Rep. Grove issues statement on tax credit fraud report

Rep. Seth Grove (R-Dover) recently issued a statement in response to a Pennsylvania grand jury report that finds that Pennsylvania’s Keystone Innovation Zone and Pennsylvania Research and Development tax credit programs are susceptible to fraud.

“Tax credits have failed to help Pennsylvania’s economy,” Grove said. “Let me be blunt, these are special interest giveaways and nothing else. Pennsylvania needs to stop using corporate welfare as its economic policy because it simply fails. We need broad-based tax restructuring to lower the tax burden on Pennsylvanians and drive real economic gains.”

The report cites allegations that two people set up front companies to obtain $10.6 billion in tax credits, which they allegedly sold for $6.4 million before disappearing in Hong Kong.

“Make no mistake,” Grove said. “This is fraud conducted on the backs of legitimate taxpayers. Just this one instance highlights how vulnerable these programs, which are funded with taxpayers’ dollars, are to fraud.”

The grand jury report recommends enhanced auditing of tax credit applicants and improved verification of applications. It also proposes that regulators have more than three months to review applications. Additionally, the jurors said that tax brokers who sell credits to third parties should be licensed and trained and that tax credit recipients should be required to show how they used the money.