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Handful of companies receive most in corporate tax credits, JLARC report shows

By Rosalind S. Helderman
Rosalind S. Helderman

More than half of the $58.6 million claimed in tax credits by Virginia corporations that pay the corporate income tax went to a handful of coal companies -- no more than four -- whose identities must be kept confidential by law, even from members of the General Assembly.

That finding emerged from a report Monday by the Joint Legislative Audit and Review Commission about Virginia's corporate income tax.

The legislative staff found that Virginia's corporate income tax works similarly to that in other states. At 6 percent, the rate is lower than in most of Virginia's competitors. Most Virginia businesses don't pay the tax -- only the 71,000 that are structured as so-called C corporations. Limited liability corporations and limited liability partnerships, for instance, don't pay the tax.

The staff concluded that eliminating the tax, as has been advocated by some lawmakers, would cause modest employment gains -- but not enough to offset the $3.3 billion in lost revenue to the state over five years.

Legislators who sit on the commission became the most animated during a discussion of tax credits designed to give corporations a break on the tax. According to JLARC staff, there were 23 tax credits available to corporations in 2009. They identified 11 credits as underutilized by companies.

In 2006, 248 corporations claimed credits for a total of $58.6 million. But more than half of that money -- $31.2 million -- went to companies who claim the Coalfield Employment Enhancement credit.

And staff said fewer than four companies claim that credit. The credit is awarded based on the tonnage of coal produced by companies -- not by the number of people they employ. And the names of the beneficiaries cannot legally be released.

"If we don't know about the jobs created, why should we be awarding this kind of money?" asked Del. Harvey B. Morgan (R-Gloucester). "Am I missing something?"

"Basically, it's confidential taxpayer information," responded Bill White from the Virginia Department of Taxation. "Under the Virginia tax code, we're just not able to release the information. It's prohibited. So you'd have to change the law in order for us to be able to tell even the members of the General Assembly who's benefiting from the credit."

"But how does the General Assembly make decisions know that there is benefit to the Commonwealth to give these tax credits if we don't know who's getting them?" Morgan asked.

By Rosalind S. Helderman  | November 8, 2010; 2:49 PM ET
Categories:  General Assembly 2010, House of Delegates, Rosalind Helderman, State Senate  
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