Watchdog agencies seek new powers to monitor tax credits
State Auditor Suzanne Bump and Inspector General Glenn Cunha both want access to Department of Revenue information that they said would allow them to provide oversight to the state's sundry tax credit programs.
"There hasn't been independent review of any tax credit programs," Cunha told the Revenue Committee on Tuesday.
In written testimony, Bump addressed the scale of corporate tax credits within the roughly $38.1 billion state budget.
"Massachusetts corporate tax expenditure budget accounts for $3.2 billion in foregone tax revenue for [fiscal 2016]. However unlike with MassHealth and [Department of Transitional Assistance], my office is effectively powerless to ensure that the use of most tax credits, incentives and deductions by businesses is properly overseen by the Department of Revenue," Bump told lawmakers. "Additionally, there is currently no process for determining whether these tax credits, deferrals, and incentives actually work. Let me repeat that, we have no way of knowing if a $3.2 billion program is working."
Bump said her office's Bureau of Special Investigations, which pursues welfare fraud, has access to personal tax returns, while corporate returns remain a mystery. She said that the auditor's office has "no idea" who buys transferable tax credits, and cities and towns have "no way of knowing" whether the Department of Revenue is properly giving them the "full value" of local room taxes. Bump said her bill (H 6) would allow the office to dig into more waste, fraud and abuse.
Sometimes controversial but securely lodged in state law, corporations and individuals have a long menu of tax breaks. A budget of tax expenditures shows tax credits available for shuttle vans, certain harbor maintenance taxes paid to the U.S. Customs Service, and historic renovation projects. This year Gov. Charlie Baker proposed repealing the state's film tax credit.
Cunha told the News Service that his office could initiate an investigation into the film tax credit with the additional authority to obtain data from the Department of Revenue that his bill (H 12) would provide.
Tax data could help Cunha verify information submitted by film production companies and see what percentage of the credits go to in-state expenses.
"The film tax credit gives the same credit whether the expense is made in Massachusetts or California, and so why are we giving a credit for an expenditure that happened in another state?" Cunha asked.
Rep. Randy Hunt, a Sandwich Republican and accountant, questioned whether granting Cunha new authority would allow him to mine the data for investigatory targets. Cunha said the office would be limited to using tax data for "open investigations."
Cunha also said the inspector general's office has not tested its ability to force the department to release data through legal action. He said statutes used by his office and the Department of Revenue are inconsistent about whether the inspector general should be granted access to the information.
"Our interest really hasn't been to be adversarial to DOR," Cunha said. Cunha said his office is limited to determining whether state money was spent properly. When asked if he thought Bump should have the additional authority she is seeking, Cunha said he is concentrating on his own bill.
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