section 620.1300 of the Revised Missouri Statutes, as stated below:620.1300. A cost benefit analysis shall be prepared to evaluate the effectiveness of all tax credit programs, as defined by section 135.800, and all programs operated by the department of economic development for which the department approves tax credits, loans, loan guarantees, or grants. Each analysis shall be conducted by the state auditor, and shall include, but not be limited to, the costs for each program, the direct state and indirect state benefits and the direct local and indirect local benefits associated with each program, the safeguards to protect noneconomic influences in the award of programs administered by the department, and the likelihood of the economic activity taking place without the program. The result of each analysis shall be published and distributed, by January 1, 2001, and at least every four years thereafter, to the governor, the speaker of the house of representatives, the president pro tem of the senate, the chairman of the house budget committee, the chairman of the senate appropriations committee, the joint committee on tax policy, and the joint committee on economic development policy and planning.The related audit reports are available at the Web site page . The audits are conducted under the Yellow Book's standards for performance audits. New MexicoNew Mexico’s State Auditor’s Office does not currently?perform audits of business tax exemption programsTennesseeIn Tennessee, payment and nonpayment of business taxes is monitored and audited by the Department of Revenue. Incentives to lure businesses are generally administered and monitored by the Department of Economic and Community Development, in conjunction with the Department of Revenue. While we don’t audit the programs directly, we look at them as part of our regular audits (performance, financial, Single Audit in the case of federal funding) and take findings as necessary. For examples, I have attached the October 2013 performance audit of the Department of Revenue and the October 2012 performance audit of the Department of Economic and Community Development (finding on TNInvestco).The TNInvestco site contains reports and some measures of the activity of the individual investments and companies, but not of the overall economic impact on the state.The closest State Audit has come to auditing business tax incentives is the attached Business Tax report from 2001. As stated in the conclusion, the missing piece is evaluation of impact of the incentives granted. The report adds that it is likely impossible to accurately assess the causative results of tax credits because of the number of factors to consider.UtahOur office recently completed a performance audit of our state's economic development tax increment financing (EDTIF) program that might be helpful for you. Here are some links that might be useful:Audit Brief:? Report:?'sOfficeofEconomicDevelopment.pdfLegislative Presentation:? other recommendations made in the audit report, we recommended that our Legislature require independent audits of the statewide economic development program at least every three years to provide reliable information regarding the effect of corporate incentives. A bill addressing this recommendation, among others, will likely be public later this week.Washington (OLA)We have a fairly extensive process in place to evaluate tax incentives (we call them tax preferences) in our state. Not all are about spurring economic development, but those ones are probably the more difficult to evaluate. Each year we issue a report that looks at around 20-25 preferences. We’ve been doing it since 2007.Here’s a link to a couple of the more notable ones we’ve done related to economic development during the last few years:Aerospace: Tech R&D: , here’s a link to the overall web site about this area of work. It has a lot more information about the body of work, process, and many specific evaluations., you may want to contact the Pew Center for the States. They have been working for some time to help states conduct evaluations of tax incentive programs. Jeff Chapman is the staff person who will have a lot of knowledge about the practices in place at multiple states across the country. Jeff’s email is jchapman@. ................
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