Nearly half of Maryland's largest for-profit companies did not pay corporate income taxes in 2005, a new report shows, strengthening calls from some lawmakers to begin tackling the state's projected $1.5 billion budget shortfall by closing business tax loopholes.
The report, released by state Comptroller Peter Franchot in response to a legislator's request, does not identify specific corporations that avoided taxes. But it found that half or fewer of the state's biggest financial, retail and manufacturing companies paid corporate taxes.
Only in a fourth sector analyzed - transportation, communications and utilities - did a majority of for-profit companies pay corporate income taxes. Overall, 68 of the 132 largest for-profit companies in the state paid corporate income taxes and 64 did not.
Franchot has pushed to stop a practice, used by Wal-Mart and other large companies, in which companies use real estate investment trusts to shift profits to states with low or no corporate taxes, and he has continued the attempts of his predecessor, William Donald Schaefer, to stop companies from hiding their profits in Delaware holding companies.
Liberal-leaning lawmakers and advocacy groups say the data suggest that despite several efforts in recent years to make sure that multistate corporations that do business in Maryland pay taxes here, the loopholes have not been closed.
"It's about looking at tax fairness when the upcoming budget package is put together," said Sen. Paul G. Pinsky, a Prince George's County Democrat who requested the data. "Before we talk about sales tax, we have got to address tax fairness, and this is a piece of that."
The report focused on the 150 largest corporations operating in Maryland, as defined by their payrolls. In the 2005 tax year, 18 were nonprofits and thus were excluded from the calculations. Government agencies also pay no taxes and are not included.
The final 2005 tally could change because some corporations operate on a later tax schedule, meaning their returns are not yet due. In 2004, 77 of the 128 largest for-profit companies paid taxes.
Iris Lav, deputy director of the Center on Budget and Policy Priorities, a nonpartisan research organization in Washington, said Maryland is not unique.
"It's unfortunately fairly common that multistate corporations are able to avoid corporate taxes," Lav said. "A lot of states are somewhat fed up with this."
