Incentives Watch: Measuring the Effectiveness of State Tax Credits

The debate continues as to whether various state tax credits and incentives are truly effective in terms of achieving their intended goals.  Another way to look at the effectiveness of a tax credit is to look at whether the companies participating in the tax credit program are meeting all the requirements.

New York’s Empire State Development Corporation (ESDC), which administers the state’s Excelsior Jobs Program was recently in the spotlight as a result of an audit released July 7 by the New York State Comptroller’s Office, according to a Bloomberg BNA Weekly State Tax Report article by Gerald B. Silverman.

The comptroller conducted an audit of the Excelsior Jobs Program and found that certain companies granted tax credits under the program weren’t meeting the job creation and investment requirements. 

As part of the audit, the comptroller looked at 25 companies participating in the Excelsior Program and found that the ESDC “failed to exercise due diligence when approving any of the 25 sampled companies for participation in the program and does not follow its own protocol for scrutiny of applications,” according to a news release from the Office of the New York State Comptroller.

In trying to determine whether a tax credit program is effective, several states have instituted a requirement that certain programs be reviewed on a regular basis.

The PEW Charitable Trusts tracks how many states have enacted specific legislation mandating the evaluation of their tax incentive programs.  Currently, there are 22 states with tax incentive evaluation programs, according to PEW.

Although New York is not currently listed by PEW as having a tax credit evaluation law, time will tell if the state decides to enact such legislation in the future.

*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Should all states enact legislation requiring the periodic evaluation of their tax credit and incentives?

For more information about tax credits, check out Bloomberg BNA’s Credits and Incentives Portfolios by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.