BILL NUMBER:  S3888

 TITLE OF BILL :

An act to amend the tax law, in relation to annual reports on
refundable tax credits


 PURPOSE

This bill would require the Commissioner of Taxation and Finance
("Commissioner") to publish an annual report identifying the names of
taxpayers receiving refundable business tax credits and the amounts of
those credits.

 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,
beginning by January 31, 2010. 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 of2008).

 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 8 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 Therefore, they no longer represent an alleviation of a tax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 business 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 processing timelines and is protected by
taxpayer confidentiality statutes. Although credit refunds are
essentially state grants for desired activities, the Department of
Taxation and Finance ("Department") is prohibited 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
information from the Division of the Budget, other state agencies, the
Legislature, 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.