Tax Expenditure Transparency Act

Tax Expenditure Transparency Act


The legislature finds that the state’s tax code includes tax expenditures enacted to achieve a variety of policy goals for the public interest. The ultimate goal should be for the state’s tax system to reflect sound principles of taxation. In order to make policy choices going forward regarding the best use of limited state resources, the legislature concludes that it is necessary to articulate the legislative intent and have measurable performance goals for each tax expenditure created. It is also necessary for a comprehensive tax expenditure report to be compiled to assist the legislature in deciding whether or not to continue existing tax expenditures.

Model Policy

Short Title.

This Act shall be known and may be cited as the “Tax Expenditure Transparency Act.

Section 1.

(A) For purposes of this section, “tax expenditure” means a provision in the tax code that provide incentives for particular kinds of activities or that give special or selective relief to certain groups of taxpayers. “Tax expenditures” are considered deviations from the normative tax base.

(1) “Tax expenditures” shall not include:

(a) deductions to arrive at income under an income tax;

(b) exemptions of business inputs under a sales tax;

(c) deductions or credits used to offset a discriminatory tax or fee.

(B) For any bill introduced in either the House of Representatives or the Senate that adopts a new tax expenditure or expands or extends an existing tax expenditure, the bill shall include legislative intent provisions, establishing the policy goals and any related metrics.

(C) All existing tax expenditures without legislative intent provisions establishing policy goals and any related metrics shall have these sections added. Existing tax expenditures must have these provisions added before the scheduled performance review.

(D) A comprehensive report detailing every tax expenditure and its effect on state revenue shall be compiled every ten years, including fiscal notes for each tax expenditure.

(E) On a ten year rolling schedule, subsequent to the comprehensive tax expenditure report, all tax expenditures shall be reviewed to determine if they are meeting their stated legislative intent and are worth the cost of continuing.

Section 2. {Severability clause}
Section 3. {Repealer clause}


Adopted by the Task Force  on Tax and Fiscal Policy at the Annual Meeting, August 9, 2013.  Approved by the ALEC Board of Directors, September, 30, 2013.

Amended by the Task Force on Tax and Fiscal Policy at the Annual Meeting, July 28, 2016.

Approved by the ALEC Board of Directors, September 12, 2016.