Report Title:

Corporate Disclosure

Description:

Requires: (1) department of taxation to report on tax benefits for development assistance programs; (2) counties to disclose real property tax reductions and abatements; (3) disclosure of development assistance; (4) recapture of assistance from recipients who fail to achieve jobs, wage, and benefit goals.

HOUSE OF REPRESENTATIVES

H.B. NO.

21

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO CORPORATE DISCLOSURE.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that despite an increase in spending for the purpose of economic development, in both on-budget and off-budget expenditures, the real wage levels of the State's average working families have suffered twenty years of decline and stagnation.

The legislature also finds that when workers receive low wages, these jobs often impose hidden taxpayer costs upon our citizens, in the form of medical assistance, food stamps, earned income tax credits, and other forms of assistance provided to the working poor and their families.

Therefore, in order to insure that the State's economic development resources are achieving their desired effect of raising living standards for working families, the legislature finds that it is necessary to collect and analyze additional information and to enact certain safeguards in its development assistance.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"CHAPTER

CORPORATE DISCLOSURE

-1 Definitions. As used in this chapter:

"Corporate parent" means any person or legal entity, organization, business, partnership, group or corporate entity recognized by law, or combination thereof, that possesses, owns or controls an interest greater than fifty per cent of the recipient corporation.

"Date of assistance" means the date upon which a granting body transmits the first dollar value of development assistance to a recipient corporation.

"Department" means the department of business, economic development, and tourism.

"Development assistance" means any form of public assistance, including both on-budget and off-budget assistance, including tax expenditures, made for the purpose of stimulating economic development of a given corporation, industry, geographic jurisdiction, or other subset of the State's economy, including industrial development bonds, training grants, loans, loan guarantees, enterprise zones, empowerment zones, tax increment financing, grants, fee waivers, land price subsidies, infrastructure whose principal beneficiary is a single business or defined group of businesses at the time it is built or improved, matching funds, tax abatements, tax credits and tax discounts of every kind, including corporate income, personal income, sales, use, raw materials, job creation, industrial investment, excise, utility, inventory, accelerated depreciation and research and development tax credits and discounts.

"Full-time job" means a job in which the new employee works for the recipient corporation for at least thirty-five hours per week.

"Granting body" means any public entity within the State, including the State, counties, regional development organizations, state and local public corporations, state departments or agencies that provide development assistance, including the department of business, economic development, and tourism, the department of labor and industrial relations, the department of human resources development, workforce development boards, economic development commissions, industrial development authorities, regional development authorities, and finance authorities.

"In effect" refers to any calendar year within the duration of the development assistance, including the duration of any loan, loan guarantee, tax credit or tax credit carryforward, property tax reduction or abatement, or tax increment financing. For on-time forms of development assistance such as grants and land price subsidies, "in effect" shall refer to a period of not less than five years from the date of assistance.

"Part-time job" means a job in which the new employee works for the recipient corporation for less than thirty-five hours per week.

"Property-taxing entity" means every entity in the State that levies taxes upon real property or personal property, including the counties.

"Small businesses" means those corporations whose corporate parents, and all subsidiaries thereof, employed fewer than an average of twenty full-time equivalent employees or which had gross receipts of less than $1,000,000 in all United States jurisdictions during the calendar year for which disclosure is required.

"Specific project site" means that distinct operation unit to which any development assistance is applied.

"Temporary job" means a job in which the new employee is hired for a specific duration of time or season.

"Value of assistance" means the face value of any and all forms of development assistance, as defined herein, such as a bond amount.

-2 Disclosure of state tax expenditures. (a) Beginning July 1, 2004, and for each succeeding year, the department of taxation shall provide a detailed tax expenditure budget to the legislature, derived from state income tax filings for the previous calendar year. The disclosure report shall provide at least the following data:

(1) The dollar amount of tax expenditures made by the State, in the form of uncollected revenues, for each individual tax credit provided by the State, including credits for the wages of certain qualified employees, enterprise zones, empowerment zones, tax increment financing, grants, matching funds, tax abatements, and tax credits and tax discounts of every kind, including corporate income, personal income, sales, use, raw materials, job creation, industrial investment, excise, utility, inventory, accelerated depreciation and research and development tax credits or discounts;

(2) For each of the tax expenditures in paragraph (1), except as specified in paragraph (3), an itemization of the name of each individual corporate taxpayer which claimed the credit of any value equal to or greater than $5,000, and the specific dollar amount credited to the corporation's tax liability under that credit for that year; and

(3) Credits claimed by individual corporations of less than $5,000 shall not be itemized as required in paragraph (2). Instead, in reporting credits for each tax expenditure, the department of taxation shall aggregate all claims of less than $5,000 and report them as a single non-specified group, with the number of claimants stated.

(b) All data produced by the department of taxation and received by the legislature in compliance with this section shall comply with applicable disclosure laws.

-3 Disclosure of property tax reductions and abatements. (a) On or before October 1, 2003, the counties shall develop a standardized disclosure registry. The form shall require at least the following data:

(1) The name of the property owner;

(2) The address and description of the property;

(3) The date upon which any individual property tax reduction or abatement first took effect;

(4) The date upon which any individual property tax reduction or abatement is scheduled to expire;

(5) The rate or schedule of each individual property tax reduction or abatement for the period between the date it took effect and the date it is scheduled to expire;

(6) The county's aggregate foregone revenue for the calendar year as a result of each property tax reduction or abatement;

(7) A compilation and summary of the entity's total foregone revenue as a result of all property tax reductions or abatements, including a summary of foregone revenue for each kind of reduction or abatement; and

(8) The respective shares of the county's property tax revenues in the reported year which went to each designated public agency including general funds, public safety, fire department, park districts, and general administration.

(b) Beginning July 1, 2004, and for each year thereafter, the counties shall employ this standardized registry to report to the department of taxation all property tax reductions or abatements which had effect during the previous calendar year.

(c) The department of taxation, by July 1, 2004, and for each year thereafter, shall compile and publish all data in all of the disclosure registries in both written and electronic form.

(d) If a county fails to comply with subsection (b), the department of taxation, within ten working days of the July 1 filing deadline, shall notify the department of that failure. Upon receipt of the notice, the department shall suspend within three working days any current development assistance activities under its control in the county's jurisdiction, and shall be prohibited from completing any current development assistance or providing any future development assistance in that county unless and until it receives proof from the department of taxation that the county has complied with subsection (b).

(e) In the event any state agency fails to enforce subsection (d), any person who paid personal income taxes or other taxes to the State in the calendar year prior to the year in dispute shall have standing to sue to compel the State to enforce the law. The court shall award the taxpayer plaintiff who prevails reasonable attorney's fees and costs in any such enforcement action.

(f) All data generated in compliance with subsections (a) and (b) shall comply with applicable disclosure laws.

-4 Standardized applications for on-budget development assistance. (a) Before October 2, 2003, the department shall adopt a standardized application form for on-budget development assistance for use by all granting bodies. The form shall include at least the following data:

(1) An application tracking number which is specific to both the granting agency and to each application;

(2) The name, street and mailing addresses, phone number and director or chief officer of the granting body;

(3) The name, street and mailing addresses, phone number and chief officer of the corporate parent of the applicant corporation;

(4) The name, street and mailing addresses, phone number, four-digit SIC number, and chief officer of the applicant corporation at the specific project site for which development assistance is sought;

(5) The applicant corporation's total number of employees at the specific project site on the date of the application, categorized by full-time, part-time, and temporary status;

(6) The total number of employees in the State of the applicant corporation's corporate parent, and all subsidiaries thereof, as of December 31 of the year preceding the date of application, categorized by full-time, part-time, and temporary status;

(7) The kinds of development assistance and values of assistance applied for;

(8) The number of new jobs to be created by the development assistance, categorized by full-time, part-time, and temporary status;

(9) The average hourly wage to be paid within one year of hiring to the new employees, categorized by number of full-time, part-time, and temporary status employees, and categorized by wage bands as follows: $6 or less an hour, $6.01 to $7 an hour, $7.01 to $8 an hour, $8.01 to $9 an hour, $9.01 to $10 an hour, $10.01 to $11 an hour, $11.01 to $12 an hour, $12.01 to $13 an hour, $13.01 to $14 an hour, and $14.01 or more per hour;

(10) For applicant project sites located in a "metropolitan statistical area", as defined by the United States Census Bureau, the average hourly wage paid non-managerial employees in the applicant's industry in the State, as most recently provided by the United States Bureau of Labor Statistics to the two- or three-digit SIC number specification, as available;

(11) For applicant project sites located outside of metropolitan statistical areas, the average weekly wage paid in the county, as most recently reported by the United States Department of Commerce in its County Business Patterns reports;

(12) The nature of employer-aid health care coverage to be provided within ninety days of hiring to the employees filling the new jobs, including any costs to be borne by the new employees;

(13) A list of all other forms of development assistance the applicant corporation is seeking for the specific project site, and the name or names of the granting body or bodies from which that development assistance is being sought;

(14) A narrative, if necessary, describing how the applicant's use of the development assistance may reduce employment at any site in any United States jurisdiction controlled by the applicant corporation or its corporate parent, including events such as automation, consolidation, merger, acquisition, product line movement, business activity movement, or restructuring by either the applicant corporation or its corporate parent; and

(15) Individual certifications by the chief officers of both the applicant corporation and the granting body as to the accuracy of the application, under penalty of perjury.

(b) Beginning October 1, 2003, every granting body in the State, jointly with applicant corporations, shall fill out the standardized application form as prescribed in subsection (a) each time a corporation applies for development assistance.

-5 On-budget development assistance disclosure. (a) Beginning July 1, 2004, and for each year thereafter, every granting body in the State shall submit to the department copies of all the standardized application forms for development assistance, as specified in section    -4, that it has received in the previous calendar year. Upon each form, the granting body shall designate whether the development assistance is pending, was approved, or was not approved, and for those applications that were approved, the date of assistance if the date of assistance occurred in the previous calendar year.

(b) For those applications that were approved but for which the date of assistance did not occur in the same calendar year, each granting body shall report in its next subsequent July 1, annual report to the department the relevant dates of assistance.

(c) For each development assistance application that was approved, and for which the date of assistance has occurred in a reporting year, each granting agency shall submit to the department a progress report, which shall include at least the following data:

(1) The application tracking number;

(2) The name, street and mailing addresses, phone number and director or chief officer of the granting body;

(3) The name, street and mailing addresses, phone number, four-digit SIC number, and chief officer of the corporation at the specific project site for which the development assistance was approved;

(4) The kind of development assistance and value of assistance that was approved;

(5) The applicant's total level of employment at the specific project site on the date of the application and the applicant's total level of employment at the specific project site on the date of the report, categorized by full-time, part-time, and temporary status, and a computation of the gain or loss in each category;

(6) The number of new jobs the applicant corporation stated in its application would be created by the development assistance, categorized by full-time, part-time, and temporary status;

(7) The total level of employment in the State of the applicant's corporate parent, and all subsidiaries thereof, as of December 31 of the year preceding the date of application and the total level of employment in the State of the applicant's corporate parent, and all subsidiaries thereof, as of each December 31, up through the reporting year, categorized by full-time, part-time, and temporary status, and a statement of the gain or loss in each category from the earliest reported year to the most recent;

(8) The average hourly wage paid as of December 31 of the reporting year to employees filling the new jobs at the specific project site, broken down by full-time, part-time, and temporary status;

(9) The nature of employer-paid health care coverage provided within ninety days of hiring to the employees filling the new jobs, including any costs borne by the new employees;

(10) A narrative, if necessary, describing how the recipient corporation's use of the development assistance during the reporting year has reduced employment at any site in any United States jurisdiction controlled by the applicant or its corporate parent, including events such as automation, consolidation, merger, acquisition, product line movement, business activity movement, or restructuring by either the applicant or its corporate parent; and

(11) Signed individual certifications by the directors or chief officers of both the applicant corporation and the granting body as to the accuracy of the progress report, under penalty of perjury.

(d) The granting body and the department shall have full investigative authority to verify the applicant's progress report data, including but not limited to inspection of the specific project site and analysis of tax and payroll records.

(e) By July 1, 2004, and by July 1 of each year thereafter, the department shall compile and publish all data in all of the development assistance progress reports in both written and electronic form.

(f) Every aspect of all development assistance applications, progress reports, and the department compilation of applications and progress reports shall comply with applicable disclosure laws.

(g) If a granting body fails to comply with subsections (a) through (e), or if a recipient corporation fails to comply with subsection (c)(11), the department, within ten working days of the July 1 filing deadline, shall suspend any current development assistance activities under its control in the granting body's jurisdiction, and shall be prohibited from proceeding with any current or future development assistance activities under its control in the granting body's jurisdiction, unless and until it receives proof that the negligent granting body or recipient corporation has complied with the above-specified sections.

-6 Job creation and job quality standards. (a) In considering development assistance applications, all granting bodies shall perform two analyses concerning the projected wages and benefits. Specifically:

(1) In considering development assistance applications, all granting bodies shall compare the aggregate projected wage, as specified under section    -4(a), with existing wages, as specified and defined under section    -4(a)(10) and (11). To derive the aggregate projected wage, the granting body shall compute the weighted hourly average wage for all new employees, including full-time, part-time, and temporary status employees. If the aggregate projected wage is less than eighty-five per cent of existing wages, the application shall be denied. For small businesses, if the aggregate projected wage is less than seventy-five per cent of existing wages, the application shall be denied; and

(2) In considering development assistance applications, all granting bodies shall perform a second wage computation to consider the value of health care coverage provided to full-time employees, as specified in section    -4(a)(12). If the applicant corporation is not providing health care coverage to full-time employees, the granting body shall subtract $1.50 an hour from the projected wage. If the recipient corporation projects some health care costs to be borne by the new full-time employees, the granting body, based on data from the applicant corporation, shall estimate the hourly cost to the new full-time employee of those costs and subtract that amount from the projected wage. If the amount resulting from that subtraction is less than eighty per cent of existing wages as specified and defined under section    -4(a)(10) and (11), the application shall be denied. For small businesses, if the amount resulting from such subtraction is less than seventy per cent of existing wages, the application shall be denied.

(b) Granting bodies shall perform a third eligibility analysis. In considering development assistance applications, all granting bodies shall divide the value of assistance, as defined in section    -1, and specified in section    -4(a)(7), by the number of projected full-time jobs, as defined in section    -4(a)(8). If the resulting sum exceeds $35,000, the application shall be denied.

(c) A granting body's requirement under subsection (a) may be waived in a bona fide collective bargaining agreement that covers employees at the specific project site of the applicant corporation, but only if the waiver is explicitly set forth in such collective bargaining agreement in clear and unambiguous terms. Unilateral implementation of terms and conditions of employment by either party to a collective bargaining agreement shall not constitute, or be permitted, as a waiver of subsections (a) and (b).

-7 Recapture. (a) Recipient corporations are required to achieve their job creation and wage and benefit goals within two years of the date of assistance. They are also required to maintain their wage and benefit goals as long as the benefit is in effect, as defined in section    -1. Corporate parents of recipient corporations are required to maintain at least ninety per cent of their original State employment, as specified in section    -4(a)(6), and section    -5(c)(7).

(b) Granting bodies, within ten working days after the second anniversary of the date of assistance, shall fill out a standardized progress report, the same as prescribed in section    -5 and the recipient corporation shall sign it and certify its accuracy under penalty of perjury. This second anniversary progress report shall be filed by the granting body with the department along with the granting body's next annual filing of progress reports.

(c) The granting body shall indicate on this second anniversary progress report whether the recipient corporation has achieved its job creation and wage and benefit goals, and whether the corporate parent has maintained ninety per cent of its state employment.

(d) On all subsequent annual progress reports, the granting body shall indicate whether or not the recipient corporation is still in compliance with its job creation and wage and benefit goals, and whether the corporate parent is still in compliance with its State employment maintenance requirement.

(e) If on any progress report occasion, beginning with the second anniversary progress report, a granting body finds that a recipient corporation has not achieved its job creation or wage or benefit goals, or the corporate parent has not maintained ninety per cent of its state employment, the granting body must, within ten working days, file a finding of development assistance default with the department and with the recipient corporation.

(f) If a recipient corporation defaults on development assistance, as provided in subsection (e), it must pay back to the granting body that fraction of the development assistance that accrued to its benefit for the calendar year in which the default occurred. For on-time forms of development assistance such as grants or land price discounts, a defaulting recipient corporation must pay back to the granting body one-fifth of the value of assistance. Remittance of the payback by the recipient corporation to the granting body shall take place within sixty calendar days of the delivery of the default notice to the recipient corporation.

(g) If a recipient corporation defaults on development assistance, as provided in subsection (e), in three consecutive calendar years, the granting body shall declare the development assistance void, and shall so notify the department and the recipient corporation. Upon that declaration, the recipient corporation must pay back to the granting body all remaining value of the development assistance it has not already paid back. Remittance of the void payback by the recipient corporation to the granting body shall take place within one hundred eighty calendar days of the delivery of such notice to the recipient corporation.

(h) Every aspect of all development assistance default notices, recapture remittances, associated correspondence, and related proceedings shall comply with applicable disclosure laws.

(i) If a granting body fails to enforce this section, any person who paid personal income taxes or any other taxes to the State in the calendar year prior to the year in dispute, or any organization representing such taxpayers, shall be entitled to bring a civil action in state court to compel enforcement under this statute. The court shall award to any prevailing taxpayer plaintiff or organizational plaintiff reasonable attorney's fees and actual incurred costs in pursuing such enforcement action."

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________