Bill to seek tax-break accountability

Businesses would have to submit audits justifying the tax credits they receive.
Wednesday, January 14, 2004 | 12:00 a.m. CST; updated 9:46 p.m. CDT, Sunday, July 20, 2008

JEFFERSON CITY — Missourians would learn more about businesses that are getting special tax breaks under a plan to be proposed in Missouri’s Senate.

Tax subsidies to the tune of tens of millions of dollars are issued each year to businesses that participate in one of about 50 state programs — with the expectation that those businesses provide public benefits, such as bringing new development to impoverished areas or preserving historic buildings.

Yet so little information is gathered about the recipients of the credits, a joint Missouri House and Senate committee found, the state can’t determine whether they are making good on their commitments — or how many claims for business tax deductions of thousands or millions of dollars are just plain fraud.

Sen. Michael Gibbons, R-St. Louis County and chairman of the Joint Committee on Tax Policy, will introduce legislation today that would require more accountability from recipients.

The bill, which follows recommendations by the Joint Committee on Tax Policy, would require annual audits submitted by businesses justifying why they’re receiving credits. Recipients also could be subject to government inspection.

The committee recommended that a failure to meet the reporting requirements should result in a reduction of the credit, and that the tax credits should be taken away if the claim is found to be bogus.

Attention was drawn to the issue of tax credit fraud after a November investigation by the St. Louis Post-Dispatch, which found that

$2 million in tax credits were given to a dozen businesses fraudulently claiming to participate in the Rebuilding Communities program. The program offers incentives for providing public benefits in distressed communities. The incentives include increasing high-tech business, transportation and home ownership.

Although Gov. Bob Holden recommended cutting Rebuilding Communities — which is now under investigation by the state attorney general — committee members said they don’t have enough information about the programs to decide what needs to go on the chopping block.

“I think there’s really a minimal amount of fraud; nothing has pointed to massive amounts of fraud,” Sen. Joan Bray, D-St. Louis County, a committee member, said before Monday’s hearing. Bray sponsored legislation establishing the program 1999. Bray said the incident reported in the Post-Dispatch was isolated.

Gibbons, however, said fraud might be much more widespread.

“When you’re dealing with tax credit programs that overall are putting out hundreds of millions of dollars’ worth of tax credits, it’s certainly conceivable that there are problems out there,” he said.

Holden had also advised the committee to address programs that might be inefficient or not well administered. The substantial growth in the number of programs in the last eight or 10 years, without an accompanying increase in oversight, is partly to blame for inefficiency, Bray said.

“I wish we’d been wise enough to make sure we were doing this from day one and then we would minimize abuse,” she said.

According to the report, representatives have testified to the committee and cited an inadequate number of workers as a reason for not collecting thorough information on tax credit recipients.

Historic-preservation credits and tax credits for factories that create new jobs and capital investments are two widely used programs statewide and in the Columbia area, said David Meyer, marketing director of Columbia/Boone County Regional Economic Development. Businesses in Boone County were issued about $2 million in tax credits over the last year, according the state Department of Economic Development.

About 40 percent of that amount was issued to participants in the Neighborhood Assistance program, such as the Central Missouri Food Bank, Boy Scouts of America Great Rivers Council and Central Missouri Counties Human Development, an agency that administers government-funded social programs.

None was issued for Rebuilding Communities.

Committee members said there has been substantial concern about cutting the programs.

“I answered letters from people who are scared to death that we’re going to end the Historic Preservation tax credit,” said Rep. Shannon Cooper, a Republican member of the committee from Clinton.

Protecting the programs that provide substantial public benefit, and the interests of the market for selling tax credits were two of the concerns said they hoped would be addressed in the legislation.

At the hearing, Gibbons said the bill introduced would deal in generalities in terms of an overhaul of the programs’ oversight and would grow program-specific as it moves through the legislative process.

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