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.
