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Nevada’s treasurer is hoping that an audit of the Governor’s Office of Economic Development (GOED) will provide greater transparency and assurance that the state is getting a fair return on its investment from tax credits given to companies such as electric automotive firms Faraday Future and Tesla Motors Inc.
On the electric vehicle front, the Nevada Legislature in 2014 passed a $1.3 billion tax incentive package to attract Tesla Motors to locate its assembly plant in the state. That was followed by the state offering tax credits to electric vehicle startup Faraday Future for its plans to build a $1 billion assembly plant. The credits were the largest ever offered in the history of the state.
Treasurer Dan Schwartz told Bloomberg BNA March 6 that while he can’t point to a specific irregularity in the use of the funds, “what is of concern is that the (GOED) office seems to be really pretty unregulated.”
The Faraday deal called for 100 percent abatement of sales and use tax over 15 years, 75 percent abatement on real property tax for 10 years, 75 percent abatement of personal property tax for 10 years and 75 percent abatement of the modified business tax for 10 years. Faraday’s agreement also includes a transferable tax credit of $9,500 per permanent full-time job, up to 4,000 jobs. The average wage per job must be $22 an hour to qualify.
Tesla’s package contained a provision for transferable tax credits that were ultimately sold by Tesla to the MGM Grand, for which the GOED came under criticism.
The credits are controversial, Schwartz explained, because in the case of Faraday, “the project isn’t even begun and they are claiming tax credits. The state is, in effect, paying out money to Faraday, based upon a future promise to get the project done.”
He added, “In the treasurer’s office’s opinion, that is a very uncertain future. We have been concerned from the get-go that the project would never get done.” Faraday pared down its plans from a $3 billion dollar factory to a $1 billion one.
The governor’s office released a statement to Bloomberg BNA from Steve Hill, director of the GOED, in which he said, “We have spoken with the Administrator of the Division of Internal Audits and have expressed our commitment to fully cooperate with any audit the Division determines appropriate.”
Schwartz said he hopes an audit finding can be presented at a future meeting of the executive branch audit committee prior to Aug. 1.
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