Combined Reporting

Regarding your recent editorial on combined reporting for corporate income tax in Maryland, you argue that a switch to combined reporting in favor of a 0.65 percent decrease in the corporate rate would represent only a temporary "inconvenience" (How to make Md.'s taxes more competitive," May 9). The Council On State Taxation, a trade association representing almost 600 corporations engaged in interstate commerce, including significant operations in Maryland, has found that combined reporting neither provides the panacea for perceived "hiding" of profits nor provides the "permanent" revenue benefit asserted in the editorial.

Maryland has long been considered among the bluest of blue states, firmly in the Democratic camp. Its recent progressive record on social justice has only further burnished that reputation: passing the Dream Act to allow in-state college tuition - and college affordability - for young immigrants, marriage equality, abolition of the death penalty and legislation to restrict gun violence. When it comes to corporate tax justice, however, Maryland has seen only red. The state has allowed many of the very largest multi-state, multi-national corporations operating here to use a tax avoidance scheme resulting in the loss of hundreds of millions of dollars in state corporate taxes and, sadly, placing Maryland-only businesses at a distinct competitive disadvantage.

A moment of silence, please, for the death of the combined reporting bill in the General Assembly. The corporate tax reform measure passed away suddenly last week, the result of a 7-6 vote by the Senate Budget and Taxation Committee, which has developed a nasty habit of killing the bill annually. In lieu of flowers, supporters ask that angry letters be sent to lawmakers. It came as no surprise, of course, but that doesn't make the death of combined reporting any less frustrating.

Regarding your recent editorial on combined reporting for corporate income tax in Maryland, you argue that a switch to combined reporting in favor of a 0.65 percent decrease in the corporate rate would represent only a temporary "inconvenience" (How to make Md.'s taxes more competitive," May 9). The Council On State Taxation, a trade association representing almost 600 corporations engaged in interstate commerce, including significant operations in Maryland, has found that combined reporting neither provides the panacea for perceived "hiding" of profits nor provides the "permanent" revenue benefit asserted in the editorial.

The news that a complex tax law change known as "combined reporting" could have resulted in $170 million in additional payments from businesses into Maryland's coffers if it had been in effect in 2006 is bound to reignite a familiar debate in Annapolis next year, with progressive groups on one side and the Chamber of Commerce on the other. The two sides have been duking it out over this issue for years, with proponents of combined reporting insisting it ensures that businesses pay their fair share and are unable to hide profits in other states, and opponents saying it would be a logistical nightmare.

In his remarks to the Greater Baltimore Committee's annual meeting Wednesday night, T. Rowe Price Chairman Brian C. Rogers noted a contradiction in how the world sees Maryland as a place to do business. On the one hand, it is universally recognized for its top-ranked school systems and universities, skilled workforce, research activity, potential for innovation, and great quality of life. On the other, it frequently winds up toward the bottom of rankings of business competitiveness — most recently, by CEO Magazine — largely because of our tax system and regulatory environment.

It's a long-held axiom that increasing taxes in an election year is bad politics. But the nascent debate over enacting "combined reporting," a corporate tax law system that supporters say ensures companies pay their fair share, suggests that it could make for bad policy, as well. Combined reporting is not a crazy idea - it's already law in more than 20 states and, in some cases, has been for many years. But it is complicated, and it's not clear that it's always a better way to tax the economic activity of corporations.

State fiscal analysts revealed Thursday that a corporate income tax change sought by an influential labor union as an alternative to budget cuts could have raised as much as $170 million if it had been in effect several years ago. The report from the comptroller's office could bolster support in the General Assembly for so-called combined reporting, which proponents say would prevent corporations from dodging taxes by hiding profits in other, lower-tax states....

Maryland is having another one of those family feuds about business taxes and regulation that outsiders find hard to follow. "MBNA! Business climate!" "Delaware! Loopholes!" "Marriott!" "Blackmail!" "Fair share!" "Confiscation!" A small state with a liberal legislature, big corporations and neighbors with lower taxes and less regulation is going to have this conversation every five years or so, and it's healthy. Unfortunately, the discussion has a tendency to bulldoze nuances and polarize interest groups no matter what measure is under consideration.

Upset by a report that nearly half of Maryland's major corporations didn't pay income taxes last year, Gov. Martin O'Malley said he would seriously consider pushing for "combined reporting," a tax law change that advocates say would make it hard for companies to hide their profits in other states. O'Malley, a Democrat who is developing plans to close the projected $1.5 billion annual gap between state spending and revenue, said that if citizens are going to be asked to pay more taxes, businesses should pay their fair share, too. "This is an unfairness of the tax code that would allow some of the largest and most profitable corporations in the state to pay no income tax," O'Malley said.

In his remarks to the Greater Baltimore Committee's annual meeting Wednesday night, T. Rowe Price Chairman Brian C. Rogers noted a contradiction in how the world sees Maryland as a place to do business. On the one hand, it is universally recognized for its top-ranked school systems and universities, skilled workforce, research activity, potential for innovation, and great quality of life. On the other, it frequently winds up toward the bottom of rankings of business competitiveness — most recently, by CEO Magazine — largely because of our tax system and regulatory environment.

A moment of silence, please, for the death of the combined reporting bill in the General Assembly. The corporate tax reform measure passed away suddenly last week, the result of a 7-6 vote by the Senate Budget and Taxation Committee, which has developed a nasty habit of killing the bill annually. In lieu of flowers, supporters ask that angry letters be sent to lawmakers. It came as no surprise, of course, but that doesn't make the death of combined reporting any less frustrating.

Maryland's General Assembly faces another year of "difficult choices" as it takes up the governor's budget. So it's surprising to me that lawmakers don't turn more readily to what should be an easy choice: closing loopholes in the corporate income tax (CIT). Federal and state governments have faced declining corporate tax revenue for years, mainly thanks to increasingly aggressive use of legal tax avoidance techniques. At the state level, this generally means shifting income from higher- to lower-taxed jurisdictions.

At an appearance before a business group in Howard County, state Sen. Edward Kasemeyer recently made a comment that he'd like to see Maryland's corporate tax rolled back from the current 8.25 percent by one-quarter of a percentage point per year for several years. Presumably, this is so it might be made more competitive with the 6 percent corporate tax rate of neighboring Virginia and below that of other neighboring states. Mr. Kasemeyer's thoughts on this topic are not just some idle speculation by one Democratic state senator.

An influential panel voted Tuesday to delay discussion of altering the state's corporate accounting rules, a move welcomed by the chieftains of large companies who worried that the change could hurt their bottom lines just as the economy appears to be brightening. The change, known as combined reporting, would make it difficult for companies to steer Maryland revenues to shell corporations in other states with more favorable corporate tax rates. Tightening corporate accounting rules has long offered a tempting, even populist, way for lawmakers to chip away at the state's persistent budget shortfalls.

Large corporations have ways of hiding profits that would make a three-card monte dealer proud. After all, the queen of hearts is bound to show up eventually; corporate profits have a way of vanishing permanently. In Maryland, for instance, retail chains several years ago were caught transferring profits by means of a real estate investment trust, or REIT. A state-based subsidiary paid a hefty rent to a REIT owned by its parent, and the profits could be transferred without ever being subject to the state's corporate income tax. Lawmakers eventually closed that loophole in 2007, but keeping up with the inventive (and well-paid)

As the Maryland General Assembly considered closing a loophole to prevent corporations from entirely avoiding state taxes, Marriott International Inc. warned legislators yesterday that it might "adjust operations" if they alter the tax system. While the Bethesda-based hotel operator insists that it pays taxes and stopped short of saying that it would move, business and economic development leaders are worried that fewer companies are choosing to call Maryland home. A dozen major Maryland companies have been bought out this year, often becoming branches of companies with headquarters elsewhere.

Gov. Martin O'Malley's effort to make sure big corporations pay income tax in Maryland -- a proposal that has faced stiff opposition in the business community -- ran into difficulty in a Senate committee yesterday. Other elements of the governor's plan to resolve Maryland's projected $1.7 billion budget shortfall could also change in the coming days. In particular, his plan to expand the sales tax to real estate management and health clubs could be scrapped and replaced with new levies on other services, lawmakers said.

The news that a complex tax law change known as "combined reporting" could have resulted in $170 million in additional payments from businesses into Maryland's coffers if it had been in effect in 2006 is bound to reignite a familiar debate in Annapolis next year, with progressive groups on one side and the Chamber of Commerce on the other. The two sides have been duking it out over this issue for years, with proponents of combined reporting insisting it ensures that businesses pay their fair share and are unable to hide profits in other states, and opponents saying it would be a logistical nightmare.

State fiscal analysts revealed Thursday that a corporate income tax change sought by an influential labor union as an alternative to budget cuts could have raised as much as $170 million if it had been in effect several years ago. The report from the comptroller's office could bolster support in the General Assembly for so-called combined reporting, which proponents say would prevent corporations from dodging taxes by hiding profits in other, lower-tax states....