(Boston)
Last night, the Massachusetts House of Representatives overwhelmingly voted,
131-23, to pass the bill to close two
corporate tax loopholes, preventing large multi state companies from avoiding
over $400 million a year in state taxes.
The bill closed two critical
and long overdue loopholes commonly known as Check the Box and Combined Reporting.
The Check the Box reform, already in place in 45 states, simply requires
that corporations file as a consistent corporate form on both Massachusetts and federal taxes. For
example, it prevents companies from declaring themselves a corporation on their
federal returns, but as a partnership in Massachusetts.
This reform alone will prevent an
estimated $170 million in corporate tax avoidance.
The other loophole-closing reform, called Combined
Reporting, is another significant step towards preventing some of the extreme
tax avoidance practices going on today, while also serving to eliminate a wide
array of potential future loopholes that tax collectors haven’t yet caught
onto.
Combined Reporting will put an end to the elaborate shell
games that some businesses play with out-of-state subsidiaries, avoiding an
estimated $220 million annually in state taxes. These schemes leave in-state
businesses that pay their full share of taxes at a competitive disadvantage. Twenty-two states have adopted combined reporting
laws, including our neighbors in New
Hampshire, Maine,
and Vermont. Combined
Reporting will put an end to tricky tax-avoidance transactions between
subsidiaries by requiring affiliated firms to file taxes together and pay taxes
based on their combined in-state business activity
“When multi-state businesses fail to pay their taxes,
regular households and companies without high-priced accountants end up picking
up the tab,” said Cummings.
“Combined reporting will help Massachusetts companies that currently pay
their taxes but compete against multi-state companies that do not,” said Phineas Baxandall, Senior Analyst for Tax and Budget
Policy for U.S. PIRG, the federation of state PIRGs. “This tax reform does away
with a thousand tax loopholes at once. As more states catch on, fewer companies
will waste their time on sham transactions and subsidiaries. This is a big step
toward fairer state taxes and fairer competition among business.”
MASSPIRG praised the House vote and the leadership of Representatives
Jay Kaufman, Frank Smizik, and Ruth Balser, James Eldridge, Jim O’Day, Carl Sciortino,
Matt Patrick, and Steven D’Amico. The bill now goes to the Senate.
