Special Edition Gold Dome Report -
July 19, 2017
The Senate Special Tax Exemption Study Committee, under the leadership of Sen. John Albers (R-Roswell), met on July 18, 2017 for an initial meeting. This Study Committee is the result of the adoption of SR 222 from the 2017 Session. Other Senators who participated in the meeting included Sens. Jack Hill (R-Reidsville), William Ligon, Jr. (R-Brunswick), Chuck Hufstetler (R-Rome), Mike Dugan (R-Carrollton), and Hunter Hill (R-Atlanta).
Sen. Albers opened the meeting with some introductory remarks, including acknowledgement of the film industry’s tax credit and that business sector’s accomplishments. Sen. Albers also accented the manufacturing inventory tax credit which yielded excellent results for Georgians. Further, he cautioned that the subject matter was complex and that it would be impossible to make a full review of Georgia’s existing tax credits and exemptions by December 1. The Senators, thus, are to prioritize the review, looking at what could be done not only this year but also in the next couple of years. He asked his colleagues to “rank” the credits and exemptions either with a one, two or three and send their ideas to him – so that they may determine which ones will be reviewed in 2017. One of the credits, which drew some questions at today’s meeting, was the one involving low emission vehicles and how it evolved. Another credit discussed was the basic skills education credit and how it was claimed by businesses. Sen. Albers appears to envision a new process in reviewing tax credits and exemptions, although it would be similar to the now-required use of a fiscal note when a bill on tax issues is introduced for consideration by the General Assembly.
The Committee is trying to review 2015 data for these “incentives,” as it is the most current year with the most tax information from recent years. However, Revenue Commissioner Lynne Riley noted that 2015 is only partially processed thus far (as is 2016); this is due to corporations lagging with the filing and completing of their returns and the complexity of the tax filings. Ms. Riley also reminded the Committee that some of Georgia’s tax credits have “caps,” but those credits may not be fully utilized by taxpayers or such caps may be imposed due to federal limitations.
Sen. Albers and his colleagues have tentatively set a schedule for future meetings:
- August 22, 2017 (although this may be shifted to August 23) – North Georgia (likely at Caterpillar’s operations)
- September 29, 2017 (Savannah)
- October 27, 2017 (LaGrange or new Kia plant)
- November 14, 2017 (Atlanta at the Capitol)
The Committee was also asked to approve a “template” for its final report. Sen. Albers proposed a form much like what has been used by Ernst & Young with its work for Fulton County. It contains such fields as: description of the exemption/credit; bill number and date which created the exemption/credit; 2014 numbers on the exemption/credit; investment by the State; return on investment; intangible return; recommendations by the Committee; overview and intention behind the exemption/credit; other considerations; similar exemptions/credits; sunset information; and a chart for each.
There was some discussion about how Georgia’s Department of Economic Development uses existing credits to lure new business to the State. The Committee seems to be interested in how a “business case” may be initiated for new credits. Sen. Albers asked if one of the Senators might take that task on and work with Kelly McCutchen with the Georgia Public Policy Foundation to formulate such a template for a “case.”
Chaaron Pearson, with The PEW Charitable Trusts (“PEW”), was on hand and provided a presentation. She explained that PEW had first prepared a report on taxes in 2012 – that review looked at tax credits, grants, loans and other state incentives to determine if they were worth the price. She stated that, nationally, these types of incentives were around $40 billion on an annual basis. 21 states now require a regular evaluation of their tax incentives. For an effective evaluation, a state should: 1) make a plan; 2) measure the impact of the incentive; and 3) have informed policy choices. Ms. Pearson also noted that there were questions on “who” should conduct such evaluations – sometimes it is done by state staff; sometimes by professionals who are non-partisan; and sometimes by university research staff. A review schedule should include: 1) all major incentives; 2) a multi-year cycle (such as every three or six years); 3) incentives with similar goals; and 4) coordination with sunset dates of the incentives. This evaluation should measure the impact of the incentives – look at disruption of the incentive, history and goals of the incentive, and design and administration costs. In looking at making informed policy choices, the evaluation needs to determine if: 1) a new legislative committee is needed; 2) whether an existing legislative committee may be utilized; 3) it requires the Governor to make recommendations after the evaluation; and/or 4) an estimate of the expiration dates is needed on incentives. States can “tweak” laws for more return on investment and they are able to identify programs which work; alternatively, states may either repeal or replace an incentive.
There was a brief mention about the State of Alabama and its “scorecard” on incentive evaluations.
Laura Wheeler, with Georgia State University’s Andrew Young School of Policy Studies, also was present. She will be working with Sen. Albers and the Committee as it moves forward.
In public comment, there were two speakers:
- Kelly McCutchen, Georgia Public Policy Foundation, discussed looking at “opportunity cost” in creating exemptions/credits. Generally, his organization is skeptical on incentives. He also cautioned trying to apply sales tax on “input” costs in manufacturing and reviewing “special interests” in providing tax breaks.
- David Sutherland, AIA Georgia, spoke about the architects’ concern about the life cycle of a historic building tax credit and its payback. He asked that those elements be discussed when these exemptions/credits were evaluated.
Our 2017 Georgia Capitol team consists of Stan Jones, Helen Sloat, Chuck Clay, George Ray, and Logan Fletcher. We will also try our hand at tweeting this year – so follow us! @GDR_Live
The articles published in this newsletter are intended only to provide general information on the subjects covered. The contents should not be construed as legal advice or a legal opinion. Readers should consult with legal counsel to obtain specific legal advice based on particular situations.