New York fails to verify jobs created for tax incentive program
The Excelsior Jobs Program provides refundable tax credits to businesses in targeted industries.
DiNapoli’s auditors found a range of problems from lowering job creation goals after companies did not meet expectations to not verifying if jobs were full-time or part-time. ESD also could not produce evidence that several companies actually created jobs and did not simply shift jobs.
“New York state gives away millions of dollars each year in tax breaks for companies that are supposed to create jobs and expand under the Excelsior program, but ESD’s oversight leaves a lot to be desired,” DiNapoli said.
“ESD needs to stop lowering the bar and giving companies a pass when they fall short of promises. ESD needs to ensure these businesses are not taking advantage of state taxpayers.”
The Excelsior Jobs Program, established in 2010, provides refundable tax credits to businesses in targeted industries in exchange for creating and maintaining specific numbers of new jobs or making significant capital investments. The program replaced the Empire Zone Program and was aimed at bringing greater accountability to the companies’ for their economic development commitments.
ESD requires companies to submit an annual performance report to account for their annual job creation and investment totals, as well as other supporting documentation such as tax reports and invoice receipts for qualified investments. Companies need to meet at least 75 percent of the agreed-upon commitments to receive any benefits.
In one case auditors found ESD used a higher wage amount than was actually paid according to the tax forms.
Auditors examined 25 companies that, as of June 2015, were authorized to receive 39 tax credits totaling $4.84 million.
Specifically, DiNapoli’s auditors found ESD failed to exercise due diligence when approving any of the 25 sampled companies for participation in the program and does not follow its own protocol for scrutiny of applications.
ESD did not provide auditors with documentation to verify that the 25 companies met all of the eligibility requirements before being officially admitted into the program and could not verify the companies met the agreed-upon job growth and investment benchmarks for five of the 39 (13 percent) tax credits totaling $214,000.
For 34 of the 39 issued tax credits totaling $4.6 million, ESD provided auditors with worksheets that staff used to compile data to support their tax credit calculations. However, although ESD steadfastly maintains it gave the auditors all the information it had, most of the files lacked the documentation to support that ESD had actually exercised due diligence and taken steps to verify the reported amounts.
For example, on 31 of the worksheets provided, ESD workers made notations indicating they had compared their data with information contained on corroborating state tax forms. Yet, those forms were present for only a very few companies.
In one case where information was available, auditors found ESD used a higher wage amount than was actually paid according to the tax forms. This resulted in at least $187,062 in excess tax credits being authorized to this company for 2012.
In addition, 11 of the worksheets were for credits based on promised investments and each indicated that ESD staff had reviewed company invoices to support investments made.
However, ESD provided auditors with complete corroborating support for only eight of the 39 tax credits, accounting for just $417,000 (less than 9 percent) of the $4.84 million.
For four of the 34 tax credits for which ESD provided supporting worksheets, auditors found that ESD adjusted the original annual job creation commitment numbers after the fact to align with the lower job creation totals that the companies had actually attained.
As a result, the three companies involved received a total of $358,329 in tax credits to which they would otherwise not have been entitled.
For two of the revisions, ESD could not provide evidence from the company justifying the need for the revision – including one company whose 2012 job commitment was reduced from 600 to 363 for no apparent reason.
Another company subsequently closed operations after being authorized to receive $556,446 in tax credits. ■