History on our Campaign to Close Corporate Tax Loopholes

HISTORY:

Last year, MASSPIRG members helped convince our lawmakers to get serious about closing tax loopholes. Then, the Special Commission on Corporate Taxes recommended closing corporate tax loopholes worth $450 million.

Gov. Patrick filed the recommendations of the tax commission as a bill in the Legislature and the House passed a bill closing two of the most significant loopholes, but added a corporate-backed amendment that weakens the bill substantially. By e-mailing your Senator you can show your legislator that you want them to put an end to these unfair practices and improve the bill.

Specific Loophole:

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.