Updated May 3 at 11:12pm

Incentives face scrutiny in G.A.

By Patrick Anderson
PBN Staff Writer

Business incentives and tax breaks were in the spotlight in the past year and will almost certainly be again in 2013. More

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PUBLIC POLICY

Incentives face scrutiny in G.A.

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Business incentives and tax breaks were in the spotlight in the past year and will almost certainly be again in 2013.

38 Studios LLC’s failed loan guarantee, the film tax credits the company tried to secure, an overhaul of the film-credit program, creation of new theater credits and an urgent push for new historic-renovation credits were all grist for debate.

A report from the state Office of Revenue Analysis in August listed $84 million in business corporation tax expenditures alone in 2009 tax filings, $41 million if you don’t include deductions for operating losses that year. A separate Division of Taxation report listed $34.5 million in credits issued in fiscal 2012 for the state’s six main business-incentive programs.

In a 10-month exploration of business subsidies across the country, The New York Times this past fall estimated that Rhode Island spends $356 million per year on incentive programs. It singled out the $75 million 38 Studios loan as a dubious example.

But as lawmakers prepare for the start of the 2013 legislative session with Rhode Island still battling high unemployment and a structural budget deficit, it’s unclear whether there’s greater sentiment to cut incentives or grow them.

Gov. Lincoln D. Chafee entered office a skeptic of corporate “deals,” and in his first budget proposed ending the $21 million Jobs Development Act and requiring combined reporting of large, multistate companies as part of an ambitious proposal to reduce the state corporate tax rate.

The plan died in the General Assembly and in his last state budget Chafee went the other way with an unsuccessful bid to resurrect the “project status” sales tax-break program.

After spending a large chuck of 2012 picking up the pieces from 38 Studios, the efficacy of business incentives is something Chafee “is specifically taking a look at,” said spokeswoman Christine Hunsinger, although she declined to discuss any specifics related to his upcoming budget proposal.

Chafee supports reviving the state historic-restoration tax credit, which was suspended in 2008, although he did not include it in his budget proposal last year.

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