In December, Massachusetts’ Special Commission on Corporate Taxes recommended the adoption of a number of measures to close corporate tax loopholes in the Commonwealth’s tax code. MASSPIRG has called on state leaders to enact these measures, and our legislative director, Deirdre Cummings, called on lawmakers to quickly enact the Commission’s recommendations. The Massachusetts House and Senate have each passed a version of the bill, and are working on the final version to be sent to Gov. Deval Patrick's desk.
The first reform, know as “Check the Box” reporting, requires corporations to file as the same entity on both their federal and state taxes. This reform prevents a corporation from, for example, filing as a corporation on their federal returns and a partnership in Massachusetts. The measure, already in place in 45 states, would prevent an estimated $170 million annually in corporate tax avoidance.
The second reform, called Combined Reporting, would put an end to the elaborate corporate shell games some businesses employ by shifting their Massachusetts profits to out-of-state subsidiaries. By requiring firms to file taxes along with their subsidiaries, Massachusetts could close a loophole worth an estimated $220 million annually. Twenty-two states have adopted combined reporting laws, including our neighbors in New Hampshire, Maine and Vermont.
