November 9, 2010

Business Tax Reform Commission hears from public tonight

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By Megan Poinski
Megan@MarylandReporter.com

After spending two years listening to experts share ideas and proposed policies, the Maryland Business Tax Reform Commission tonight will listen to what the public has to say.

Since the commission began meeting in 2008, they have been learning about the state’s current corporate and business taxation laws, as well as different ways used elsewhere to assess and collect corporate taxes. At 6:30 p.m. today in the Joint Hearing Room of the Legislative Services Building, commission members will open the floor to members of the public who wish to share their ideas or thoughts with them.

“People are going to say whatever they want to say to make sure that the commission hears their opinions,” said David Roose, director of the Bureau of Revenue Estimates, who has been staffing the commission from the Comptroller’s Office.

Formed by legislation in 2007, the 18-member commission will start making decisions on its final recommendations next week, with a report due to the legislature and governor Dec. 15, a year earlier than originally planned. The panel is charged with evaluating the state’s current tax structure, and making recommendations for changes in order to create more fair and equitable taxes for businesses across the state.

Commission member Karen Syrylo, an accountant who works with the Maryland Chamber of Commerce, predicted that there will be a mix of several testifiers tonight: some from businesses or policy groups advocating for or against a certain tax policy, some who may take issue or agree with some of the data the commission has studied and made available on its website, and some who might try to bring different data or plans to the table.

Over the last two years, the commission has taken a close look at many different aspects of corporate taxes and incentives. They have studied different ways that corporate taxes could be assessed, like combined reporting, gross receipts taxes, value added taxes, and alternative minimum taxes. They have also broken into two subcommittees, one which has looked at business tax incentives currently utilized and how to measure their effectiveness, and one that concentrated on the pros and cons of the different methods of assessing corporate taxes in the context of Maryland’s economy.

Focus on combined reporting

Roose said that commission members will choose what they write in their recommendations to the governor and General Assembly, but combined reporting – one of the most vigorously debated items – is likely to appear prominently.

Combined reporting is a way of calculating corporate income taxes based on how much a company makes in a state, not where they are headquartered. Bills to require combined reporting have been introduced in the General Assembly, but have not been passed – largely because of the lack of real information on how it would impact the state. The commission was set up in response to those bills.

Using combined reporting for corporate taxes is not easy, nor is combined reporting well defined. Many states use combined reporting, but have different definitions, calculations, and formulas. There are different ways to look at large corporations – which are often composed of smaller subsidiaries – and how they should be taxed. Additionally, litigation and projections have led to different ways to calculate combined reporting.

Syrylo said the commission has closely examined what has worked – and what has not – in other states using combined reporting. This has been scrutinized from the state’s point of view, as well as the corporate point of view, and the corporate accountant’s point of view. Combined reporting – like many other different taxation methods – would result in some businesses being taxed more, but others being taxed less.

A report to the commission last year found that combined reporting could generate over $100 million to the state, with smaller Maryland-based corporations paying less taxes and larger national companies in financial services and retailing paying more.

Despite the state’s financial downturn, Roose said the commission has stayed focused on fair business taxation, not items that might make the state more money.

Only six of the 18 commission members represent business interests or members of the public. Five are legislators, four are state officials, two represent local governments, and the commission is chaired by Ray Wacks, budget director for Howard County.

Syrylo said that keeping Maryland competitive as a place for businesses to locate has been constantly brought up in commission discussions.