February 2, 2011

Liberal lawmakers push fight for combined corporate tax reporting

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By Len Lazarick
Len@MarylandReporter.com

Liberal senators and delegates are pressing ahead with bills to bring the combined reporting method of corporate taxation to Maryland, even after the Business Tax Reform Commission rejected the idea in November.

Sen. Paul Pinsky

“We think combined reporting will create a level playing field,” said Sen. Paul Pinsky, a Prince George’s County Democrat who has championed the measure in the past.

Pinsky’s bill (SB 305) has 18 sponsors in the 47-member Senate. He thinks he has one or two more votes as well.

House sponsors say they already have 40 to 45 delegates signed onto the bill, and are collecting more.

In general, combined reporting taxes all corporations and their subsidiaries based on their percentage of sales in a particular state, rather than where they are headquartered. Pinsky said this prevents corporations like Wal-Mart from sheltering their income through out-of-state subsidiaries.

Del. Tom Hucker, D-Silver Spring, said it was difficult for him to tell local pizza parlors that they should pay taxes when big chains like Pizza Hut might not be paying their fair share.

Si Boettner of Chesapeake Trading Co. in St. Michaels used to have two other stores which are now closed. He said, “Things are challenging,” but the company still collects $50,000-$60,000 in state sales tax, indicating gross receipts of about $1 million. He supports combined reporting.

“It’s not whether you’re liberal or conservative, Democrat or Republican,” Boettner said. “Can you be fair?”

While labor unions, Progressive Maryland, and Maryland Nonprofits are supporting the tax change, it faces an uphill political slog this year.

House Majority Leader Kumar Barve led the charge against the idea when the Tax Reform Commission rejected the proposal in an 18-4 vote. Barve, an accountant, called combined extremely complicated. All the delegates and O’Malley cabinet members on the commission voted against the plan.

A report to the commission in 2009 found that if combined reporting had been instituted in 2006, the state would have made $100 million more in corporate taxes. The commission got another report in November using 2008 figures, showing the state would have received between $13 and $51 million less in revenues.

But Pinsky pointed out that 23 states already use combined reporting, including conservative states such Arizona, Alaska and Texas. Major national corporations doing business in Maryland are already paying taxes based on combined reporting elsewhere.

“They’re already doing it,” Pinsky said. “We’re talking about the big fellows,” like Citicorp.