SC is right to protect sensitive business info while recruiting new businesses

For the seven years I served as the director of South Carolina’s Department of Revenue, I also served on the South Carolina Coordinating Council — the entity that approves state economic incentive agreements now at the center of a heated debate regarding how much information to share with the public.

Having some context regarding why we wrote certain legislation the way we did should help citizens make an informed opinion over how to balance the importance of protecting key confidential business information and the use of state dollars.

For indeed this is a balancing act if we want to continue the historically strong success South Carolina has enjoyed by recruiting some of the best companies in the world to the Palmetto State.

Not all incentives alike

Not all economic development incentives are the same; one of the most important is the Job Development Credits. This incentive is a withholdings tax credit based on wages paid — that means a business gets a percentage back of what they paid in withholding taxes for all workers.

The more people you employ, the greater the possibility for a larger credit.

I am one of the co-authors of the Job Development Credits Act and I can assure you that the Job Development Credits paperwork contains some of the most sensitive information that private companies possess.

This includes employee positions, wages paid to employees by position, planned capital investment by years and dollar amounts and most importantly financial statements, which are obviously highly confidential for non-public companies.

While the Job Development Credits application, final agreement and cost benefit are routinely disclosed, the South Carolina Department of Commerce has always rightly redacted this kind of confidential business information as allowed by law.

Potentially disastrous

While knowing this confidential business information might be interesting to the public, making it widely known could be disastrous for companies competing on a global scale. It’s akin to asking you for your personal tax return and then sharing it with your neighbors who don’t like you.

I am not aware of any other state in the nation which requires disclosure of such sensitive business information, and our General Assembly agrees. Our South Carolina Freedom of Information Act provides that “confidential proprietary information provided to a public body for economic development…purposes is not required to be disclosed.”

Focus on the bigger issue

From reading a recent Circuit Court Order on this topic, it appears SC Commerce may have failed to disclose certain information which should have been disclosed — the name of the corporate executive who signed the paperwork — and the media have focused on this.

That one apparent oversight should not blind us to the bigger issue.

Namely, how do we conduct business in a way where key information is protected while also informing our public regarding the use of tax dollars?

Obviously SC Commerce is subject to the Freedom of Information Act — and when the state gives millions of dollars of incentives clearly the public is entitled to see the cost-benefit analysis to justify the incentives (which SC Commerce routinely provides).

But providing key, sensitive business information like the Job Development Credit information would hamper — if not largely end — economic development in South Carolina.

Hindering economic development hurts all of us.

This is particularly true for non-public companies, which include the vast majority of small- to medium- sized businesses — the companies producing the great majority of new jobs in South Carolina.

As we emerge from this pandemic, now more than ever we need to be mindful of the need for jobs and economic prosperity for the millions of people who call South Carolina home.

Educate yourself

So may I encourage you to pause from rushing to an uninformed opinion, and to educate yourself on economic development incentives?

SC Commerce provides a huge amount of information related to incentives each year on the department website www.sccommerce.com.

You can also read comprehensive annual Commerce-related reports on www.scstatehouse.gov/reports/reports.php.

As you educate yourself consider the needs of companies to maintain sensitive, competitive information in an open business market; remember, they can operate anywhere in the United States.

I hope these companies choose South Carolina.

And I hope our leaders can agree on a productive balance when it comes to deploying economic development incentives while keeping taxpayers informed.

Burnie Maybank is a tax and economic development attorney at Nexsen Pruet in Columbia.

This story was originally published November 7, 2020 at 5:27 AM with the headline "SC is right to protect sensitive business info while recruiting new businesses."