3 tax-credit pro­grams are tar­geted for sun­set

The Standard Journal - - LOCAL - RN-T Staff Writer By Diane Wag­ner

A Ge­or­gia Se­nate study com­mit­tee wants to set up a re­view sched­ule to de­ter­mine if state tax cred­its and ex­emp­tions are worth the loss of rev­enue. And it’s rec­om­mend­ing the elim­i­na­tion of three pro­grams, as a start.

Sen. Chuck Huf­stetler, R-Rome, is one of six mem­bers of the Se­nate Study Com­mit­tee of Spe­cial Tax Ex­emp­tions chaired by Sen. John Al­bers, R-Al­pharetta. The chair­man of the Se­nate’s Fi­nance Com­mit­tee, Huf­stetler has chafed at the state’s lack of mech­a­nism for vet­ting the “re­turn on in­vest­ment.”

Cred­its al­lowed for teen driver ed­u­ca­tion classes, em­ployer sub­si­dies of mass tran­sit use and diesel emis­sion-re­duc­tion tech­nolo­gies are pro­posed for the chop­ping block.

Three other pro­grams — for the film in­dus­try, his­toric prop­erty re­ha­bil­i­ta­tion and com­pany re­search and de­vel­op­ment — net­ted sup­port.

A tem­plate for eval­u­a­tion also is in­cluded with a pro­posed sched­ule in the com­mit­tee’s fi­nal re­port be­fore the Jan. 8, 2018, start of the Ge­or­gia Gen­eral As­sem­bly ses­sion. There are 29 tax credit pro­grams and 39 tax ex­emp­tion pro­grams on the list.

“It is the in­ten­tion of the Com­mit­tee that these and other po­ten­tial tax ex­pen­di­tures be eval­u­ated on a re­peat­ing, ro­tat­ing ba­sis … ap­prox­i­mately once ev­ery five years,” the re­port states.

Ten states have eval­u­a­tion plans and 17 others are work­ing on a process, ac­cord­ing to tes­ti­mony taken dur­ing the com­mit­tee’s five meet­ings around the state.

“Ore­gon was able to save hun­dreds of mil­lions of dol­lars due to their eval­u­a­tion process,” the re­port states, while Alabama re­struc­tured its his­toric re­ha­bil­i­ta­tion tax credit to make it more ef­fi­cient and ef­fec­tive.

In an­a­lyz­ing the six tar­geted Ge­or­gia pro­grams, the com­mit­tee used the tem­plate based on cri­te­ria set by other states: jus­ti­fi­ca­tion, ef­fec­tive­ness, ef­fi­ciency, eq­uity, re­turn on in­vest­ment, credit struc­ture and ad­min­is­tra­tion, bud­getary risk, lo­cal gov­ern­ment im­pact and op­por­tu­nity costs.

Huf­stetler has said the eco­nomic ben­e­fit of a tax break comes when the tax dol­lars gen­er­ated from the ac­tiv­ity ex­ceed the cost. The re­port also ac­knowl­edges a pub­lic ben­e­fit if the in­cen­tive en­cour­ages a cer­tain type of be­hav­ior.

The film tax credit, al­lowed for com­pa­nies that spend at least $500,000 in the state, was hailed as a mea­sur­able in­come-pro­ducer.

In 2007, the eco­nomic im­pact of the film in­dus­try was $241 mil­lion, ac­cord­ing to the Ge­or­gia De­part­ment of Eco­nomic De­vel­op­ment. The tax credit was es­tab­lished in 2008 and, in fis­cal year 2017, the im­pact was $9.5 bil­lion.

“The mo­tion pic­ture and tele­vi­sion in­dus­try is re­spon­si­ble for more than 92,000 jobs and more than $4.6 bil­lion in to­tal wages in Ge­or­gia, in­clud­ing in­di­rect jobs and wages,” the de­part­ment re­port notes.

Credit for re­ha­bil­i­tat­ing his­toric prop­er­ties also was de­ter­mined to gen­er­ate eco­nomic and so­cial ben­e­fits to an area, although the com­mit­tee rec­om­mends mod­i­fy­ing the pro­gram to ex­clude pri­vate homes.

Ex­am­ples of suc­cess­ful re­hab projects are Ponce City Mar­ket in At­lanta, which now leases space to more than 80 busi­nesses, and the 1925 Daniel Ash­ley Ho­tel in Val­dosta. The ho­tel makeover as low-in­come se­nior hous­ing re­ceived an “out­stand­ing achieve­ment” award from the city for go­ing be­yond its preser­va­tion reg­u­la­tions.

The credit of up to $150 to­ward teen driver ed­u­ca­tion pro­grams from pri­vate providers was deemed in­ef­fec­tive. In 2014, just 872 fil­ers claimed the credit, although more than 32,000 teens got their li­censes that year. Also, 114 coun­ties don’t have a pri­vate drivers ed provider.

If it’s con­tin­ued, the com­mit­tee rec­om­mends ex­pand­ing it to fee­based pub­lic school pro­grams. How­ever, it’s un­clear if the in­cen­tive is re­quired, since 16-year-olds need the classes to get a per­mit.

A tax credit was es­tab­lished in 2001 for the pur­chase and in­stal­la­tion of diesel par­tic­u­late emis­sion re­duc­tion tech­nol­ogy on com­mer­cial ve­hi­cles, but no­body has claimed it since 2012. The com­mit­tee is rec­om­mend­ing elim­i­na­tion.

Em­ploy­ers are el­i­gi­ble for a $25 tax credit per em­ployee for sub­si­diz­ing cer­tain trans­porta­tion ben­e­fits, such as van­pools or pub­lic trans­porta­tion passes. How­ever, just $122,074 was claimed be­tween 2011 and 2015.

The com­mit­tee re­port in­di­cates the amount is likely too small to ef­fect a change in com­muter be­hav­ior that re­duces traf­fic con­ges­tion and im­proves air qual­ity.

Ge­or­gia should keep — but re­quire ad­di­tional re­port­ing on — the pro­gram that al­lows a 10-per­cent tax credit for a com­pany’s re­search and de­vel­op­ment ex­penses above a base amount, the com­mit­tee is rec­om­mend­ing.

“It is pos­si­ble that this credit re­sults in some ad­di­tional re­search ac­tiv­i­ties in the state,” the re­port states. “These ac­tiv­i­ties will likely re­sult in in­creased em­ploy­ment and are typ­i­cally as­so­ci­ated with higher wages.”

Com­pa­nies claimed about $116 mil­lion in R&D cred­its be­tween 2011 and 2014, based on data pro­vided by Ge­or­gia De­part­ment of Rev­enue.

In ad­di­tion to sug­gest­ing three ex­ist­ing pro­grams be al­lowed to ex­pire, or “sun­set,” the com­mit­tee is rec­om­mend­ing “sun­rise” eval­u­a­tions for ev­ery new in­cen­tive. The process “would al­low the Gen­eral As­sem­bly to un­der­stand the full eco­nomic ef­fect of any leg­is­la­tion with tax ex­pen­di­tures be­fore vot­ing on it,” the re­port states.

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