GM Pact Cloaks Michigan Tax Credit Details in Secrecy

By Alex Ebert

A confidentiality agreement between General Motors and Michigan state officials is blocking the release of data on all 732 agreements for the state’s maligned MEGA tax credit program.

A 2015 renegotiation of GM’s MEGA tax credits forces the Michigan Strategic Fund to keep the credit figures for all companies confidential, lest it reveal GM’s by process of elimination. That peculiarity surfaced this week when the state auditor general released a report commending the economic development agency for managing the big-business tax credit, but saying the Michigan Strategic Fund should be more transparent about the job creation and retention tax credits with other government bodies.

However, even if the Michigan Strategic Fund shares more information with legislators, much of the data on tax credits in the $14 billion program will remain hidden from public. Tax credits through the program are still transferred and redeemed, even though the program ended in 2011. But data on who owns the credits, and how much those companies have outstanding, are unavailable due to one thing: the state’s agreement with GM.

“We do not publicly disclose proprietary tax information, and the confidentiality of such information is protected under state law,” Laura Toole, communications manager for GM, told Bloomberg BNA in an email. “General Motors does not intend to waive its confidentiality rights.”

But transparency advocates and tax credit critics say the secrecy is counterproductive to a discussion of whether the tax incentive program actually works.

“Frankly, I think the legislature needs to take a can-opener to the Michigan Economic Development Corporation and let the sunshine in,” Michael LaFaive, senior director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy, told Bloomberg BNA. “It’s fundamentally unfair and perhaps dangerous to take money from millions of taxpayers, and give it to a privileged few without explaining how or why.”

‘Statutory Clarification’

Politicians from both parties have roundly planned the MEGA program as a policy that appeared to award companies while the state slid into the Great Recession and high levels of unemployment. And stats tend to support this criticism because companies often don’t meet projected hiring announcements.

From 2014 through 2016, segments of the MEGA program varied between 29 percent and 84 percent of projections for hiring or job retention. For example, companies getting tax credits for hiring in the program’s “High-Tech” section only created 39 percent of jobs those companies promised.

But without more transparency for the program, public analysis of how many outstanding credits are still in play for each company isn’t possible. For this reason, the auditor’s report raised the questions asked by transparency advocates for years:

•  “What type of tax information should be precluded from public disclosure? Should such preclusion exist for only the amount of taxes paid and/or taxable income, and not preclude estimated tax credits negotiated with public funds?”
•  “When do State officials have the discretion to negotiate confidentiality provisions into individual agreements involving public funds? Do such agreements limit transparency and consistency among program participants or other taxpayers?”
•  “Should the MSF Act more clearly define the type of information that could cause the applicant significant competitive harm? Does information such as the agreed-upon amount of estimated and capped tax credits impact a business’s competitive advantage?

After saying it couldn’t report the credit values for current holders, the auditor suggested the Michigan Legislature address these questions “through statutory clarification.”

LaFaive agreed that a legislative change needs to be made. Similar to unavailability of MEGA information, LaFaive said, the state has denied him facts regarding how the state creates its assumptions for grants through the Michigan Business Development program. He said that a signed confidentiality agreement shouldn’t be permitted to keep this data secret.

“What we have here is the state going out of its way to keep information confidential from the public, when that information has been paid for by the public,” he said.

State, GM Response

Kathleen Achtenberg, Michigan Strategic Fund spokesperson, provided a statement saying the fund takes the auditor’s recommendation “very seriously.” She said the organization “has already taken the necessary steps to ensure open and transparent communications with our legislative partners.”

However, the statement didn’t address the confidentiality agreement with GM or how the Michigan Strategic Fund could be more transparent with taxpayers.

Toole said the 2015 renegotiated agreement between GM and the Michigan Economic Development Corporation “ensures predictability in the amount and timing of the tax credits earned by General Motors under the MEGA.” However, the most recent publicly available report of GM’s credits was from 2015, when the Michigan Economic Development Corporation report estimated the company’s tax credit value at $2.1 billion.

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bna.com

To contact the editor responsible for this story: Jennifer McLoughlin at jmcloughlin@bna.com

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