Bill aims to make economic incentives data public in TN
NASHVILLE — A new bill before the Tennessee General Assembly would impose a higher level of transparency and accountability for the state’s most widely used economic development incentives.
The Fair Accountability and Clarity in Tax Subsidies Act, or FACTS Act, would allow the public to scrutinize companies receiving state tax credits and grants.
Tennessee awards more than $218 million in tax credits a year to lure companies or encourage them to expand in Tennessee, and has a running tab for unclaimed business credits at nearly $1.3 billion. That’s forgone revenue that could be spent on government services such as schools and roads.
But state law has prevented the public from knowing which companies receive tax credits, how much they receive, and whether the companies are fulfilling their hiring or investment obligations.
“It’s really long overdue for tax credits to be open,” said Deborah Fisher, executive director of the Tennessee Coalition for Open Government, an advocacy group. “It improves trust and accountability in a very important state effort — which is to improve economic opportunities for Tennesseans.”
One of the most fundamental changes would make information about business tax credits public. The current state law has strict confidentiality around all “tax information,” including credits. Proponents argue that the public and lawmakers have a right to know how tax funds are being spent — or in this case, when the government chooses to forgo tax revenue.
The money management company Alliance Bernstein, for instance, was awarded tax credits when it decided last year to relocate its headquarters to Nashville, but the state will not release any information about those incentives.
Support from both parties
The bill is sponsored by Sen. Kerry Roberts, R-springfield. A coalition of advocates helped craft the law. Economic development transparency is one of the few issues that attract support from conservatives and liberals alike.
“We hope this can shine some light on who is getting them, and make it easier for lawmakers to craft public policy,” said Ron Shultis, policy coordinator for Beacon Impact, a conservative advocacy group that criticizes what some call “corporate welfare.”
Shultis emphasized that the transparency would apply only after the incentives are offered and accepted. Economic development officials prefer to keep relocation negotiations secret because they say other states could make better offers.
“We wanted to make sure we didn’t hamper (the Department of Economic & Community Development’s) ability to attract business and lure companies to Tennessee,” Shultis said.
The Nashville Area Chamber of Commerce signaled that it wasn’t fully supporting the legislation. The chamber “supports transparency” for economic development projects, according to a statement attributed to chamber executive Lee Harrell. “However, it is important to strike the right balance with regards to timing, proprietary information and transparency.”
The bill would require companies to publicly report how many jobs they created, and how much money they invested in equipment and real estate in exchange for tax credits — information deemed confidential under current state law. How much each company received under each type of tax credit would also become public.
Allows state to recover money
All companies receiving grants under the state’s $115 million annual Fasttrack program would also be subject to “clawbacks.” The state would be able to recover money from companies that didn’t hit their job commitments or file employment reports on time. Today, only a subset of Fasttrack grants — those with the most flexibility for companies to cover expenses such as interior office improvements — are subject to clawbacks. This would extend the protections to grants for job training and infrastructure.
The bill would also require the Tennessee Department of Economic & Community Development to verify if companies are reporting accurate job figures. It would allow the department to access information from other state agencies, such as the Department of Labor & Workforce Development.
Companies are required to report the number of employees to the state for unemployment taxes. This bill would require economic development officials verify job figures for half of all Fasttrack grants.
Another provision would eliminate discretionary business tax credits. State law allows the commissioners from the Revenue and Economic and Community Development departments, for instance, to jointly waive a company’s employment requirements if they determine it to be in the “best interest of the state.”