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State and Local Government / Transparency

Subcommittee Recommends Buying Back Tax Credits

By Christine Harbin on Nov 18, 2010

The Tax Credit Review Commission is beginning to deliver its final recommendations on targeted tax credit programs. From an article by the Missouri Watchdog:

The low-income housing program has more than $1 billion in credits outstanding through the year 2022. The subcommittee recommends buying back some of those credits to lessen the state’s indebtedness.

Recommending buying back credits is an admission that outstanding tax credits represent a considerable future liability for the state. If individuals and businesses did not redeem tax credits at indeterminate times in the future, then state revenues would be more constant and the state government would be able to forecast and plan its budget more easily. If there were a high number of tax credits outstanding, and they were suddenly redeemed, it could create or exacerbate budget problems in the future.

I have some questions relating to the logistics of this recommendation, however. Won’t buying back credits increase the state’s indebtedness in the present? Will the state government buy them at their face value, or will it buy them at a premium to encourage recipients to sell early?

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Christine Harbin

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