Other States 1 |
2 | 3
"It's a scam," said Colorado state Treasurer Mike Coffman, when ask about the CAPCO program in Colorado.
More comments by others
"we became convinced the model was flawed, the program
wouldn't work, that jobs would not be created and the taxpayers would not be getting a good return on their
investment," Bob Lee, head of the Colorado Office of Economic Development.
"We can't mend this program. We must end this program." Colorado Governor Bill Owens.
As is always the case in politics few if any lawmakers are willing to challenge or question the details of programs protrayed as benefiting everyone. In this case boosting the economy and creating jobs.
In return states would give modest tax credits to induce insurance companies to invest their money in the more risky areas.
Each state tailored its version to satisfy legislative personalities. These were more cosmetic than substantive
Oklahoma officials took the most drastic measures by denying the public access to all information about a program costing $100s millions per year.
When the real data started showing on public records, the public learned
- The insurance companies were only loaning the funds and the states were backing the loans. Plus the states were giving the insurance companies tax credits to be used to reduce state income tax for other insurance arms operating in the states. States were typically giving tax credits worth 10% of the loaned amount per year for 10 years. In the end the states would repay twice the loan value.
- The CAPCOs would own 100% of the business and take 50 to 66% of the insurance company loan as profits disguised as management fees on the front end. Leaving the new businesses with little money to succeed.
- If the business venture failed the CAPCOs kept their 50 to 66% profit, the insurance companies kept all the tax credits they received and the states repaid the loans.
- If the business was successful the CAPCOs still owned the business and would receive 100% of the profits.
of state guaranteed funding was skimmed for profits.
Leaving only 34% for the business venture to succeed on. According to a Missouri state CAPCO study.
Oklahoma adopted a more egregious variation that eliminated the out of state CAPCOs and insurance companies in favor of local acting as CAPCOs. Allowed the local CAPCOs to take and sell tax credits worth 200% of the amount to be invested. Use one-half to fund the investment and the other have as profits disguised as management fees
Note: The area of the law addressing the 200% limitations is ambiguous leaving it unclear, what, if anything, is in fact limited to 200%.
In addition Oklahoma added a secrecy clause that prevents the public from learning how much and who
While the other states make major revisions or shut their programs down after learning they had been taken for $100s million, Oklahoma's is still operating under the cover of state officials guarded secrecy.
Program has been improved and is being used for a wider variety of tax evasion schemes.
States that adopted the above program and amount scammed before they learned and acted.
State officials benefiting?
Key media news articles discussing this tax credit abuse scheme.
Learn more about the CAPCO scam
Solication letter verify loophole was still open in September 2007 - Whitewashing the solication letter.