Combined Reports For Everyone!

You’d think, of all companies, one that bills itself as “the place for one stop shopping” would champion the merits of placing everything under one roof.

Yet, when word of “combined reporting” makes its way down to a Bentonville boardroom, its enough to make a Wal-Mart executive reach for a $4 generic vicadin. Combined reporting is a tax policy that treats parent companies and its subsidiaries as one corporation for state income tax purposes - profits are combined, and then a share of that income is taxed by a state based on a formula calculating the corporation’s level of activity within that state.

Lawmakers in Wisconsin and Maryland are the latest to jump on the combined reporting bandwagon. Apparently in Wisconsin, $90 million is on the table should the state decide to reform its tax law and adopt combined reporting. Its a tough question for a state strapped for cash, and whose revenue department has already gone after WalMartopia for more than $17.7 million in back corporate income taxes, interest and penalties for 1998, 1999 and 2000.

According to the Milwaukee Journal Sentinel:

Ninety million dollars is how much officials estimate could gush into state coffers annually if Wisconsin institutes combined reporting on corporate income tax returns. That’s about a 10% increase in corporate tax collections - a tempting prospect for some legislators at a time when Madison is striving for every nickel.

Maryland Governor Martin O’Malley had proposed the measure in his state as well, according to the Baltimore Sun:

The O’Malley administration estimates that by moving to “combined reporting,” the state would receive an additional $25 million per year in revenue, with three-fourths available for operating expenses and the remainder reserved for the Transportation Trust Fund. Some legislators believe that the annual fiscal impact could be much greater, perhaps $100 million or more.

Opponents of the measure counter that it will stifle growth, and that businesses facing higher taxes will simply shift jobs and investment to other states. Personally, I can’t wait to watch business after business pack their bags and flee the evilness that is combined reporting in California, New York, Texas and Illinois...the sound of them flocking to Mississippi, Alabama and South Carolina will be deafening. The number of combined reporting states is growing so fast - five states proposed the measure this year alone - it is this expert’s opinion that by 2010, every single corporation will be located in Oklahoma. Go Sooners.

Next for O’Malley: halt ‘loopholes’ [Baltimore Sun]

Lawmakers weigh change in business taxes [Milwaukee Journal Sentinel]

Wal-Mart owes back taxes, state says [Milwaukee Journal Sentinel]

Growing Number of States Considering a Key Tax Reform [Center on Budget and Policy Priorities] (You can find a larger version of the ‘combined reporting’ map here)

Posted by Corey Himrod on Monday, September 24, 2007

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