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Legal worries spur changes to Commerce’s economic incentives plan

File photo

File photo

An economic incentives bill approved by both the Idaho House and Senate was pulled back on March 17 amid constitutional concerns, but a revised version was approved by the Senate two days later.

The attorney general’s office had warned that the original bill could leave Idaho “constitutionally vulnerable.”

The legal opinion objects to giving the seven-member Economic Advisory Board the final word on which companies get tax breaks, with no option to appeal the decisions. Under the legislation, Idaho would refund up to 30 percent of state corporate income taxes, payroll taxes and sales taxes to businesses that create 50 new jobs in urban areas and 20 in rural areas.

The lack of an appeals process means identical applicants could receive different tax incentives based on their ability to negotiate, Deputy Attorney General Chelsea Kidney wrote in the opinion.

She wrote that the issue could be fixed by allowing the panel’s director to consider an appeal if an application is denied or if a company contests its tax rate or other terms of an incentive agreement. The board is made up of citizens appointed by the governor to three-year terms advising the commerce department.

The revised version of the legislation, approved March 19 by the Senate, allows companies that don’t get an incentive to appeal that decision to state courts. The Senate also approved amendments that make sure the Economic Advisory Board gives as low a tax break as needed to spur new jobs and tax revenue.

After the opinion was released from the attorney general’s office, Senate Majority Leader Bart Davis, R-Idaho Falls, gave a notice of reconsideration that allows him to call for another vote and that stalled the bill in the chamber temporarily.

Backers had touted the legislation as a way to entice companies to expand in the Gem State.

Sen. Jim Rice, R-Caldwell, said it was a low-risk way to compete with other areas for new projects. Typically, he said, states hand out tax breaks and hope businesses hold up their end of the bargain — with no recourse if the company goes belly up.

Under the legislation, companies wouldn’t reap the tax benefit until hitting the job creation mark, even if it takes several years.

“They start getting it when they perform sufficiently,” he said. “What they receive back is money that they’ve paid in, so the state has already received the funds.”

The measure also mandates workers be paid wages that at least match the county average.

That’s something lawmakers hope could lift Idaho from its position as the state with the second-lowest average wage and the nation’s highest share of workers per capita earning the minimum wage.

The measure passed the House on a 63-5 vote earlier this month.

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