What's happening
This bill requires standardized reporting, disclosure, and recapture provisions for corporations or authorities receiving state development tax incentives.
Why it matters
Creates new transparency and accountability mechanisms. by requiring detailed, standardized applications and annual progress reports from all recipients of state economic development assistance, ensuring the public and lawmakers know who is receiving tax breaks, how much, and what jobs or investments are promised.
Enforces strict job creation and retention requirements. as a condition for receiving incentives, mandating that companies and authorities must meet specified employment targets or face mandatory “clawbacks” (repayment/recapture) of tax credits, grants, or exemptions if they fall short.
Centralizes and publishes data on incentive programs. by directing the Department of Taxation and Finance to aggregate, compile, and disclose all development assistance activity—including outcomes, compliance, and recapture efforts—subject to the Freedom of Information Act, enabling oversight and analysis of economic development spending.
Limits loopholes and increases scrutiny over economic development deals. by defining key terms (such as what counts as a “new employee”), requiring certifications of truthfulness, and granting state agencies explicit authority to verify compliance, inspect records, and suspend future aid for non-compliance, thus reducing the risk of abuse or ineffective spending.
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Who cares
Headline styles
Hold Corporations Accountable for Taxes
Plain English, a few words. Used as the page title.
Sponsors
3 Co-sponsors
History
- Referred to corporations, authorities and commissions
- Referred to corporations, authorities and commissions
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Hold Corporations Accountable for Tax Breaks
In Assembly Committee · Corporations, Authorities And Commissions · Sponsor Ron Kim
Full text
12 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1923
2019-2020 Regular Sessions
IN SENATE
January 17, 2019
Introduced by Sens. KRUEGER, BAILEY, PARKER -- read twice and ordered printed, and when printed to be committed to the Committee on Corporations, Authorities and Commissions
AN ACT to amend the business corporation law and the public authorities law, in relation to enacting the "corporate accountability for tax expenditures act"
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Short title. This act shall be known and may be cited as the "corporate accountability for tax expenditures act".
§ 2. The business corporation law is amended by adding a new article 14 to read as follows:
ARTICLE 14
CORPORATE ACCOUNTABILITY FOR TAX EXPENDITURES Section 1401. Definitions.
1402. Unified economic development budget.
1403. Standardized applications for state development assist-
ance.
1404. State development assistance disclosure.
1405. Recapture. § 1401. Definitions.
As used in this article:
(a) "Base years" means the first two complete calendar years following the effective date of a recipient receiving development assistance.
(b) "Date of assistance" means the commencement date of the assistance agreement, which date triggers the period during which the recipient is obligated to create or retain jobs and continue operations at the specific project site.
(c) "Default" means that a recipient has not achieved its job creation, job retention, or wage or benefit goals, as applicable, during the prescribed period therefor.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06627-01-9
S. 1923 2
(d) "Department" means, unless otherwise noted, the department of taxation and finance or any successor agency.
(e) "Development assistance" means (1) tax credits and tax exemptions (other than given under tax increment financing) given as an incentive to a recipient business organization pursuant to an initial certification or an initial designation made by the department under article eighteen-A or eighteen-B of the general municipal law;
(2) all successor and subsequent programs and tax credits designed to promote large business relocations and expansions. "Development assistance" does not include tax increment financing, assistance provided by industrial development agencies under article eighteen-A or eighteen-B of the general municipal law pursuant to local ordinance, participation loans, or financial transactions through statutorily authorized financial intermediaries in support of small business loans and investments or given in connection with the development of affordable housing.
(f) "Development assistance agreement" means any agreement executed by the state granting body and the recipient setting forth the terms and conditions of development assistance to be provided to the recipient consistent with the final application for development assistance, including but not limited to the date of assistance, submitted to and approved by the state granting body.
(g) "Full-time, permanent job" means a job in which the new employee works for the recipient at a rate of at least thirty-five hours per week.
(h) "New employee" means a full-time, permanent employee who represents a net increase in the number of the recipient's employees statewide. "New employee" includes an employee who previously filled a new employee position with the recipient who was rehired or called back from a layoff that occurs during or following the base years.
The term "new employee" does not include any of the following:
(1) An employee of the recipient who performs a job that was previously performed by another employee in this state, if that job existed in this state for at least six months before hiring the employee.
(2) A child, grandchild, parent, or spouse, other than a spouse who is legally separated from the individual, of any individual who has a direct or indirect ownership interest of at least five percent in the profits, capital, or value of any member of the recipient.
(i) "Part-time job" means a job in which the new employee works for the recipient at a rate of less than thirty-five hours per week.
(j) "Recipient" means any business that receives economic development assistance. A business is any corporation, limited liability company, partnership, joint venture, association, sole proprietorship, or other legally recognized entity.
(k) "Retained employee" means any employee defined as having a fulltime or full-time equivalent job preserved at a specific facility or site, the continuance of which is threatened by a specific and demonstrable threat, which shall be specified in the application for development assistance.
(l) "Specific project site" means that distinct operational unit to which any development assistance is applied.
(m) "State granting body" means the department, any other state department or state agency that provides development assistance that has reporting requirements under this article, and any successor agencies to any of the preceding.
(n) "Temporary job" means a job in which the new employee is hired for a specific duration of time or season.
S. 1923 3
(o) "Value of assistance" means the face value of any form of development assistance. § 1402. Unified economic development budget.
(a) For each state fiscal year ending on or after June thirtieth, two thousand twenty, the department shall submit an annual unified economic development budget to the governor, senate and assembly. The unified economic development budget shall be due within three months after the end of the fiscal year, and shall present all types of development assistance granted during the prior fiscal year, including:
(1) The aggregate amount of uncollected or diverted state tax revenues resulting from each type of development assistance provided pursuant to law, as reported to the department on tax returns filed during the fiscal year.
(2) All state development assistance.
(b) All data contained in the unified economic development budget presented to the governor, senate and assembly shall be fully subject to the freedom of information act.
(c) The department shall submit a report of the amounts in subparagraph one of paragraph (a) of this section to the department, which may append such report to the unified economic development budget rather than separately reporting such amounts. § 1403. Standardized applications for state development assistance.
(a) All final applications submitted to the department or any other state granting body requesting development assistance shall contain, at a minimum:
(1) An application tracking number that is specific to both the state granting agency and to each application.
(2) The office mailing address, office telephone number, and chief officer of the granting body.
(3) The office mailing address, telephone number, and the name of the chief officer of the applicant or authorized designee for the specific project site for which development assistance is requested.
(4) The applicant's total number of employees at the specific project site on the date that the application is submitted to the state granting body, including the number of full-time, permanent jobs, the number of part-time jobs, and the number of temporary jobs.
(5) The type of development assistance and value of assistance being requested.
(6) The number of jobs to be created and retained or both created and retained by the applicant as a result of the development assistance, including the number of full-time, permanent jobs, the number of parttime jobs, and the number of temporary jobs.
(7) A detailed list of the occupation or job classifications and number of new employees or retained employees to be hired in full-time, permanent jobs, a schedule of anticipated starting dates of the new hires and the anticipated average wage by occupation or job classification and total payroll to be created as a result of the development assistance.
(8) A list of all other forms of development assistance that the applicant is requesting for the specific project site and the name of each state granting body from which that development assistance is being requested.
(9) A narrative, if necessary, describing why the development assistance is needed and how the applicant's use of the development assistance may reduce employment at any site in New York.
S. 1923 4
(10) A certification by the chief officer of the applicant or his or her authorized designee that the information contained in the application submitted to the granting body contains no knowing misrepresentation of material facts upon which eligibility for development assistance is based.
(b) Every state granting body either shall complete, or shall require the applicant to complete, an application form that meets the minimum requirements as prescribed in this section each time an applicant applies for development assistance covered by this article.
(c) The department shall have the discretion to modify any standardized application for state development assistance required under paragraph (a) of this section for any grants that are not given as an incentive to a recipient business organization. § 1404. State development assistance disclosure.
(a) Beginning February first, two thousand twenty-one and each year thereafter, every state granting body shall submit to the department copies of all development assistance agreements that it approved in the prior calendar year.
(b) For each development assistance agreement for which the date of assistance has occurred in the prior calendar year, each recipient shall submit to the department a progress report that shall include, but not be limited to, the following:
(1) The application tracking number.
(2) The office mailing address, telephone number, and the name of the chief officer of the granting body.
(3) The office mailing address, telephone number, and the name of the chief officer of the applicant or authorized designee for the specific project site for which the development assistance was approved by the state granting body.
(4) The type of development assistance program and value of assistance that was approved by the state granting body.
(5) The applicant's total number of employees at the specific project site on the date that the application was submitted to the state granting body and the applicant's total number of employees at the specific project site on the date of the report, including the number of fulltime, permanent jobs, the number of part-time jobs, and the number of temporary jobs, and a computation of the gain or loss of jobs in each category.
(6) The number of new employees and retained employees the applicant stated in its development assistance agreement, if any, if not, then in its application, would be created by the development assistance broken down by full-time, permanent, part-time, and temporary.
(7) A sworn declaration of whether the recipient is in compliance with the development assistance agreement.
(8) A detailed list of the occupation or job classifications and number of new employees or retained employees to be hired in full-time, permanent jobs, a schedule of anticipated starting dates of the new hires and the actual average wage by occupation or job classification and total payroll to be created as a result of the development assistance.
(9) A narrative, if necessary, describing how the recipient's use of the development assistance during the reporting year has reduced employment at any site in New York.
(10) A certification by the chief officer of the applicant or his or her authorized designee that the information in the progress report
S. 1923 5
contains no knowing misrepresentation of material facts upon which eligibility for development assistance is based.
(c) The state granting body, or a successor agency, shall have full authority to verify information contained in the recipient's progress report, including the authority to inspect the specific project site and inspect the records of the recipient that are subject to the development assistance agreement.
(d) By June first, two thousand twenty-one and by June first of each year thereafter, the department shall compile and publish all data in all of the progress reports in both written and electronic form.
(e) If a recipient of development assistance fails to comply with paragraph (b) of this section, the department shall, within twenty working days after the reporting submittal deadlines set forth in such paragraph (b), suspend within thirty-three working days any current development assistance to such recipient under its control, and shall be prohibited from completing any current or providing any future development assistance until it receives proof that such recipient has come into compliance with the requirements of paragraph (b) of this section.
(f) The department shall have the discretion to modify the information required in the progress report required under paragraph (b) of this section consistent with the disclosure purpose of this section for any grants that are not given as an incentive to a recipient business organization. § 1405. Recapture.
(a) All development assistance agreements shall contain, at a minimum, the following recapture provisions:
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the business corporation law and the public authorities law, in relation to enacting the "corporate accountability for tax expenditures act"
Purpose
To provide a comprehensive record of all economic development incentives that are entered into between state entities and businesses in order for the Legislature and the Governor to make well informed decisions about tax expenditures.
Summary of provisions
Creates the State Corporate Accountability for Tax Expenditures Act. Provides that State economic assistance provided by any state agency, public authority and/or public benefit corporation, as an incentive to a business organization must be based on the terms of a written incentive agreement between the department and the business organization. Every agreement must identify the specific State economic assistance to be provided to the business organization during the term of the agreement and lists terms the agreement must contain. Provides that State economic assistance incentive agreements must provide that if a business organ- ization either fails to make the requisite level of capital investment in the project or fails to create or retain the specified number of jobs within the specified time frame, as provided under the Act authorizing the State economic assistance, the business organization shall be deemed to no longer qualify for the State economic assistance. Provides that the full content of all written incentive agreements are to be published.
Read the full memo (1,505 words)
Existing law
None.
Justification
Every year, New York State spends billions of dollars on economic devel- opment incentives and subsidies, mostly for large businesses. These subsidies take many forms: corporate income tax credits, property tax abatements, low-interest loans, empire zone credits, rebates, utility rate reductions, deferrals on taxes that would otherwise be paid, incen- tives to invest in research and development, training grants, land site preparation and infrastructure financing. In return, companies promise economic development, especially the creation of new jobs and/or promise assistance to lower income and/or elderly New Yorkers.
There is currently no comprehensive system of standards or oversight for the distribution of economic development subsidies and incentives. These subsidies are usually offered through off-budget public authorities (of which there are more than 600 in New York State) or as tax expenditures built in the State budget, but rarely approved as freestanding legis- lation. Decisions about the allocation of economic incentives and evalu- ation of the economic benefits to residents of New York State provided by those incentives are not subject to significant public or legislative scrutiny or review. In fact, it is currently not possible for New York State to accurately calculate the cost effectiveness of these incen- tives. Once granted, measures initiated in the name of economic develop- ment are seldom audited nor do they sunset, especially those that relate to tax breaks.
The state's structural budget problems mean that we must ensure public transparency and ongoing review of expended dollars and lost state revenues. We need to evaluate whether these models are working. A comprehensive cost/benefit analysis would detail the benefits that are provided in comparison to the other proposed uses of state funds. The impact of inequities in our tax policies due to the use of industry specific tax expenditures should also be addressed. We need to exercise due diligence through legislative and public oversight to make sure that programs are run efficiently and that the state gets the best return for the public for each state dollar that is spent. Dollars spent on econom- ic development incentives and tax breaks should be reviewed with the same degree of scrutiny as dollars spent on all other government programs.
Many of the corporate tax expenditures were enacted for the purpose of encouraging investment and job creation in New York. However, the effi- cacy of the expenditures have yet to be analyzed and measured. By having the Tax Department submit a report on all of the State's tax expendi- tures, credits, deductions, exclusions, exemptions or any other tax benefits to the Senate, Assembly and the Governor, informed decisions can be made based on the efficacy of the existing programs. All too frequently, the state has provided subsidies, loans and tax breaks to companies that then failed to create jobs as promised. The accountabil- ity procedures for keeping track of the subsidy process are weak. Gener- al outcome reports, which are meant to provide details of the state's job-creation and tax-credit programs, are not reported, are incomplete, not filed annually, or ignore the details of the reporting requirements. Comprehensive audits, prepared by the comptroller's office, found that 93 of 152 program-specific reports were never completed and only 15 of 173 subsidiaries connected to Empire State Development (ESD) filed an annual report at all.
Critics claim that corporations would relocate to New York without large tax breaks and that targeted economic development incentives fail to produce economic growth. Economic Development Councils (EDC) have pledged more than $4.4 billion to 5,300 projects since 2011, but site little to no job creation goals. Local Development Corporations (LDC) offered a total of $1.3 billion in tax breaks to 1,660 projects between 2010 and 2015, producing only 1,686 jobs, considerably lower than the 9,136 promised. Industrial Development Agencies (IDA) also fell short on their stated goals. Between 2010 and 2015, costs of IDA's rose 22 percent while the tax exemptions for the projects grew by 44 percent.
The most notable tax subsidy is with Tesla's Solar City. In 2012, Gover- nor Andrew Cuomo announced.the Buffalo Billion program. Solar City would receive $750 million in cash and tax incentives in exchange for building a solar panel manufacturing factory. The original agreement would have created 1460 new jobs within two years, another 1440 new jobs with suppliers and service providers, and 5000 new jobs within ten years to help to reverse Buffalo's 40 year economic decline. However, the agree- ment has been revised 10 times over the last four years. The requirement to bring in 1440 suppliers was ultimately waived. In 2016, Solar City was in dire financial shape. It was sold to Panasonic, Tesla's battery partner, who would then manufacture solar panels as a subtenant under Tesla. This newer Tesla team has surpassed its first employment target which is to create 500 jobs by April of 2019. However, the manufacturer still needs to more than double the current workforce of 600-700 to meet the second target by 2020. Tesla's solar energy deployments are down by 50%. Tesla is also no longer the nation's biggest rooftop installer and will only provide half the stated capacity of the Buffalo factory by 2018 year end. Newly added tariffs on imported solar panels have altered the cost-benefit equation of the contract.
Amazon's November 2018 announcement to build two new state of the art e-commerce headquarters one in Crystal City, VA and the other in Long Island City (LIC), NY again raised concerns over proposed tax incen- tives.
Amazon will invest $3.68 billion over 15 years. Other highlights of the agreement include Amazon's commitment to build a state of the art tech center, offer workforce development and job training as well as much needed infrastructure development. In exchange, New York will offer Amazon up to $1.7 billion in incentives on a post-performance basis if the company creates as many as 40,000 jobs. The State commitment includes $505 million in capital grants and $1.2 billion in Excelsior Jobs tax credits.
Amazon will also receive $897 million in Relocation and Employment Assistance Program (REAP) and $386 million from the Industrial & Commer- cial Abatement Program (ICAP). This brings the total amount of public funds granted to $2.988 billion.
LIC community members are concerned about the impact of Amazon's deal. Residents worry about losing their small businesses, their homes or being driven out by increased property taxes. Whatever the outcome of these recent deals, pressure continues to create oversight and account- ability as a means to halt completely unnecessary giveaways to some of the world's richest companies. As New York continues to encourage economic development opportunities, these types of fiscally unsound incentive programs must be monitored.
In addition to real job creation, companies should be expected to have a record of good corporate citizenship if they are going to receive public support. Currently there are no such standards. If subsidies are really going to benefit the people of New York, the businesses that receive them should be required to pay living waves, avoid criminal activity, and work with the communities in which they are located.
Legislative history
2017-18 S3364-A/No Same as - died in committee 2015-16 S3109/A6180-A Kavanagh - died in committee 2013-14 S3449/A2062-A Kavanagh - died in committee 2011-12 S446-A/A5920-A Kavanagh - died in committee 2009-10 S750/A557 Kavanagh - died in committee 2007-08 S3337/A8227 Kavanagh - died in committee 2005-06 S2414/A2026 Brodsky - died in committee 2004 S5921/A10231 Brodsky - died in committee
Fiscal implications
Increase in cost for additional audit equipment.
Local fiscal implications
Increase in cost for additional audit equipment.
Effective date
This act shall take effect on the one hundred twentieth day after it shall have become a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.