Requires the commissioner to publish an annual refundable tax credit report by January 31st

Summary of provisions

Section 1 of the bill would add a new Tax Law §171-t requiring the Commissioner to publish an annual refundable tax credit report, begin- ning by January 31, 2011. To the extent practicable, the report would provide the name of each taxpayer claiming a refundable business tax credit and the amount of each credit earned. Section 1 of the bill further provides that if the credit is generated by the activities of a limited liability company, a partnership, or a Subchapter S corporation, the report will include only the name of the entity and the amount of credit generated by the entity. The names of the individual members, partners, or shareholders will not be disclosed.

Section 2 of the bill provides for an immediate effective date.

Existing law

This is a new provision. However, there is some precedent for entity level tax credit information reporting. A similar reporting requirement was contained in the recently enacted Brownfield reform legislation (Chapter 390 of the Laws of 2008).

Statement in support

The pace of enactment of tax credits designed to achieve some sort of economic development goal or business purpose has increased considerably in recent years. The first tax credit - the investment tax credit - was created in 1969. In the ensuing 25 year period, there were only B tax credits available. However, between 1995 and 2007, 29 credits were enacted, 12 of which have been enacted since 2005. Currently, there are 36 business tax credits available to taxpayers.

The pace of refundable credits has accelerated as well. Nine of the 12 credits enacted since 2005 are refundable. These 9 are nearly half of all refundable tax credits. The other 12 refundable credits were enacted in the 35 year period between 1969 and 2004.

Refundable credits have unique characteristics that warrant further scrutiny. By definition, they equal amounts in excess of tax liability. Therefore, they no longer represent an alleviation of a tax burden. Rather, refundable credits act as a subsidy delivered through the tax system instead of the appropriations process. The magnitude of the excess is significant as well. Generally, the credit refund vastly exceeds a taxpayer's tax liability. For example, in 2005, general busi- ness corporations claiming a refund of the QEZE real property tax credit paid $16 million in liability, but received refunds totaling nearly $73 million. Finally, because credits are part of a taxpayer's return useful information on credit utilization is delayed by tax filing and process- ing timelines and is protected by taxpayer confidentiality statutes. Although credit refunds are essentially state grants for desired activ- ities, the Department of Taxation and Finance ("Department") is prohib- ited from revealing information that might help policymakers evaluate the success or failure of the credit in meeting its intended goals.

The Department routinely receives numerous requests for credit informa- tion from the Division of the Budget, other state agencies, the Legisla- ture, the press, and outside interest groups. Data about refundable tax credits is viewed as critical for long-term State financial planning and the formulation of economic development and social policy. Information about credits is crucial during budget-making, the development and adjustment of the forecasts for the State financial plan, and other fiscal activities. Disclosure of refundable tax credit information would provide a better understanding of the impact of various State policies in general and the efficacy of specific tax credits in particular.

Legislative history

This is a new bill.

Budget implications

This bill will not have an impact on state finances.

Effective date

This bill would take effect immediately.