How Tax Incentive Evaluations Have Changed Policy

Since the start of the 21st century, lawmakers in states throughout the country have used tax incentive evaluations to make data-driven refinements to their economic development programs to bolster jobs and growth and ensure that incentive programs yield the intended results. These summaries, which were originally distributed as part of a newsletter for incentive evaluators and scholars, detail evaluation findings and how lawmakers applied them to hone and improve their programs.

August 2019

North Dakota

In 2019, North Dakota created a new manufacturing incentive after the state’s interim tax incentive evaluation committee identified a strategic gap in the economic development programs they offer and recommended creating the program to assist businesses in modernizing their manufacturing processes.

Washington, D.C.

In Washington, D.C., Mayor Muriel Bowser (D) signed two pieces of legislation related to the city’s budget, which include the redirection of nearly $16 million in forgone revenue away from the district’s signature package of economic development incentives, together known as the Qualified High Technology Companies program. These changes were spurred by the findings of an evaluation of the program published by the district’s Office of the Chief Financial Officer in 2018. The report highlights that this is one of D.C.’s largest economic development tax expenditures, costing the city over $45 million in forgone revenue in 2017 alone. Based on OCFO’s findings, the program is not well targeted, has few fiscal protections, and is poorly monitored. The reforms eliminate carryforward provisions for the program’s franchise tax credits and cut total program benefits in half.

December 2019

Indiana

In May 2019, Governor Eric Holcomb (R) signed two pieces of legislation to terminate several tax incentives identified as either infrequently used or ineffective by evaluations from the Legislative Services Agency. SB 171 eliminates seven credits (the coal conversion system property tax deduction, the coal combustion product property tax deduction, the recycled coal combustion byproduct personal property tax deduction, the aircraft property tax deduction, the intrastate aircraft property tax deduction, the Hoosier alternative fuel vehicle manufacturer investment income tax credit, and the local income tax option hiring incentive credit) and SB 563 terminates the Industrial Recovery Tax Credit.

Oklahoma

In April and May 2019, three pieces of legislation were enacted to implement recommendations from Oklahoma’s 2018 evaluation of the state’s tax incentives. HB 1411 eliminates a population restriction on the municipalities eligible for the state’s Affordable Housing Tax Credit, expanding the number of housing units eligible for the credit. SB 840 requires that new jobs eligible for incentives under the Oklahoma Quick Action Closing Fund exceed the average county wage to better target the incentive to higher-quality jobs. SB 485 reforms the Small Business Incubators Incentives Act, disallowing incentives for incubator sponsors but retaining incentives for incubator tenants, with the former having been found ineffective.

Minnesota

In May 2019, Governor Tim Walz (D) signed SF 1 requiring the state’s Housing Finance Agency to implement transparency measures for its housing grant and loan application processes. The reform is aligned with recommendations from a 2019 evaluation of the Economic Development and Housing Challenge program conducted by the Office of the Legislative Auditor.

Nebraska

Governor Pete Ricketts (R) signed LB 560 clarifying eligibility and refundability provisions in the state’s Beginning Farmer Tax Credit to better align the incentive’s design with its intended goals. The reforms follow recommendations from a 2018 evaluation of the program conducted by the Legislative Audit Office.

Pennsylvania

In June 2019, Governor Tom Wolf (D) approved HB 262, which includes reforms to the state’s Historic Preservation, New Jobs, and Film Tax Credits. As recommended in the Independent Fiscal Office’s (IFO) reports, HB 262 establishes a processing fee to pay for administration of the Historic Preservation Credit and sets a yearly application time frame and deadline for the state to notify applicants of their status. The bill also ends applications for the New Jobs Tax Credit after June 2020, consistent with IFO’s finding that the program is “unlikely to incentivize job creation in its current form.” Learn more about Pennsylvania’s evaluations and policy change here.

Virginia

In early 2019, Governor Northam approved three pieces of legislation to enact provisions consistent with JLARC evaluation findings. HB 2347 incorporates a recapture provision into the state’s Small Business Investment Grant Fund. HB 2065 eliminates the Telework Expenses tax credit, which the evaluation noted was rarely used and likely ineffective. HB 2539 terminates the Worker Retraining tax credit, which the evaluation found to be ineffective in encouraging retraining and provided too small of a benefit to businesses and the state.

June 2020

Colorado

As mentioned in the December 2019 newsletter, the Colorado Tax Expenditure Evaluation Interim Study Committee referred five bills and requested that the Statutory Revision Committee consider repealing additional tax expenditures identified as legally obsolete or unused. As a result, nine bills were introduced during the 2020 legislative session that reflected evaluation recommendations and best practices shared by subject matter experts during the interim meetings. Prior to postponing session convenings, four bills were enacted by the General Assembly and signed by Governor Jared Polis (D). These include: a bill to clarify eligibility requirements for the long-term lodging sales tax exemption and the repeal of three expenditures: the residents of bordering states sales tax exemption, the nonprofit transit authority agency fuel tax, and the pre-1987 net operating loss deduction. Two additional bills are now pending signature including legislation concerning tax expenditure bill requirements and modifications to the net operating loss deduction.

Virginia

In April, Governor Northam signed HB 1505, which repeals the state’s Small Business Jobs Grant Fund Program, moves its cash balance into the Small Business Investment Grant Fund, and reduces award amounts for the Small Business Investment Grant Fund. A 2018 Joint Legislative Audit & Review Commission (JLARC) evaluation of the Jobs Grant Fund Program found that it was underutilized, not well marketed, and not a main factor influencing business decisions. Though the program was helpful for job training and workforce development, approximately 90 percent of the jobs created by beneficiaries would have occurred regardless of the grant. The evaluation also recommended reducing award amounts for the Small Business Investment Grant Fund. When signing HB1505l, the governor included a provision allowing the state to use the fund balance from the eliminated program to assist small businesses that have suffered financial stress due to the pandemic.

Washington

In 2019, Washington’s Joint Legislative Audit and Review Committee (JLARC) reviewed a sales and use tax exemption for modifying large private airplanes owned by nonresidents. The report concluded that the preference likely resulted in new jobs and increased overall tax revenues for the state. The Legislative Auditor recommended that the legislature extend the July 1, 2021, expiration date and clarify its objective. JLARC staff briefed the Senate Ways and Means Committee on the study prior to the committee’s hearing a bill implementing the recommendation. The Legislature subsequently passed a bill implementing the auditor’s recommendation. While many 2020 bills were vetoed by Governor Jay Inslee (D) due to budget concerns, this bill was signed into law despite its estimated $11.6 million per biennium cost. The economic analysis showing increased job and economic growth likely factored into the governor’s decision to sign the legislation.     

September 2020

Georgia

In August, Governor Brian Kemp (R) signed legislation to make several changes to the state’s film incentive program. The new law clarifies eligibility for certain projects, significantly increases the data reporting required for firms to collect credits, and requires third-party audits of qualified film spending. These changes follow two audits (linked here and here) published by the Georgia Department of Audits and Accounts in January that showed the program has forgone billions of dollars in tax revenue while having significant design and administration issues.

Mississippi

In July, Governor Tate Reeves (R) signed SB 2563, the Incentives Transparency for a Prosperous Mississippi Act. The measure seeks to strengthen the initial requirements for entities receiving economic incentives in excess of $5 million by requiring the Mississippi Development Authority to certify that a project is in the “best interest” of the state and provide supporting evidence, such as a feasibility study. The bill also requires incentive recipients to agree to performance measures, includes provisions allowing the state to recapture all or part of an incentive for noncompliance, and defines annual recipient reporting requirements for awards issued after July 1, 2020. These new practices were partially informed by evaluations from the University Research Center (URC). URC’s second incentive evaluation report (contained in the annual tax expenditure report) suggests that thorough and accurate feasibility studies could have prevented the state from incentivizing some failed projects. Additionally, both rounds of evaluations cited a lack of sufficient and credible data as one of several constraints in estimating the fiscal and economic impact of incentives.

Nebraska

In August, policymakers in Nebraska approved the ImagiNE Nebraska Act, a new incentive program that replaces the state’s signature business incentive portfolio, the Nebraska Advantage Act, slated to sunset later this year. ImagiNE is the result of years of research and deliberation between policymakers and community stakeholders to modify or replace the Advantage Act while protecting against the budgetary challenges it created. The Legislative Audit Office’s review of the Advantage Act in 2019 highlighted these budget problems, noting that the program “does not have the types of protections that could have prevented the program from increasing substantially beyond the state’s expectations.” In its replacement, policymakers addressed the lack of fiscal protections by limiting ImagiNE’s yearly program costs.

Washington, D.C.

In August, Mayor Bowser approved D.C.’s Fiscal Year 2021 budget, which now awaits congressional approval. The budget includes significant reductions to the Qualified High Technology Company (QHTC) program, one of the city’s largest economic development tax incentives. The council explained its decision in the FY2021 budget and financial plan, where it cited the Office of the Chief Financial Officer's (OCFO) 2018 evaluation of the program. That evaluation noted that the benefits of QHTC are uncertain and aspects of its design and administration are problematic. This is the second time the council relied on OCFO’s 2018 evaluation to modify the QHTC, which was initially scaled back in 2018 due to similar concerns.

December 2020

Louisiana

In September 2020, the Louisiana Department of Economic Development issued new regulations clarifying the definition of jobs eligible for the state’s Quality Jobs Program, which incentivizes businesses to locate or expand operations in Louisiana. This change is aligned with a recommendation offered by the Louisiana Legislative Auditor in a March evaluation of the program. The auditor recommends that the legislature clarify “new direct job” eligibility to include companies that rehire previous employees who have been away from the company for a defined length of time or that acquire part of a company that has been out of operations for at least three months or for jobs maintained under a business sold to a new parent company that would have been lost absent the transfer.

Mississippi

In July, Mississippi Governor Reeves signed SB 2847, which implements additional administrative requirements for the tourism project incentive program. The Mississippi Development Authority (MDA) must now require applicants to include an independent study identifying the number of out-of-state visitors anticipated to visit a tourism project and the ratio of out-of-state visitors to in-state visitors. Additionally, MDA shall request a cost-benefit analysis of the tourism project. This reform is aligned with findings from the 2019 University Research Center evaluation of the program, which finds that many projects that qualified for the incentive did not draw much spending from out-of-state customers and suggests that the jobs and income created by the projects do not represent net, new economic activity.  

Montana

Following its first series of tax credit reviews this year, the Montana Revenue Interim Committee adopted four bills. One bill, CC01, makes Montana’s tax credit review process permanent and sets a 10-year review schedule. The measure also retains the state’s exemption on income taxes imposed by foreign states or countries and removes the expenditure from future reviews. TC02 repeals the new and expanding industry credit, which has seen little use between 1997 and 2016. TC01 increases the energy conserving expenditures credit and makes it refundable. TC03 makes the state’s installing alternative energy systems credit refundable. These bills will be introduced in the following legislative session.

Virginia

In April, Governor Northam signed SB590, which extends the sunset date for the state’s Recyclable Materials Processing Equipment Tax Credit from 2020 to 2025 and expands the credit to include certain advanced recycling equipment purchases. This reform is aligned with recommendations from a 2019 Joint Legislative Audit & Review Commission evaluation of the program, which suggests the legislature continue the credit as it helps businesses comply with environmental regulations and because demand for the credit may expand as recycling increases.

March 2021

New Jersey

On January 7, Governor Phil Murphy (D) signed legislation that establishes a suite of economic development programs, including replacements for two of the state’s primary incentives: Grow NJ and the Economic Redevelopment and Growth program. This legislation reflects the culmination of a years-long effort by policymakers and stakeholders engaged in conversations about the design, administration, and cost issues identified in a 2018 study by the Rutgers University Edward J. Bloustein School of Planning and Public Policy and a state comptroller 2019 performance audit. The bill places an annual cap on the programs, in addition to an aggregate cap over a seven-year period. It also establishes a biennial review process for the largest programs, marking an important first step in providing lawmakers with regular information about economic development incentives.

July 2021

Kansas

On May 3, Governor Laura Kelly (D) signed SB 66 into law. The bill extends and modifies the state’s angel investor tax credit. Among the modifications, the measure shortens the length of time a business needs to stay in-state to qualify for the credit, which was one of the main recommendations from a recent evaluation conducted by the Legislative Division of Post Audit (LPA). On February 1, Kristen Rottinghaus, a performance audit manager for LPA, provided neutral testimony before the Senate Commerce Committee where she highlighted key evaluation findings.

Maryland

In June, Governor Larry Hogan (R) approved three bills that address findings from previous Department of Legislative Services (DLS) evaluations of the biotechnology investment incentive tax credit, Regional Institution Strategic Enterprise (RISE) zone program, and research and development (R&D) tax credit. Among other modifications, the measures implement the following changes in alignment with DLS recommendations: SB 19 clarifies the biotechnology investment incentive tax credit’s purpose and lowers its percentage to 33% of the investment in a qualified Maryland biotechnology company; SB 778 limits RISE zones to 500 acres and clarifies the program’s purpose; SB 196 sets aside $3.5 million of R&D tax credits specifically for small businesses.  

Nebraska

In May, Governor Ricketts signed legislation to modify the state’s New Markets Job Growth Investment Act based on findings from a 2020 Legislative Audit Office (LAO) review of the program. LAO found that the program statute does not reflect intended legislative goals, such as attracting federal New Markets funding into the state. The measure addresses this finding by statutorily defining the intended program goal as helping small businesses obtain capital and investment funding. Community Development Entities must also report additional information to improve future program evaluations as recommended in LAO’s report. Governor Ricketts also approved LB366, which clarifies the definition of a “related person” in eligibility provisions for the state’s microenterprise tax credit program. This change is based on a 2018 LAO review that found the program’s lack of a “limitations section” exposes it to activity that would otherwise be ineligible for benefits under other state incentives. Department of Revenue staff noted that allowing this to continue would conflict with the program’s purpose of supporting microbusinesses “that contribute to the state’s economy.”

Oklahoma

In April, Governor Kevin Stitt (R) signed SB 71 into law, requiring the state’s Department of Commerce to implement reporting requirements for beneficiaries of the Oklahoma Local Development and Enterprise Zone Incentive Act. Additionally, the measure directs the Tax Commission to submit an annual report using data from these requirements to the governor and the legislature. The changes follow recommendations from a 2019 evaluation that cited difficulties in reviewing the program due to a lack of data. The new reporting provisions require beneficiaries to submit data on employment, capital investment, and information on project changes as directly recommended by the evaluation.

Virginia

In March, Governor Ralph Northam (D) signed two measures to modify incentive programs based on evaluations from the state’s Joint Legislative Audit and Review Commission (JLARC). One measure requires the  Commonwealth Transportation Board to develop guidelines for awards of the state’s Economic Development Access Program. This stems from a 2020 JLARC evaluation, which found that the program lacks rigorous eligibility criteria and that many projects have not met job creation expectations. A second proposal was approved to lower job creation and investment thresholds for companies seeking data center incentives within a distressed region. This aligns with a 2019 JLARC finding that the program has not yielded growth in distressed regions as current job and investment criteria are likely a barrier to smaller data centers that could otherwise develop in these areas. During the state’s veto session in April, Governor Northam also signed legislation to eliminate two coal tax credits: one for mining companies and one for electricity generators. The programs are among Virginia’s most expensive credits, costing nearly $300 million from fiscal years 2010-2018, and their elimination follows JLARC’s recommendation after finding that they result in economic losses to the state and are obsolete.

Washington

In April and May, Governor Jay Inslee (D) signed into law various measures informed by recommendations from the Legislative Auditor’s evaluations of the property tax exemption for multifamily housing, the customized training tax credit, the targeted urban area exemption, the farmworker housing exemption, and a deduction for government-funded behavioral health services. Among other modifications, the bills enact the following recommendations: SB 5287 requires cities and counties to report to the Department of Commerce the multifamily housing exemptions they’ve granted each year; HB 1033 states that the legislature’s objective for the customized training credit is to help existing small businesses recruit and retain employees and expand; HB 1386 removes population requirements for cities and counties to qualify for the targeted urban construction exemption and extends the application date; SB 5396 creates a tax preference performance statement for the farmworker housing exemption, clarifies several definitions and qualification criteria, and sets an expiration date; HB 1296 reestablishes the deduction for government-funded behavioral health services and specifies an intent and tax preference performance statement.

December 2021

Massachusetts
The Massachusetts Tax Expenditure Review Commission (TERC) held meetings on October 7 and November 18 where members discussed ongoing efforts to review the commonwealth’s tax expenditures. TERC Commission Chairman Kevin Brown of the Massachusetts Department of Revenue noted that while TERC’s role is not to recommend policy changes, several expenditures were repealed based on TERC’s first published report, which was included as part of the final FY22 state budget.

April 2022

Colorado

The Legislative Oversight Committee Concerning Tax Policy was established pursuant to legislation referred by the 2019 Tax Expenditure Evaluation Interim Study Committee. During the 2021 legislative interim, the Legislative Oversight Committee Concerning Tax Policy met several times to review the state’s current tax policy and the Office of the State Auditor’s (OSA) tax expenditure evaluations. During these meetings, committee members heard presentations on tax expenditures and tax expenditure evaluation from the Tax Foundation and The Pew Charitable Trusts, as well as presentations on Colorado’s tax expenditures and ways to change the Taxpayers’ Bill of Rights, as suggested by  considerations from legislative staff. As a result of the legislative oversight committee’s work, several measures are now pending for consideration in the General Assembly: the alternative transportation options credit, the farm close-out exemption excluding motor vehicles, the repeal of several infrequently used expenditures, and the sales and use tax exemption for public school construction. Based on 2020 legislation establishing bill requirements for newly enacted tax expenditures (including statutorily declared purpose statements), a recent homeless contribution income tax credit proposal includes a legislative declaration for the expenditure’s policy goal.

Maine

In January, lawmakers introduced legislation addressing a myriad of findings and concerns highlighted in a 2021 Office of Program Evaluation and Government Accountability (OPEGA) evaluation of the Maine Seed Capital Tax Credit program (MSCTC).  For example, OPEGA found that MSCTC awards benefit businesses that are neither aligned with the program’s purpose nor have the “potential for rapid growth,” such as film and tourism companies. Since the program vaguely defines “export businesses,” OPEGA found that the hospitality industry was able to take advantage of the credit by citing sales to out-of-state customers. Analysts concluded that this likely departs from the original intent of incentivizing export industries. Following these findings, lawmakers narrowed the definition of “export activities” to ensure that incentives benefit intended industries. Additionally, the program likely supports investment that would have occurred regardless of the incentive given that founders and their family can own up to 50 percent of a business and still claim the incentive for investing in their own company. The legislation addresses these challenges by removing program eligibility for visual media production companies and lowering the threshold of ownership from 50 to 25 percent – meaning that investors or their relatives can only own up to 25 percent of a business and still receive incentives for their financing. Also, in order to help OPEGA overcome future evaluation limitations due to incomplete and inconsistent beneficiary data, the bill adds reporting requirements and financial penalties for beneficiaries who fail to report this information.

Maryland

The Maryland General Assembly is currently considering legislation to modify several provisions of the state’s enterprise zone (EZ) program. As introduced, the legislation would implement several recommendations from the Department of Legislative Services’ evaluation of the EZ program. These include establishing a purpose for the EZ program, limiting the expansion of EZs and adding rules to evaluate and prioritize the designation of new EZs, increasing reporting requirements including formal metrics, a framework for analyzing the cost-effectiveness of each EZ, and implementing certain fiscal protections. The measure has since been amended in committee to remove several of these modifications, however, the legislation is still pending Senate consideration.

August 2022

Colorado

During the 2021 legislative interim, the Legislative Oversight Committee Concerning Tax Policy reviewed tax expenditure evaluations performed by Colorado’s Office of the State Auditor’s (OSA). Committee members heard presentations on Colorado’s tax expenditures, options for changing the Taxpayers’ Bill of Rights from legislative staff, and tax expenditure and evaluation topics from the Tax Foundation and The Pew Charitable Trusts.

The legislature enacted several measures during the 2022 legislative session in response to the committee’s work. These include the alternative transportation options credit, the repeal of several infrequently used expenditures, and the sales and use tax exemption for public school construction. Based on 2020 legislation establishing requirements for newly enacted taxes to include policy goals, the recently enacted homeless contribution income tax credit proposal includes this information, which will assist with future evaluations.

Georgia

Georgia’s state auditor released a follow-up report detailing the progress state agencies have made implementing recommendations from the auditor’s 2020 review of the administration of the state’s film tax credit. The report shows that actions on all 12 of the auditor’s recommendations have been taken, with eight recommendations being fully addressed and four being partially addressed.

Maine

In 2019, Maine’s Office of Program Evaluation and Government Accountability (OPEGA) reviewed a program that provides tax credits to businesses that hire new employees. OPEGA found that administrators inadvertently made overpayments to some businesses because of erroneous tax withholding data used to calculate program benefits. OPEGA recommended steps for the administering agency to improve the accuracy of the program’s data. Lawmakers and the state’s economic development agency agreed with those recommendations, so policymakers enacted legislation this year to change how the incentive is calculated.

Maryland

Legislation in Maryland made significant changes to the state’s Enterprise Zone program. Inspired by repeated evaluation findings highlighting concerns with program design and effectiveness, Delegate Julie Palakovich Carr in Maryland’s General Assembly led a summer study group which met with program stakeholders on nine occasions in 2021. The process culminated with legislation that was responsive to stakeholders’ desires to keep the program flexible while making several improvements outlined by the Department of Legislative Services evaluation of the program—improving data reporting and clarifying the legislature’s goals for the program.

Nebraska

In Nebraska, policymakers enacted a bill that adds reporting requirements for recipients of the Nebraska ImagiNE Act—the state’s new flagship economic development incentive. Shortly after the passage of the new incentive, Nebraska’s Performance Audit Committee asked for a brief review of the program to determine whether the existing evaluation process will have enough data to thoroughly evaluate the program when it comes up for review. The new law implements some of the findings of this review by asking recipients to provide additional information on the property tax rates, job training usage, and talent recruitment activities.

Oklahoma

Policymakers in Oklahoma repealed a seldom-used incentive that provided a sales and use tax exemption for equipment used in computer services and data processing or research and development. As the fiscal note for the bill states, the 2019 evaluation of the program indicated that more generous and easier-to-use alternatives are available.

Utah

Utah lawmakers enacted recommendations based on an audit of the state’s Rural Job Act—a program that allocates money to rural investment companies which then provide assistance to small businesses that create jobs in rural areas of Utah. The legislation gives the agency that administers the program access to relevant tax documents needed to improve how it calculates program performance. The new law also clarifies how the administering agency should calculate new jobs that receive investments from more than one participating company.

July 2023

Washington

State lawmakers passed three bills in 2023 that reflected recommendations of previous incentive evaluations. Lawmakers clarified the intent of the tax exemption for newspapers, as the Joint Legislative Audit and Review Committee had recommended in 2009. They also extended the exemption for hog fuel, as the committee had recommended in 2019. Lastly, they extended and clarified the goals of three exemptions relating to food processing industries, as recommended in 2022.

Philadelphia

Informed by the city’s first incentive evaluation, released in 2019, Philadelphia launched a pilot job creation grant (called the Quality Jobs Program) in March 2023. Among the changes, the city turned what had been a credit into a grant, defined different qualifying levels of job creation for small and larger businesses, set job quality parameters for qualifying jobs, and targeted the program to both city businesses and city residents.

Colorado

The Legislature repealed 10 incentives in 2023 after the Colorado Office of the State Auditor found each to be used infrequently.

Montana

The 2021-22 Montana Revenue Interim Committee requested two bills in connection with its work. The first, a revision of the tax credit review schedule, passed in 2023. Lawmakers introduced the second measure containing revisions to the two tax credits reviewed by the revenue committee—the student scholarship organization and innovative education tax credits—but that bill did not pass.

Florida

In 2023, lawmakers repealed a series of economic development tax incentives, including the entertainment industry tax credit; the qualified target industry businesses tax refund; and the Quick Action Closing Fund. They also eliminated Enterprise Florida, one of the economic development entities that oversaw several incentives and administered other economic development programs. 

Massachusetts

Following the release of the state’s first annual tax incentives report in 2021, lawmakers made changes in the 2022 budget to tax incentives reviewed in the report. They repealed the medical user fee credit, the harbor maintenance credit, and the exemption of income from the sale, lease, or transfer of certain patents. They modified the film incentives credit to increase the qualification threshold for in-state production expenses and repealed the sunset provision.

Maine

Following reviews by Maine’s Office of Program Evaluation and Program Accountability of the state’s Pine Tree Development Zones program, lawmakers in 2023 passed a bill to replace it. The replacement, the Dirigo Business Incentives program, uses tax credits to promote capital investment and worker training in particular industries.

December 2023

Oklahoma

In 2021, the Oklahoma Incentive Evaluation Commission published an evaluation of the state’s coal production income tax credit. The consultant hired to perform the analysis found that the credit was a net cost to Oklahoma and not effective in boosting economic activity. The consultant recommended repealing the incentive, and the commission, which oversees the evaluator’s work, voted to recommend repeal by allowing the credit to expire. The Legislature let the credit sunset in 2021.

Colorado

In its 2023 evaluation of agricultural sales tax exemptions, the Office of the State Auditor noted that the Legislature, as recommended by the office, had clarified in 2019 whether certain agricultural inputs were intended to be exempt from state sales and use taxes.

January 2025

Louisiana

The Legislature passed a bill in early 2025 that allows many of Louisiana’s incentives to sunset in the year. Among these are the work opportunity tax credit; industry exemption contracts with the state Board of Commerce and Industry; exemptions for manufacturing establishments; and incentives for angel investors, sound recording investors, enterprise zones, modernization, quality jobs, new markets, urban revitalization, technology commercialization, and community development. Additionally, the legislation reduces the caps for its film and historic preservation incentives and introduces a cap to the research and development credit.

May 2025

Washington

State legislators passed S.B. 5794, which adopts recommendations from several tax preference evaluations by the Joint Legislative Audit and Review Committee (JLARC). These recommendations include repealing obsolete tax preferences, clarifying legislative intent, and adding expiration dates to existing incentives. Lawmakers also recently used the committee’s assessments to identify ineffective and obsolete exemptions that could be repealed in order to raise revenue to reduce a large budget gap. JLARC estimated that repealing these exemptions would yield $1 billion in state revenue over four years.

Oklahoma

Oklahoma Governor J. Kevin Stitt (R) signed S.B. 577, which, among other things, implements requirements for data collection and reporting for the state’s five-year ad valorem tax exemption for property used for manufacturing in qualified industries. Lawmakers sought the legislation in response to a recommendation from the Oklahoma Incentive Evaluation Commission. The evaluation recommended that the project team improve its data accessibility, data collection in areas such as jobs created, and data transparency for employee payrolls. These changes would make it easier to accurately evaluate the incentive