News Story

No Audits for Ten Years on Companies Getting Special Tax Breaks from State

For the first 10 years the state's flagship economic development program didn't do any audits of businesses that were collecting tax credits, the Michigan Economic Development Corporation CEO said Wednesday.

Greg Main of the MEDC said that is now changed and every tax credit since 2006 will be reviewed by the end of this fiscal year.

Main testified at a House tax committee hearing in Lansing about two weeks after an Auditor General report pointed out lax oversight of the tax credit program.

State Representative Tom McMillin, R-Rochester Hills, estimated the MEDC may have given out $150 million in erroneous tax credits over the last five years.

Main told the committee there was no audit system in place from 1995 to 2005 because MEDC officials didn't believe there was going to be a lot of companies applying for the tax credits and the MEDC staff had a close relationship with those who did apply.

In 2005, state officials started auditing with 30 percent of those companies receiving tax credits. In 2007, Main said 33 of 113 companies that had tax credit filings were audited..

By the end of the fiscal year, the state will do an audit on every tax credit issued since 2006. Main said the MEDC even hired an outside firm to help with the work load.

The MEDC has had some unflattering attention recently.

The Auditor General report came a little more than a month after it was learned that the Michigan Economic Growth Authority (MEGA) board approved a $9.1 million tax credit to a company named Renewable and Sustainable Companies LLC. Richard Short, the CEO, is a convicted embezzler. The Flint Journal reported that at the time he was working on the MEGA deal, Short was also scamming thousands of dollars form an 86-year-old neighbor with dementia.

The Auditor General report found several problems with the Michigan Strategic Fund's oversight of the MEGA tax credit program. The audit concluded the MSF's procedures were "moderately effective."

The Auditor General report stated that some companies received tax credits even though they didn't qualify.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.