NASHVILLE, Tenn. - The state agency in charge of carrying out corporate tax breaks each year is under fire from the state's top fiscal watchdog for lacking documentation that proves some corporations are eligible for the tax credits.
Each year, the Department of Revenue administers more than $100 million in business tax credits. Tennessee uses those credits as an incentive to lure companies to invest in the state – a common practice among both state and local governments.
One such tax break is the Qualified Headquarters Facility Credit, given to companies that decide to move their out-of-state corporate headquarters to Tennessee.
The latest audit of the Department of Revenue from the Tennessee Comptroller's office found that from December 2014 to April 2017, the Department of Revenue processed $1,605,143 in Qualified Headquarters Facility Credits for three companies, without having proper invoices to prove to the comptroller’s office that those companies deserved the tax breaks.
“You wouldn't prosecute a crime without good evidence, and you shouldn't hand out hundreds of thousands of dollars in tax credits without good evidence as well,” said John Dunn, public information officer for the comptroller’s office.
The findings don't necessarily mean the Department of Revenue gave out the tax credits incorrectly. The audit found that the agency gave out nearly $6 million in headquarters tax breaks during the audit period, with proper documentation for the majority of the credits.
In the audit, Department of Revenue officials said they thought they "were not required" to keep the documentation, and that the documents "are still obtainable today from the taxpayers."
But the Department of Revenue would not tell NewsChannel 5 who those taxpayer companies were, citing a state confidentiality law.
Critics of corporate tax incentives say such secrecy -- with money that could be used for Tennessee schools, roads or healthcare instead of corporate tax breaks -- is a concern.
“State law allows the politicians to get together with these large corporations in secret, and negotiate these deals,” said Ben Cunningham with Tennessee Tax Revolt. “It's a terrible situation. We should have stopped this a long time ago.”
State and local governments argue that corporate tax incentives bring jobs to the area, which boost the economy and provide other tax increases the state can collect.
The Department of Revenue says several people in their office reviewed and approved the tax breaks with the proof documentation available before getting rid of them, prior to the comptroller's audit.