Overview
Loopholes in state tax codes allow mostly out-of-state businesses to avoid their fair share of taxes. As a result of these loopholes, in-state businesses are playing on an uneven field, competing at a disadvantage against multi-state companies that use high-priced accountants and complex transactions with their subsidiaries to avoid paying their fair share. Businesses should thrive based on their efficiency and innovation, not their opportunities for ‘creative’ accounting and tax avoidance.
U.S. PIRG supports the closing of corporate tax loopholes through reforms such as “combined reporting.” Companies with affiliates and subsidiaries declare all their profits and then assess which income they should pay taxes on based upon their business activity in each state. Combined reporting, which has already been enacted in 21 states, also takes tax authorities out of the business of sifting through complicated transactions between companies subsidiaries. Taxation is made simpler since paying one’s own affiliates will no longer affect a corporation’s tax bill.
