Prosecute firms that lie to get tax breaks, panel recommends

TRENTON, N.J. (AP) — Lying on applications to get tax breaks in New Jersey should open companies up to prosecution, and the state should create an inspector general post to watch over the agency handing out incentives, according to a new report published Friday by a legislative committee probing the credits.

Those were just two of more than two dozen recommendations in the Special Committee on Economic Growth's final report, issued after nearly a year of looking into the now-expired tax incentives and holding four public hearings. The Chris Christie-era tax break program expired June 30, meaning that new applications aren't being considered, though previously approved awards could still be paid out.

The other recommendations include creating a compliance officer within the Economic Development Authority, which runs the state's multibillion dollar tax credit programs, reducing the generosity of incentives and putting a cap on individual awards to companies but leaving annual disbursements unlimited.

“We took a hard look at the programs in place to determine the reforms needed to make them work with more transparency and accountability,” said committee chairman Democratic state Sen. Bob Smith in a statement.

The recommendations don't go far enough, though, according to Darryl Isherwood, Democratic Gov. Phil Murphy's senior adviser for economic development. He cited the need for an annual award cap, calling it “integral," and pointing out the committee stopped short of such a recommendation.

“We’re gratified that the committee has recognized issues first raised by the governor in the early days of his campaign," he said.

Economic Development Authority CEO Tim Sullivan said he took the report “to heart,” but said it stood by the governor's call for overall caps on business tax breaks.

The committee's report comes about a year after Democratic Gov. Phil Murphy put tax breaks in the spotlight. Murphy cited state auditor and comptroller reports last year that raised questions about how the awards were handed out as the rationale for the creation of his own task force to probe the programs.

The task force met several times over 2019 and issued two reports, concluding that the development authority's process for handing out awards was shaky.

The agency had a bias in favor of approving awards and failed to adequately vet businesses' claims about the likelihood of their jobs moving out of state — a key factor in awarding tax breaks — according to the final report, issued last month.

The task force also said that its investigation led to voluntary terminations of awards that saved the state $11 million, though they've declined to specify any details about the returned tax break money.

Another significant outcome of the task force's work was the critical spotlight it shined on influential Democratic power broker George Norcross, whose firm benefited from the tax breaks. The task force, for example, turned up documents showing firms connected to Norcross gave inconsistent responses while applying for credits when asked if they were considering leaving New Jersey.

Norcross disputed the task force's findings and even went to court to try to stop the panel from issuing one of its reports but lost the legal fight. He defended his businesses in a hearing before lawmakers, saying the task force’s work contained misstatements and “mischaracterizations.” He's suggested the task force was conducting a political “witch hunt."

Tensions within the Democratic Party between Norcross, who is a close friend of Senate President Steve Sweeney, and Murphy, who's clashed with both men, cast the task force's and legislative panel's works in a political light as well.

The legislative panel's creation came after a May 2019 task force meeting that cast Norcross in a critical light, though the panel also pointed to the June 30 expiration of tax credits as a factor in its establishment.

What happens next is unclear.

Murphy has said the task force's work shows that sweeping reforms, including capping how much the state approves in tax breaks annually, are required. While the legislative report embraces caps for individual firms, the report stops short of recommending an annual limit — something Murphy has said is necessary to limit the state's tax liability.