Privacy of state tax credits guarded

| Friday, June 3, 2011

HARRISBURG -- Businesses getting tax credits in some state programs remain shielded from public disclosure, but Pennsylvania's fiscal watchdog says taxpayers should know about every dime of the money.

"We should know how much they received," Auditor General Jack Wagner said on Thursday. "These are taxpayers' dollars."

The state budget allows a maximum of almost $204 million for 13 tax credit programs, according to the Department of Revenue, but the agency estimates companies will tap about $181 million.

"You'd think step one would be making it known to the public who's getting these things," said Don Thomson of North Huntingdon, chairman of the Westmoreland County Conservative Coalition, a taxpayers group. "If (businesses) are happy to get them, they should have the dollar amount listed. I'm not saying they aren't valid tax credits. Maybe they are."

How much individual companies receive in tax credits for funding education scholarships, for example, is "confidential taxpayer information," a Revenue Department spokeswoman said. So is business-specific information about companies locating in tax-free zones called Keystone Opportunity Zones, or KOZs.

Yet, the state posts on websites information about other tax credits, such as those for making movies in Pennsylvania or for research and development investments, typically by pharmaceutical companies.

Unless the Legislature specifically exempts a program from confidentiality statutes, the Revenue Department can't provide information to the public, spokeswoman Elizabeth Brassell said. There's no reason for the disparity, except that older programs tend to lack reporting requirements, she said.

The Pennsylvania Chamber of Business and Industry wants "grant and tax credit programs to have a significant amount of transparency and accountability, in order to prevent abuse and waste," said spokeswoman Lesley Smith.

"I don't think our members would have a problem with more disclosure," said Kevin Shivers, executive director of the National Federation of Independent Business in Pennsylvania. They disclose significant information in contracts, he said.

Small businesses tend to question the value of tax credits, Shivers said. Instead of targeting businesses for "preferential treatment," state officials should use the money for "across-the-board" tax cuts, he said.

The Tax Foundation, a nonpartisan research group, said that states across the country are moving away from offering tax credits and incentives for film production, because such programs provide a windfall for movie studios but few benefits for taxpayers.

Facing budget challenges, eight states eliminated or suspended their programs during the past year, the foundation said. In Pennsylvania, Gov. Tom Corbett, facing a $4.2 billion deficit, spared the film industry and continued a $60 million appropriation for film tax credits.

Stephen Herzenberg, executive director of Keystone Research Center, said "there is no good policy reason" for disclosing some tax credits and not others.

"The fact (that information) is readily available for some makes clear it's certainly possible to provide the transparency," he said.

But Robert Strauss, an economics professor at Carnegie Mellon University, who agrees "consistent policy is best," believes taxpayer information on businesses should remain confidential. "I'm a little old-fashioned," he said. He believes disclosure of an individual's or company's tax return erodes privacy.

When the House last month approved a bill expanding business tax credits for educational scholarships, it ignored a recommendation from a legislative research agency to include a reporting requirement that would make businesses' tax credits available to taxpayers. Last June, the Legislative Budget and Finance Committee, in a study on state tax credits, recommended disclosing who gets credits so that lawmakers could judge the program's effectiveness.

The bill's sponsor, Rep. Tom Quigley, a Montgomery County Republican, said he wasn't aware that House members ever talked about disclosure. He assumed information on business tax credits was public.

The House bill expanding the Educational Improvement Tax Credit, or EITC, is pending before the state Senate. It would increase income limits and raise the cap on the EITC program from $60 million to $100 million next year, and to $200 million in 2012-13.

Shivers, a former aide to Republican Gov. Tom Ridge, said that scholarship donations are more akin to a "charitable donation" than a grant and that could be one reason lawmakers didn't insist upon disclosure when creating the program in 2001.

Additional Information:

The numbers

The names of businesses and the amount of tax credits they receive for funding scholarships through the Educational Improvement Tax Credit program are confidential, the Department of Revenue says. Other state records show businesses gave a combined $67.3 million to groups that provide scholarships for private schools and services for public school districts in 2009, the latest year available, according to the Department of Community and Economic Development. The businesses get tax credits of up to 90 percent for a two-year funding commitment.

Here's the breakdown:

-- 1,913 businesses contributed $42.5 million to 239 organizations that awarded scholarships to 38,685 K-12 students

-- 740 businesses contributed $17.9 million to 547 educational improvement organizations, which provide 'innovative programs' for public schools

-- 321 businesses contributed $6.9 million to 141 pre-kindergarten scholarship organizations, serving an estimated 5,584 pre-K students

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