Louisiana lost out on roughly $1.1 billion in revenue last fiscal year due to 78 tax incentive programs administered by five state agencies, according to an audit released today by the Louisiana Legislative Auditor.
State lawmakers in 2013 passed a law requiring state agencies annually report the return on investment for their respective tax incentives. The audit released today was compiled in compliance with that law, using the 2017-18 Tax Exemption Budget prepared by the Louisiana Department of Revenue. The audit takes no position on the merits of the respective incentive programs, nor does it measure the accuracy of return on investment claims.
Nearly one-third—32%—of the 78 tax incentive reports did not comply with all of the reporting requirements, the audit notes.
“Specifically, the reports for 25 incentives claimed by taxpayers in fiscal year 2017, which resulted in a revenue loss of approximately $127million, did not include whether or not the state received a positive return on investment through the incentive,” reads a summary of the audit, which also notes only five of those incentives “would reasonably be expected to have a related ROI.”
LDR notes not all incentives are intended to provide a monetary ROI, but should still have a stated return benefit, such as ensuring Louisiana’s business competitiveness or assisting citizens.
The audit notes there are not specifications in the 2013 statute regarding calculation methods for incentive ROI, adding many of the reports appear to focus on the overall impact to the state economy rather than the direct revenue received by the state as a result of the credit.
“LDR should establish a method of data collection and tracking in order to maintain the financial data and statistics required for economists to evaluate the ROI of the incentive programs in the state,” the audit recommends. “Reports of ROI should specifically identify new revenue to the state produced by the program and should include a clear definition of the calculation of the ROI.”
In a formal response to the audit, LDR officials concur with the recommendation and agree to outline a plan to better develop and improve incentive reporting.