Report 2015-127 Recommendations

When an audit is completed and a report is issued, auditees must provide the State Auditor with information regarding their progress in implementing recommendations from our reports at three intervals from the release of the report: 60 days, six months, and one year. Additionally, Senate Bill 1452 (Chapter 452, Statutes of 2006), requires auditees who have not implemented recommendations after one year, to report to us and to the Legislature why they have not implemented them or to state when they intend to implement them. Below, is a listing of each recommendation the State Auditor made in the report referenced and a link to the most recent response from the auditee addressing their progress in implementing the recommendation and the State Auditor's assessment of auditee's response based on our review of the supporting documentation.

Recommendations in Report 2015-127: Corporate Income Tax Expenditures: The State's Regular Evaluation of Corporate Income Tax Expenditures Would Improve Their Efficiency and Effectiveness (Release Date: April 2016)

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Recommendations to Legislature
Number Recommendation Status
1

To increase oversight of existing and future tax expenditures through the use of best practices, the Legislature should consider enacting a joint legislative rule requiring specific goals, purposes, and objectives as well as detailed performance indicators for all tax expenditure types, including elections and exemptions.

2

To increase oversight of existing and future tax expenditures through the use of best practices, the Legislature should consider enacting a joint legislative rule to require sunset dates for all future tax expenditures.

3

To increase oversight of existing and future tax expenditures through the use of best practices, the Legislature should consider enacting a law requiring a state entity to conduct a comprehensive evaluation of all tax expenditures and develop conclusions and recommendations to continue, modify, or repeal each of them. The state entity should have the necessary resources and a reasonable time frame for analysis.

4

To increase oversight of existing and future tax expenditures through the use of best practices, the Legislature should consider enacting a joint legislative rule requiring a legislative body to consider the state entity's conclusions to aid it in developing recommendations to continue, modify, or repeal every tax expenditure.

5

To ensure that the research and development (R&D) credit is effectively fulfilling its purpose, the Legislature should consider commissioning a study on the cost-effectiveness of the R&D credit for stimulating additional R&D activity or new jobs within the State, including an impact analysis on how the credit affects the state economy. The study should also define performance metrics for use in subsequent reports.

6

To ensure that the minimum franchise tax exemption is effectively fulfilling its purpose, the Legislature should consider commissioning an evaluation of it to determine if it is effectively encouraging business formation within the State.

7

To improve the effectiveness of the water's edge election, the Legislature should consider modifying it to include tax havens within the water's edge and thus subject to state tax apportionment.

8

To improve the effectiveness of the water's edge election, the Legislature should consider making it mandatory and require all multinational corporations to exclude foreign income, except tax havens, from state tax apportionment.

9

To improve the effectiveness of the low-income housing credit, the Legislature should consider allowing low-income housing developers to sell project credits to investors in a manner that reduces the federal tax implications for investors who claim the credit.

10

If not otherwise addressed by the LAO's planned report on the film and television credit, the Legislature should commission a study to determine how to limit instances in which the credit benefits projects that would have filmed in the state without it.



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