In an advanced era of public-private relationships, private corporations are writing the statutes that create their own benefits.
The Major Business Headquarters Expansion Act was sponsored and signed by Governor LePage on July 27, 2017. to practically no media fanfare, despite its title identifying it as a major act, which indeed it was, statutorily linking Maine to a national and global corporate network,
During a Zoom meeting last night, I learned about an organization called ALEC.
The American Legislative Exchange Council (ALEC) is a nonprofit organization of conservative state legislators and private sector representatives who draft and share model legislation for distribution among state governments in the United Stateshttps://en.wikipedia.org/wiki/American_Legislative_Exchange_Council
In this advanced age of government by public-private relationships, ALEC is the poster child, creating and distributing legislation across the states of America, to be used as “model legislation”. Is the Major Business Headquarters Expansion Act, a product of model legislation?
The most recent poster child for this legislative hostage-taking has been the American Legislative Exchange Council (ALEC), a conservative nonprofit that gathers state legislators, corporations, think tanks, and lobbyists to spoon-feed legislators pre-written model bills, which are then implemented, largely at the state level. ALEC has been called a “corporate bill mill,” helping secure favorable state legislation for everyone from Koch Industries to the NRA.
……. The bad, predictable news is that ALEC’s waning influence and toxic reputation (though its income stream remains considerable) hasn’t meant that corporations are now being shut out of the legislative process. Instead, some of the country’s largest corporations have transitioned into a new era where they’re simply writing their own laws in-house, submitting them directly to governments for implementation. (emphasis by author)
The American Prospect
In February of 2016, Albert DiMillio, a retired corporate tax director and CPA with over thirty years of experience initiated a process that brought about a review of the Maine Capital Investment Credit calculations for corporations that have less than 100% of the sales apportioned to Maine, which is no accident in the Major Business Headquarters Expansion Act, instead it is a requirement, as Maine continues down the slippery slope of government by public-private deal-making. Mr. DiMillo was told at that time that as an individual he could not request a review by OPEGA and had to have a legislator request a review. In Mr, DiMillo’s letter to the committee, he cited his concern over the ”nature of the Credit, its calculation and the benefits accruing to out of state corporations.", submitting files to the committee illustrating that over twenty million in unintended credits that could have gone to less than 100% Maine corporations. in the years 2011 to 2015. Mr. DiMillo expressed his concerns that a significant number of corporations had an apportionment factor of 10% or less of revenues in Maine.
In responding to the OPEGA ETIF (Employment Tax Increment Financing) Evaluation Report, before the Government Oversight Committee, Geoff Baur, Vice President of Tax at Idexx Laboratories made a clear statement identifying that Idexx initiated and negotiated the tax credits in Major Business Headquarters Expansion Act:
When it became clear that the available economic development incentives were not sufficient to compete with other regions, we sought partnership from the State in the form of an additional incentive. Congressional testimony, by Geoff Baur for Idexx Laboratories (emphasis by author)
It is taken for granted in this well-worn paradigm that taxpayers will subsidize large corporations and that corporations will not locate anywhere but for large subsidies paid by the public. Is Idexx saying that it cannot be profitable without subsidies? Or is it just being frank about increasing its profits by taking more and more from the public?
In a letter dated March 29 2021 Gerome Gerard, the state tax accessor, identifies Idexx as the only applicant certified under the Major Business Headquarters Expansion Act.
The effect of the act extends far beyond local state borders, and beyond what Idexx needed to achieve its own ends, suggesting hidden agendas. By design, the Major Business Headquarters Expansion Act is chartering the course of the economy far beyond Maine. The act could be model legislation designed to be distributed across states, creating a public-private tax-payer subsidized national and global network.
Geoff Baur states that Maine did not have competitive economic development incentives even though Pine Tree Tax exemptions worth up to 100% of the tax owed transformed the Seed Capital (refundable) Tax Credit into a fifty percent subsidy of a private corporation’s capital investment. in 2018
Not competitive? Mr. Baur says Idexx needs additional incentives because other places offer better incentives and Idexx can go elsewhere if it doesn't get what it wants. Maybe we should be asking what other use can all of those taxpayer dollars be put toward?
Was it Idexx who called for structuring the corporate welfare as 2% of a global corporation’s unitary investment with 35 million invested in Maine, or is there a hidden deal in the works with other players whom we do not know about? 2% of a global corporation’s unitary investment with 35 million invested in Maine works out to a subsidy worth almost 45% of the Maine capitalization, less than the Seed Capital (refundable) Tax Credit was worth at the time. Something doesn’t add up. What is the reason for making the subsidies depend on the value of unitary investments outside the state of Maine?
In reading the Idexx testimony, it is startling to see how blatantly it is written as if Idexx writes the law and not the elected Maine Legislature, as in the passage below from Mr. Baur’s testimony:
In crafting the final iteration of the law, we worked with the Taxation Committee to include best practices in business incentive legislation such as: the requirement that the business make the investment, complete construction, and reach new job creation benchmarks before any benefits are received; a claw back to protect the State; and a certification process through the Department of Economic and Community Development (DECD) to ensure transparency. Additionally, the MBHE included a provision that required OPEGA to review the structure and design of the law for other best practices in economic development incentive programs. Congressional testimony, by Geoff Baur for Idexx Laboratories
The private company speaks as the author of the laws, while the state acts as if it is a national or global development corporation. If private corporations can direct the writing of legislation that mandates the taxpayers to capitalize the corporation, what we have is the corporate state take over of government by and for the people, who are just the pawns in the game, representing money in the form of taxation that the state development corporation has to spend on subsidizing the capitalization of the private ownership of the means of production.
The Office of Program Evaluation and Government Accountability (OPEGA) report included these two recommendations.
Recommendations for Improvements to the ETIF Program
- ETIF statute or rule should be amended to support effective implementation of the “but for” application requirement.
- The Legislature should clarify whether the same qualifying jobs may be claimed for both ETIF and the Major Business Headquarters Expansion Program.
The Opega Report clearly states that the ETIF credits are intended to be provided only to businesses that would otherwise not have hired net new employees
ETIF requires business applicants to attest that the business activity leading to the creation of the net new jobs would not occur but for the availability of ETIF benefits. OPEGA found this attestation to be a weak tool for ensuring financial benefits are provided only to businesses that would otherwise not have hired net new employees. This problem is not unique to Maine, but has been found to be an issue in other states with similar programs as well OPEGA Evaluation of Employment Tax Increment Financing (ETIF) January 2019
The testimony by Mr. Baur refutes OPEGA’s testimony, at least as it applies to Idexx, and advocates that Idexx should be allowed to use the ETIF credits with the Major Business Headquarters Expansion Act credits because that is what Idexx assumed it could do:
That expansion is the reason I am before you today. Specifically, I would like to respond to the Office of Program Evaluation and Government Accountability (OPEGA) report on Employment Tax Increment Financing (ETIF). That report includes a recommendation that the legislature clarify whether a business participating in the Major Business Headquarters Expansion tax credit (MBHE) is also eligible to participate in ETIF. Should this Committee decide to provide that clarity, for reasons I hope to make clear, we believe it was the intent of the 128th Legislature that a business be eligible for both the MBHE and ETIF and relied on that belief when we began our project. If the current legislature believes a modification to the law is appropriate, we hope that the fact that IDEXX has relied on that belief would lead you to conclude that any currently certified projects should be grandfathered in the event of any modification. Congressional testimony, by Geoff Baur for Idexx Laboratories
At one point Geoff Baur quotes a section from the OPEGA report that makes the point that the additional benefits added to the base benefits granted to IDEXX may offset any benefits realized from the program by the taxpayers who are subsidizing IDEXX’s capitalization cost:
Many factors affect whether these potential increases in the tax base would be realized. One significant factor in the short term is the participation of the MBHE businesses in other State tax incentive programs such as the Employment Tax Increment Financing, Business Equipment Tax Exemption or Pine Tree Development Zone Programs. Participation in these programs could offset some, or all, of the direct increases in sales, property and income taxes for the duration of a business's participation in these other programs. (Assessment of the Design of the Newly Enacted Major Business Headquarters Expansion Program, pg.9, 2018) (actually quote is found on page 4-added by author)
Baur does not address the point being made by OPEGA. Instead, he says ”Had the Legislature intended to disallow participation in ETIF, it could have done so when it considered the OPEGA report last year.”
And Idexx could have stated that the business would be eligible to use the MBHE and the ETIF together when it crafted the act in the first place.
Mr. Baur goes on to say that if the Legislature must prohibit using the ETIF with the Major Business Headquarters Expansion (refundable)Tax Credit, it should not apply to Idexx, (currently the only MBHE certificate holder) because Idexx accepted the Major Business Headquarters Expansion Credits under the belief that it would be able to use the ETIF with it, showing no concern that the extended benefits to which Idexx feels it is entitled, by omission, may wipe out any benefits to the taxpayers capitalizing Idexx as captive investors. Baur says it would undermine confidence in the tax credits as if it is desirable to retain at any cost, a tax credit that provides no benefit to those paying its costs.
Such a decision would create great uncertainty in any new or existing economic development incentive offered by the State. To avoid creating that uncertainty, we would hope you would grandfather application of both the MBHE and ETIF to existing holders of the MBHE Certificate of Approval who have commenced investment. (meaning Idexx-comment by author)
It is quite an amazing sense of entitlement expressed by Baur as if the people can cover costs of capitalization Idexx at no economic gain because Idexx is doing the public such a great favor by creating jobs for 1250 people!
There was also this comment in the Assessment of the Design of the Newly Enacted Major Business Headquarters Expansion Program, pg.4, 2018
Indirect tax effects – for example, additional income taxes paid by any Maine businesses with increased revenue due to MBHE participants’ spending – could still be realized immediately regardless of MBHE businesses’ participation in other programs. However, current statutory language does nothing to require or encourage MBHE businesses to use Maine vendors, to the degree possible, for any of their construction or ongoing operating needs. As a result, there is a risk that the significant investment and ongoing spending associated with the new or expanded headquarters facilities could be directed to out-of-state businesses.(Assessment of the Design of the Newly Enacted Major Business Headquarters Expansion Program, pg.4, 2018).
I haven’t done the research to determine if the above was ever addressed, but just the fact that it needs to be addressed speaks to the facts in evidence that when the public-private partners craft a law together they do it with what benefits themselves in mind and with little regard to the impact on the taxpayers subsidizing their programs. That regard is reserved for OPEGA. If there is no watchdog over the public-private partners, both the state development corporation and its private partner are only concerned with serving each’s own interest.
In the case of the dual use of ETIF and MBHE tax credits, it may be that the Oversight Committee listened this time as found in the report from JOINT STANDING COMMITTEE ON TAXATION August 2019
Part D merges the changes made to the income tax credit for major business 16 headquarters expansions made by 2 different laws enacted in the 128th Legislature, 17 Second Regular Session, Public Law 2017, chapter 405, "An Act To Improve the 18 Effectiveness of the Major Business Headquarters Expansion Tax Credit" and Public Law 19 2017, chapter 375, "An Act To Amend the Maine Tax Laws." JOINT STANDING COMMITTEE ON TAXATION August 2019
Sec. D-2. 36 MRSA §5219-QQ, sub-§3, as amended by PL 2017, c. 375, Pt. D, §4 and c. 405, §1, is repealed and the following enacted in its place:
3. Refundable credit allowed. A certified applicant who has received a certificate of completion is allowed a credit as provided in this subsection.
B. The credit under this subsection is limited as follows.
As search of Jobs for additional full-time employees that are counted for determining eligibility for the credit under one certificate of completion may not be counted for determining eligibility for the credit under a separate certificate of completion. (emphasis by author)
However:
That only tells us that the general law is amended, whether Idexx arranged its own exception to the rule, I cannot say, at least not today
Idexx revenue jumps 12% to $2.71 billion in 2020
The Westbrook-based veterinary diagnostic testing firm also reported a net income boost of 31% over 2019.
Individual Subsidy Records for Idexx since 2010 report enterprise zones and tax credit rebates as “undisclosed”
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