Utah

Tax incentive evaluation ratings

Tax Incentive Evaluation Ratings: Utah

Rating: Making progress

Key points:

  • Utah is making progress because the state has adopted a plan for regular evaluation of tax incentives.
  • A legislative interim committee will consider the evaluations and then make recommendations on whether each incentive should be continued, modified, or ended.
  • Currently, the process requires evaluation of corporate and income tax credits, but the legislative fiscal analyst has recommended studying other incentives as well.

Utah evaluation law

Year enacted: 2016.a

Who evaluates: Office of the Legislative Fiscal Analyst and the Governor’s Office of Economic Development.

Length of review cycle: Three years.

For more information on state ratings, please visit our interactive map.  

In 2016, Utah lawmakers approved legislation requiring evaluation of tax credits on a three-year cycle. The law places the Revenue and Taxation Interim Committee in charge of the evaluation process. The committee, which convenes each year after the Legislature’s regular session concludes, is responsible for recommending whether each credit should be continued, modified, or ended.b This approach appears well-designed to help lawmakers improve incentive policy once the evaluations begin in 2017; in Utah, interim committees often vet legislation that will be considered in the following session.c

The law builds on work that Utah is already doing: Various interim committees regularly discuss incentives and hear from agencies that administer them.d What makes the new law different is that the reviews will be informed by independent evaluations from the nonpartisan staff in the Office of the Legislative Fiscal Analyst (LFA). Additionally, the Governor’s Office of Economic Development (GOED), which administers many incentives, will provide analysis to the committee.e

The law requires evaluation of corporate and income tax credits.f However, with the Legislature’s blessing, the LFA has created an inventory of all state tax expenditures, including incentives that reduce sales and property taxes.g In October 2016, the LFA recommended expanding the scope of the review process to include these additional tax incentives. It also recommended adding purpose statements to incentives to provide a basis for assessing their success.h

In Utah, evaluation is already a proven approach for improving incentives. The state auditor published a 2014 evaluation that highlighted ways to improve the administration of one of the state’s large incentives, the Economic Development Tax Increment Financing (EDTIF) program. The audit argued that GOED had incorrectly calculated wages in ways that allowed companies to qualify for incentives that they otherwise would not have.i The next year, lawmakers approved legislation clarifying how wages should be calculated to end several of the practices the audit had identified.j

The EDTIF audit, however, was only a one-time report. With the new law and the legislative fiscal analyst’s efforts, Utah lawmakers will soon have regularly updated information on the results of their tax incentives.

Endnotes

  1. Utah Code Ann. § 59-7-159, http://le.utah.gov/xcode/Title59/Chapter7/59-7-S159.html?v=C59-7-S159_2016071320160717.
  2. Ibid.
  3. Jonathan Ball and Andrea Wilko (director and chief economist, respectively, Utah Office of the Legislative Fiscal Analyst), interview with The Pew Charitable Trusts, Aug. 26, 2016.
  4. For example, see Utah Economic Development and Workforce Services Interim Committee, http://le.utah.gov/asp/interim/Commit.asp?Year=2016&Com=INTEDW.
  5. Utah Code Ann. § 59-7-159.
  6. Ibid.
  7. Ball and Wilko interview.
  8. Utah Office of the Legislative Fiscal Analyst, “Issue Brief: Evaluating Tax Exceptions and Inducements” (Oct. 18, 2016), http://le.utah.gov/interim/2016/pdf/00004082.pdf.
  9. Utah Office of the State Auditor, “Performance Audit No. 14-03: A Performance Audit of GOED’s Corporate Incentives Program” (Oct. 14, 2014), http://financialreports.utah.gov/saoreports/2014/PA14-03GOEDGovernor'sOfficeofEconomicDevelopment.pdf.
  10. Utah S.B. 179 (2015), http://le.utah.gov/~2015/bills/static/SB0179.html.
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Improving Tax Incentives for Jobs and Growth

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Tax incentives—including credits, exemptions, and deductions—are one of the primary tools that states use to try to create jobs, attract new businesses, and strengthen their economies. Incentives are also major budget commitments, collectively costing states billions of dollars a year. Given this importance, policymakers across the country increasingly are demanding high-quality information on the results of tax incentives.