Budget Amendment ID: FY2018-S3-294

GOV 294

Tax Expenditure Review

Messrs. Humason, Tarr and Ross moved that the proposed new text be amended by striking out section 8 and inserting in place thereof the following section:-

SECTION 8. Chapter 14 of the General Laws is hereby amended by adding the following section:-

Section 14. (a) There shall be within the Department of Revenue, but not subject to its supervision or control, a tax expenditure review commission that shall examine and evaluate the administration, effectiveness and fiscal impact of tax expenditures as defined in section 1 of chapter 29 and as presented with the governor’s proposed budget under section 5B of said chapter 29. The commission shall consider the public policy objectives behind the grant of any tax expenditure and the metrics of measuring success in meeting those objectives and shall make recommendations as to whether the tax expenditure should be repealed, sunset, amended to  better achieve its policy goals and metrics or permitted to continue in its current form.

(b) The commission shall consist of 7 members, the Commissioner of the Department of Revenue or a designee, who shall serve as chair; the secretary of administration and finance or a designee; the inspector general or a designee; the state treasurer or a designee; and 3 members who shall be appointed by a majority vote of the ex officio members and have experience in economics or tax policy. The 3 appointed commission members shall each serve 3-year terms and may be eligible for reappointment upon a majority vote of the 4 ex officio members. The commission shall be staffed by the department of revenue.

(c) The commission shall establish a schedule to review tax expenditures so that each expenditure shall be reviewed at least once every 5 years; provided, however, that the commission shall not review personal income tax expenditures more than once every 10 years. The review schedule may group tax expenditures by the individuals or industries benefitting from the expenditures, the objectives of the expenditures or the policy rationale of the expenditures. The commission’s review of each tax expenditure shall include the date the tax expenditure was enacted and the statutory citation.

(d) Pursuant to the schedule established in subsection (c), the commission shall evaluate, using best practices and standardized criteria:

(i) the purposes, intent and goals of each tax expenditure and whether the  expenditure is an effective means of accomplishing those ends;

(ii) the fiscal impact of each tax expenditure on state and local taxing authorities, including past fiscal impacts and expected future fiscal impacts;

(iii) the economic impact of each tax expenditure including, but not limited to, revenue loss compared to economic gain and jobs created, retained or lost as a result of the tax expenditure;

(iv) the extent to which the purpose, intent or goal may have occurred without the tax expenditure;

(v) the extent to which the commonwealth’s administration of the tax expenditure, including enforcement efforts, is efficient and effective;

(vi) the extent to which there are other local, state or federal tax expenditures, direct expenditures or other programs that have similar purposes, intent or goals as the tax expenditure and the extent to which such similar initiatives are coordinated, complementary or  duplicative;

(vii) similar tax expenditures, if any, offered by other states and the impact of the  tax expenditure on regional and national economic competitiveness; and

(viii) the extent to which the tax expenditure is a cost-effective use of resources.

(e) For each tax expenditure reviewed, the commission shall provide a recommendation  as to whether the tax expenditure should be repealed, allowed to sunset, amended to better achieve its policy goals and metrics or allowed to continue in its current form.

(f) The commission shall have access to documents and information, including aggregated tax return information and related documents maintained by the department of revenue necessary for the performance of the commission’s duties under this section but excluding information provided to  the commonwealth by other federal and state tax agencies where such access is prohibited by law; provided, however, that tax returns and related documents shall not include a taxpayer’s personal identifying information and such returns and documents shall be confidential and exempt from disclosure as a public record. The commission, in collaboration with the department of revenue, shall adopt policies and procedures to ensure taxpayer confidentiality.

(g) Annually, not later than November 1, the commission shall report the results of its findings and activities of the preceding year and its recommendations to the clerks of the senate and house of representatives who shall forward the same to the chairs of the senate and house committees on ways and means and the chairs of the joint committee on revenue. The report shall include all information required to be reviewed by this section and recommendations, as required under subsection (e), for each tax expenditure reviewed. All reports shall be made available electronically and prominently displayed on the official website of the department of revenue