By Bryan Lowry, July 14, 2015
Kansas handed out tax credits for plugging abandoned oil wells and shooting a movie in the state in 2013, but the state Department of Revenue won’t say how much they were worth or who got them.
That’s confidential.
The agency will not disclose the value of a credit if fewer than five tax filers take advantage of it.
It says the longstanding policy is needed to preserve taxpayer privacy.
But watchdog groups say that policy makes it difficult to investigate the effectiveness of certain tax credits. And some lawmakers say it hampers their ability to make decisions on tax policy.
By comparison,
Missouri has made such information public
and easily accessible through a few clicks on a computer keyboard.
In Kansas, it’s public information that five tax filers took advantage of a credit for making buildings accessible to the disabled at a total cost of $10,165 to the state in 2013. If one fewer person had used the credit, the information would be sealed.
The department will not say how many filers used a film production tax credit, which required the state to pay 30 percent of production costs for a movie shot in Kansas that same year.
The department also won’t disclose the cost of a tax credit for banks and insurance companies that invest in stock issued by Kansas Venture Capital Inc.
The revenue department’s yearly report on tax expenditures
shows the state spent at least $622 million in 2013 on income and privilege tax credits, which allow qualifying taxpayers to subtract from the amount of taxes they owe for a wide range of reasons.
But that dollar figure is incomplete. The total amount is confidential. That’s because even the total spent on the confidential credits is kept secret.
Kansas law doesn’t specifically bar the Department of Revenue from releasing these numbers. The statute empowers the agency to release statistics related to tax policy but forbids it from releasing individual taxpayers’ information.
The agency has interpreted that as preventing the release of the numbers when there are fewer than five beneficiaries.
“The rationale is that by law, taxpayer data is confidential. … When we are dealing with taxpayer data for five or fewer taxpayers, there is a risk that disclosure of this data may in fact reveal confidential data concerning one or more taxpayers within that group,” Jeannine Koranda, the agency’s spokeswoman, wrote in an e-mail.
Even disclosing the aggregate total for the 31 different credits listed as confidential would violate the agency’s policy, Koranda said.
“The policy, which has been in place for almost 40 years, was developed to strike a balance between confidentiality and transparency,” she said in a follow-up e-mail.
Koranda did not know exactly when the policy went into effect, but said it was before Gov. John Carlin took office in 1979. It has persisted under both Democratic and Republican administrations.
Sen. Jeff Melcher, a Leawood Republican, said he couldn’t think of a good reason for keeping the names of beneficiaries of tax credits confidential “other than other people would be complaining that they’re not getting it … which I don’t think would be a particularly compelling argument.”
Melcher, a member of the Senate Tax Committee, unsuccessfully pushed for the state to close its revenue hole during the legislative session by closing credits and exemptions instead of raising sales taxes.
He said if he could know which companies or individuals were benefiting from a credit, then he would want an explanation of how they got it.
He had a simple message for people who wouldn’t want the information disclosed: “Then don’t take the money.”
Joan Wagnon, who was revenue secretary under Gov. Kathleen Sebelius, said disclosing the information has “always been a big no-no.”
Rep. Brandon Whipple, a Wichita Democrat, a member of the House Tax Committee, said the restriction of “less than five” seems arbitrary, and he questioned the agency’s refusal to disclose the cost.
“It sounds like their interpretation is the most extreme possible where they’re pretty much saying we don’t even want to acknowledge it’s there. It’s there, but we don’t want to give any detail at all,” he said.
Senate Vice President Jeff King, an Independence Republican, said that keeping the cost confidential — even from lawmakers — impedes policymakers from making decisions. He noted that lawmakers have sought to pay for cuts to the overall tax rate in recent years by reducing and eliminating credits, deductions and exemptions.
“It’s very hard to do that effectively if there are certain tax credits we don’t even know what we’re spending on,” King said. “So as a member of the Senate, I am certainly interested in knowing all of the money we’re spending on tax credits, even if that means respecting the privacy of the person to whom we’re spending.”
King, a lawyer, said it was possible to respect the privacy requirement in the statute while still being transparent with the overall cost.
The confidential credits include one for electric co-generation facilities and another for new pipeline projects. Both those credits — though used by a small handful of beneficiaries — could be worth millions of dollars.
The pipeline credit entitles beneficiaries to a 10 percent tax credit on the first $250 million of their investment.
Wagnon defended the policy, saying it would be easy to identify the utility companies benefiting from the electric co-generation credit, for example, because “how many people do that?” She said disclosing the amount spent on the individual credit would violate statute but added that she didn’t think anything should prevent the agency from disclosing the total value of all the confidential credits added together.
Greg LeRoy, executive director of Good Jobs First, a national organization that advocates for accountability with tax incentives, said “states that refuse to disclose tax credit or tax exemption information are just hiding critical information from taxpayers, pure and simple.”
By not disclosing the data, Kansas makes it difficult for public officials, academics and journalists to investigate programs and study their effectiveness, LeRoy said. Keeping the cost and recipients confidential makes it difficult to compare the cost of the credit with number of jobs it creates or study its geographic distribution in the state, he said.
“It means they’re completely blindfolded,” LeRoy said. “For purposes of evaluating these programs — and that’s certainly an oversight obligation of your state Legislature — how can they fulfill their role?”
LeRoy also supports identifying the companies that receive credits.
“If a company claims a tax credit on line 39(c) or whatever of their state tax return, that’s no different than if the state wrote them a check,” LeRoy said. “And if the state wrote them a check, that would be public information. So why are we treating 39(c) any different?”
Kansas’ policy contrasts starkly with its neighbor to the east, Missouri.
LeRoy called Missouri an exemplary state when it comes to tax credit disclosure. It created an online database in 2007 known as the Missouri Accountability Portal.
The Missouri Department of Revenue has made it a priority to put as much information online for taxpayers as possible, said spokeswoman Michelle Gleba.
She called the site a “tool that provides taxpayers with a one-stop location to view public information ranging from tax credits to sales tax license revocations to state employee salaries.”
The site allows for an easy search for information on tax credits and other expenditures: Click on the tab for tax credits, then search by category, customer or legislative district.
A search by category shows that Missouri has approved nearly $403,000 in agriculture tax credits for 2015; a click shows most of that was for a credit for quality beef producers.
Another click will identify every beneficiary of the credit and how much each received. Bollinger Farms in Patton, Mo., for example, received a credit worth $336,000, significantly more than any other recipient.
Searching by customer, a user can find out that the Cerner Corp. received a $3.4 million tax credit through the Missouri Works Training program.
A search by legislative district indicates that the 18th House District in Kansas City, where Cerner is headquartered, had received more in tax credits than any other district for 2015 as of July 9.
There’s no evidence to suggest making this information available online has a negative impact on a state’s business climate, LeRoy said. Some states, such as North Carolina, have been doing it for more than a decade.
That’s confidential.
The agency will not disclose the value of a credit if fewer than five tax filers take advantage of it.
It says the longstanding policy is needed to preserve taxpayer privacy.
But watchdog groups say that policy makes it difficult to investigate the effectiveness of certain tax credits. And some lawmakers say it hampers their ability to make decisions on tax policy.
By comparison,
Missouri has made such information public
and easily accessible through a few clicks on a computer keyboard.
In Kansas, it’s public information that five tax filers took advantage of a credit for making buildings accessible to the disabled at a total cost of $10,165 to the state in 2013. If one fewer person had used the credit, the information would be sealed.
The department will not say how many filers used a film production tax credit, which required the state to pay 30 percent of production costs for a movie shot in Kansas that same year.
The department also won’t disclose the cost of a tax credit for banks and insurance companies that invest in stock issued by Kansas Venture Capital Inc.
The revenue department’s yearly report on tax expenditures
shows the state spent at least $622 million in 2013 on income and privilege tax credits, which allow qualifying taxpayers to subtract from the amount of taxes they owe for a wide range of reasons.
But that dollar figure is incomplete. The total amount is confidential. That’s because even the total spent on the confidential credits is kept secret.
Kansas law doesn’t specifically bar the Department of Revenue from releasing these numbers. The statute empowers the agency to release statistics related to tax policy but forbids it from releasing individual taxpayers’ information.
The agency has interpreted that as preventing the release of the numbers when there are fewer than five beneficiaries.
“The rationale is that by law, taxpayer data is confidential. … When we are dealing with taxpayer data for five or fewer taxpayers, there is a risk that disclosure of this data may in fact reveal confidential data concerning one or more taxpayers within that group,” Jeannine Koranda, the agency’s spokeswoman, wrote in an e-mail.
Even disclosing the aggregate total for the 31 different credits listed as confidential would violate the agency’s policy, Koranda said.
“The policy, which has been in place for almost 40 years, was developed to strike a balance between confidentiality and transparency,” she said in a follow-up e-mail.
Koranda did not know exactly when the policy went into effect, but said it was before Gov. John Carlin took office in 1979. It has persisted under both Democratic and Republican administrations.
Sen. Jeff Melcher, a Leawood Republican, said he couldn’t think of a good reason for keeping the names of beneficiaries of tax credits confidential “other than other people would be complaining that they’re not getting it … which I don’t think would be a particularly compelling argument.”
Melcher, a member of the Senate Tax Committee, unsuccessfully pushed for the state to close its revenue hole during the legislative session by closing credits and exemptions instead of raising sales taxes.