Missouri has levied $1M in tax credit penalties

JEFFERSON CITY, Mo. | Missouri has levied more than $1 million of penalties against dozens of tax credit recipients for violating a state reporting law intended to gauge whether their projects actually are producing the promised results.

Records provided Friday to The Associated Press show 56 business entities, nonprofit groups and individuals have failed to comply with a 2004 state law requiring annual progress reports after receiving tax credits.

The state economic development and revenue agencies initially refused to release the identities of those penalized. But the Department of Economic Development reversed course Friday after the AP contacted Gov. Jay Nixon’s office for comment about whether he believed the records should be kept secret.

The list of tax credit recipients flouting the reporting requirements include major employers, such as Harley-Davidson Motor Co., as well as numerous developers who got historic preservation tax credits to remodel old buildings. A spokesman for Harley-Davidson attributed the problem to a paperwork mix-up.

Some of Missouri’s tax credit programs — including ones for housing developments and historic renovation projects —are among the most generous in the nation. The state waives more than $500 million of income taxes annually as incentives for developers, businesses and social causes such as food panties and domestic violence shelters.

A commission appointed by Nixon recommended this week that lawmakers should end almost half the state’s tax credit programs and revamp many of the remaining ones, cutting the total cost to the state by as much as $220 million a year. If enacted, it would mark the most sweeping changes to the programs since the Tax Credit Accountability Act of 2004.

That law came about following revelations that Missouri had issued more than $2 million of tax credits to businesses that may not have actually existed for purported computer equipment that never actually was bought. At the time, the Department of Economic Development said Missouri law allowed it to release only the name and dollar amount of tax credit recipients, but no further details about the projects.

The 2004 law made information about tax credit recipients an open record under Missouri’s Sunshine Law, expanded the details they must provide to the state and required annual reports for three years after the issuance of the credits. Businesses, for example, are required to provide their number of employees, and updated estimates of how many new employees will be hired and how much the project will cost.

If tax credit recipients are six months late on their reports, they are to be penalized an amount equal to 2 percent of the value of the credits issued for each month they are late. If they still haven’t filed a report a year after the deadline, the penalty increases to 10 percent of the value of the tax credits for each month they are late until eventually reaching a 100 percent penalty.

According to the Department of Revenue, Missouri has sent nearly $1.1 million of penalty notices to 56 tax credit recipients who missed the reporting deadline since it began on June 30, 2006. That includes $566,547 of penalties assessed to 16 historic renovation projects and $250,098 in penalties assessed to the recipients of eight movie production tax credits.

The Revenue Department declined to release any names, citing a state law shielding taxpayer information that it handles. The Economic Development Department also initially refused to release names, claiming that same law also applied to the missed accountability reports because the agency had submitted the information to the Department of Revenue.

After what Nixon spokesman Scott Holste described as an intense review, the Department of Economic Development ultimately released the names of the tax credit recipients it turned over for penalty enforcement.

Harley-Davidson, which has a manufacturing plant in Kansas City, was the largest and most prominent tax credit recipient on the late list. It was cited for missing a June 30, 2009, deadline to report on $5.5 million of tax credits.

Harley-Davidson spokesman Bob Klein said Friday that the motorcycle maker had received tax breaks under two different Missouri programs but had filed a report on a single form.

“Revenue had assessed a penalty, but they subsequently waived that,” Klein said. “It was just a mix up on the forms.”

Jazz Hill Homes, which renovated 11 historic apartment buildings in Kansas City, was cited for missing reporting deadlines in 2008 on about $3 million in tax credits. Ross Freeman, the president of Pioneer Group Inc., which originally was involved in the project, said he had filed reports on a timely basis but added that his firm sold its interest several years ago to an Ohio company. A phone number for that company was disconnected.

Kansas City attorney Jean Maneke, a Sunshine Law expert, said state attorneys had “a pretty good leg to stand on” in originally denying a detailed list of penalized tax credit recipients. But “I don’t think that’s what the intent was in the statute,” she said.

Former Republican Sen. Michael Gibbons, of Kirkwood, who sponsored the 2004 law, said the intent was to make more information publicly available about tax credits so that lawmakers could evaluate whether they were truly producing a benefit.

“The whole purpose of making this available and public was to enhance accountability,” Gibbons said. “If somebody’s not filing their annual reports . . . you need to know who’s holding up and who isn’t. So I would think it would be public.”