Key Reforms: Disclosure

Reform #1: Require Disclosure of Subsidy Spending and Company Compliance

You can’t evaluate what you can’t see

In most states and cities, it’s very difficult to access information about how subsidy money is spent or what taxpayers are getting in return. This is for two reasons: First, many jurisdictions don’t follow up after granting subsidies to calculate the total cost of tax breaks and monitor whether companies are complying with subsidy commitments. Second, even when such information exists, it is not typically in a format or location that is easily accessible by the public.

Without this basic information, it is impossible to evaluate whether subsidized companies are living up to their promises and whether subsidies are effective in promoting economic development that positively impacts communities. The solution is better collection and availability of information on which companies receive subsidies, how much they get, what benefits they have promised to produce, and whether outcomes match expectations.

Disclosure is annual, company-specific reporting of public costs (subsidies received) and public benefits (jobs created, wages, etc.) relating to economic development deals. Disclosure of overall job creation (and destruction) and a company’s ongoing performance – combined with greater public participation — can help states and cities better judge deals and avoid wasting precious resources.

Deal-specific disclosure

State laws requiring annual deal-specific disclosure are the best way to get a handle on subsidy use and company compliance. This type of law reveals the basic information of how money is spent on development deals. Each year, states must produce a public, company-specific report laying out the costs and benefits of every deal. State must also devise a mechanism for reporting that information to the public in a timely and accessible format.

Government officials and the public can then use the information collected under disclosure laws – information known as “disclosure data” – to evaluate the real-world impact of both individual projects and subsidy programs as a whole. Disclosure data provide information on whether companies are providing the benefits they promised, and at what cost to taxpayers. A strong disclosure law provides data that:

  • names the company that got the subsidy and the agency and/or program that was the source of the subsidy;
  • provides the dollar amount the company received and the date;
  • reports the number of jobs created and/or retained;
  • reports on the quality of those jobs, including wages, healthcare, and full-time vs. part-time positions;
  • is collected in a central place and published (preferably on the Web) in a form that enables citizens to readily analyze deals or programs; and
  • is updated and released at least annually.

With this information, we can see whether companies are in compliance with the agreements they signed, and find out if the government agencies administering the subsidies are doing anything to penalize noncompliant recipients. We can also see what our money has bought us – whether subsidies are promoting economic development that is benefiting community residents.

Best practice

Most states have some form of company-specific online disclosure, but the quality and completeness vary greatly. For a detailed analysis of state subsidy practices and links to state disclosure websites, see the January 2014 Good Jobs First report Show Us the Subsidized Jobs and its online appendices here.

A comprehensive deal-specific disclosure law:

  • covers all state, regional, and local development agencies;
  • gives the public access to information both before and after a deal is negotiated; and
  • provides for annual, company-specific, deal-specific, publicly-available reports on subsidies which summarize the original deal (costs) and then track actual outcomes (benefits), not projections.

When such a law is in place, companies receiving subsidies fill out a form answering questions such as: How much did the company get? Which subsidy program did the money come from? What did the company do with the money? How many jobs did it create? How well do the jobs pay? Are they full-time? Do they provide healthcare? Are they accessible by public transportation?

The form also includes the company’s street address, and if the deal involved a relocation, the address of the old site and whether that site was accessible by public transit, plus how many jobs were moved. The company’s form is then certified by the local agency that did the deal and mailed to the state. The state makes the data available on the web in spreadsheet form.

Companies receiving every kind of subsidy above, say $25,000, should be required to fill out this form – and not just for grants and loans, but also corporate income tax credits and sales tax exemptions that are usually hidden from public view. Corporate income tax returns, which are not available to the public, would still be private. But the amount of money a company gets to deduct
from its income tax bill by taking a tax credit should be disclosed.

Once the information is collected, it must be disseminated to the public in an useful and accessible format. In the 21st Century that means putting it online.

Some cities also have disclosure laws. Among them is New York City, which passed a disclosure law in the spring of 2005. The law gives New Yorkers access to better information on job retention and creation at subsidized firms and, for the first time, information on job quality and on the number of subsidized jobs going to city residents.

Other types of disclosure

In addition to deal-specific disclosure, there are several other types of subsidy information that are useful for monitoring subsidized companies and evaluating subsidy policy:

Unified economic development budgets

Unified economic development budgets (UDBs) are annual reports that provide a state’s legislators with a comprehensive inventory of all spending line items for economic development, including the cost of subsidies. The purpose is to ensure that tax breaks get as much scrutiny as appropriations get. Tax breaks for economic development are often huge and go on for years; it’s no exaggeration to call appropriations the tip of the iceberg and tax expenditures the bottom. But because tax spending is often poorly accounted for, legislators often continue to approve it while cutting spending to other programs, even when states struggle with deficits.

About 30 states publish what is called a tax expenditure budget by compiling line items of foregone tax revenue (not just those for economic development), but only about a dozen of those are considered reasonably complete by state tax experts.

In several states, watchdog groups have created their own UDBs. While this can’t be called a permanent best practice solution, since it ultimately too much work for a non-profit and the states’ responsibility, such reports are great tools for researchers and accountability campaigners.

Hidden taxpayer costs disclosure

The public should know which companies account for the largest number of recipients of social programs such as Medicaid and State Children’s Health Insurance. Such companies are, in effect, receiving a subsidy from taxpayers to make up for the fact that they do not provide adequate wages and benefits. There have been efforts to get states to identify those companies, and some have done so.  See Good Jobs First’s compilation of these hidden taxpayer cost revelations.

Big-Company Tax Disclosure to Shareholders

Publicly traded companies (those listed on stock exchanges) already have to disclose how much they pay in federal income tax each year in their annual reports and Forms 10-K. They also disclose how much they pay in all state income taxes, but only in one aggregate number. The solution is simple: amend Securities and Exchange Commission rules to require publicly traded companies to include a 50-state matrix in their Form 10-K showing how much tax they paid in each state, grouped in three categories: income tax, property tax, and sales, utility, and excise taxes.

Having such data made public would enable taxpayers and elected officials to really see who the tax dodgers are. Given that we already know large numbers of big companies are paying little or no income tax in some states, this would spell out the details.


Just because your state doesn’t have a disclosure law doesn’t mean disclosure data are not available, and just because your state does have such a law does not mean the available information is comprehensive and up-to-date. The quality and accessibility of disclosure data varies widely from state to state, and is often housed in disparate agencies that administer various subsidy programs.

Also keep in mind that disclosure data are only one tool for researching subsidy deals. In-depth research on a particular deal may require the use of other sources of information, including development agreements, newspaper archives, state audits, and phone calls to development officials. And while disclosure data are extremely helpful in evaluating ongoing projects, pre-approval documents such as subsidy applications can also be vital resources. Monitoring and researching development proposals in their early stages are crucial tasks for communities working to impact development decisions and maximize community benefits.

Passing a disclosure law doesn’t automatically improve development practices. It is simply a way to improve access to information that taxpayers, advocacy groups and public officials can use to evaluate development practices. It’s then up them to press for reforms to rectify any abuses that the data bring to light.