Tax Incentive Backlash & the Clawback Landscape

Glossary

Clawback

A provision allowing a government to recover subsidy money or benefits when a company fails to meet the performance targets — jobs, wages, investment — that the subsidy was granted to secure. In statute it is often called recapture.

Maintenance period

The span of years over which a company must sustain its promised jobs, rather than hitting the count once on a single compliance date. Its absence creates the snapshot problem, rewarding a one-day audit over durable employment.

Megadeal

A subsidy package of exceptional size — running into the tens or hundreds of millions of dollars for a single company or facility — of the kind catalogued by the watchdog Good Jobs First, where the cost-per-job ratio and the enforceability of the clawback face their hardest test.

Proration

The formula that scales the amount recaptured to the size of the performance miss. Proportional proration ties the clawback smoothly to the shortfall and tends to be enforced; all-or-nothing and no-formula designs tend not to be.

Recapture

The statutory term for a clawback: the legal recovery of previously granted incentive value after a triggering shortfall or default. Its strength depends on the trigger, the proration formula, and the collection mechanism.

Secured recovery

A clawback backed by an instrument the government can reach without a favorable court verdict — a performance bond, an irrevocable letter of credit, a lien, an escrow holdback, or a parent guarantee. Its opposite, unsecured recovery, relies on litigation.

Tax abatement disclosure

A required reporting of revenue a government foregoes by granting tax breaks, mandated for U.S. state and local governments by the governmental accounting standard Statement No. 77 (effective for fiscal years beginning in 2016). It makes otherwise invisible giveaways visible without restricting them.

Trigger

The condition that sets a clawback in motion — a job shortfall, a wage-floor miss, a capital-investment shortfall, a relocation, or a closure. A trigger is only as strong as the definition beneath it and the independent verification behind it.