PRESS RELEASE
Tax Credit Authority should find out before approving more aid
When the General Assembly approved the capital budget bill last month, it OK’d multiple new tax breaks for Intel Corp. and its planned semiconductor plants outside Columbus with only a vague idea of what the cost would be. Before it considers the Intel project for another tax credit, estimated to be worth $650 million, the Ohio Tax Credit Authority should seek an estimate from the Department of Taxation on the cost of the new tax breaks approved in the capital bill, House Bill 687.
“Policymakers are giving our public dollars to Intel without understanding how they might affect state and local governments’ future ability to provide critical services like public education or trash collection,” said Zach Schiller, Policy Matters Ohio research director. “Ohioans and our elected representatives need to know what tax breaks cost — and what we could be giving up to pay for them.”
HB 687 contained five new tax breaks for the Intel project, covering the sales tax and Commercial Activity Tax, as well as more liberal property-tax exemptions for some suppliers. There was no estimate of the cost of these, either from the taxation department or the Office of Budget and Management. The Legislative Service Commission, which often has access to less information than the administration, said only that the cost would be “hundreds of millions of dollars across several fiscal years, depending on the level of investments by the semiconductor business and its suppliers in Ohio.”
These new tax breaks include a major expansion in the sales-tax exemption for equipment used primarily in research and development. When policymakers first approved the sales-tax exemption for property used in research and development, they took steps to protect public dollars by not including expensed R&D costs. Expensed costs are written off the same year they are incurred, compared to capitalized costs, which are written off more slowly over time. But in the capital budget bill, Ohio policymakers included a provision to give Intel a sales-tax exemption for those costs. Another significant expansion covers tangible personal property used to “regulate, treat, filter, condition, improve, clean, maintain or monitor environmental conditions where manufacturing activities take place.” This, too, represents a dramatic departure from the existing exemption, which only covers this kind of equipment “in a special and limited area of the facility, such as a clean room or paint booth, where such total regulation is essential for production to occur.”
These and other new tax breaks are explicitly tied to Intel being awarded a Job Creation Tax Credit. Under the state’s rules for such credits, the Tax Credit Authority “may from time to time set additional eligibility requirements for job creation tax credit applications.” It should require that the taxation department provide an estimate of the cost of the new tax breaks and all the state and local aid being provided. The TCA also should ensure that community input is sought on the substantial impact of the project and its effects on housing, transportation, schools and the environment.
“The size and scope of the Intel deal approved by Ohio’s lawmakers are unprecedented for the state,” said Schiller. “We should expect to know the financial costs and tap the public so policymakers can ensure Ohio makes the most of this huge outlay.”
Policy Matters Ohio is a nonprofit, nonpartisan state policy research institute with offices in Cleveland and Columbus.