Measure would level the playing field for Wisconsin Businesses
Madison, WI -- Yesterday, Governor Doyle and Legislative leadership announced a state stimulus package including a provision that will close corporate tax loopholes. “Combined reporting,” as the tax modernization is called, levels the playing field between businesses by preventing companies from using out-of-state subsidiaries to avoid paying their taxes.
Five years ago less than 30% of the U.S. economy, represented by 16 states used combined reporting. Now over 55% of the economy will take place in states using combined reporting.
“Governor Doyle, Senate Majority Leader Decker, Speaker Sheridan and legislative leadership are standing up for Wisconsin businesses, and proposing an important step to level the playing field for our state’s businesses,” said Bruce Speight, WISPIRG Advocate. “Combined reporting has become standard best practice.”
Combined reporting was first introduced in California in 1937 as a way to adjust to the fact that modern companies often operate across state lines. The practice requires companies to file taxes in a single combined return, rather than carving up activities into separate – often out of state – subsidiaries that can avoid state taxes. Combined reporting eliminates any incentive to use accounting schemes or fictional transactions between subsidiaries as a way to hide reportable income. Combined reporting only taxes companies based on their in-state business activity.
For decades combined reporting was stymied by lawsuits, and then by lobbying from corporations that benefit from tax loopholes. The landscape has shifted as the people become more aware of tax-avoidance schemes that favor out-of-state companies.
Texas, Ohio, and Michigan don’t levy corporate income taxes but use combined reporting to assess taxes on their broad-based business taxes that the states introduced in 2005, 2006 and 2007 respectively.
