No to Combined Reporting in 2011, Local Flexibility Voted Down

As reported in the Baltimore Sun, after two years of study, the Business Tax Reform Commission recommended at its meeting on November 16 that the General Assembly not implement combined reporting for 2011, but left the door open for discussions in the future.

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. Last week, fiscal analysts announced that next year’s gap between state revenues and expenses will be $1.6 billion, nearly one-third larger than previously thought.But for years, business groups have argued that the change could cost the state money — a position that was bolstered Tuesday when the comptroller’s office distributed a study concluding that the state would have lost $13 million to $50 million if the rules had been in place in 2008.

According to the Daily Record, the Commission approved a recommendation to convene a group of lawmakers, economic development officials and business representatives to discuss transparency and reporting requirements for state business incentives.  However, it voted down a recommendation to examine the flexibility of economic development incentives and tax credits against local income taxes for out-of-state earnings in partnerships and limited liability corporations.

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