The past quarter century has seen a dramatic decline in the yield of corporate income taxes at both the federal and state levels. Major federal corporate tax legislation enacted in 2004 created a new tax break, known as the “Qualified Production Activities Income” (QPAI) deduction that has further accelerated the decline of the corporate tax. This policy brief evaluates the QPAI deduction and discusses possible state policy responses.
State Corporate Taxes
ITEP’s state corporate tax work examines the tax-paying habits of Fortune 500 corporations and corporate contributions to state revenue. It occasionally releases a comprehensive state corporate tax study as a companion to its national report on federal taxes paid (or not paid) by profitable corporations. ITEP also examines state tax incentives provided to corporations in exchange for the promise of economic growth.
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brief August 1, 2011 The “QPAI” Corporate Tax Break: How it Works and How States Can Respond
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brief August 1, 2011 “Nowhere Income” and the Throwback Rule
Every state that levies a corporate income tax must determine, for each company doing business within its borders, how much of the company’s profits it can tax. One factor that all such states use to make this determination is the percentage of the company’s nationwide sales that can be attributed to the state. Ideally, all of a company’s sales would be attributed to the states in which it operates, but, due to differences among states’ corporate income tax rules, this is not always the case. In some instances, a portion of a business’ sales are not attributed to any state, which means that a corresponding portion of its profits go untaxed, a phenomenon often referred to as “nowhere income.” This policy brief explains how this phenomenon arises and discusses how a throwback rule can be used to ensure that all corporate profits are subject to taxation.
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brief August 1, 2011 Combined Reporting of State Corporate Income Taxes: A Primer
Over the past several decades, state corporate income taxes have declined markedly. One of the factors contributing to this decline has been aggressive tax avoidance on the part of large, multi-state corporations costing states billions of dollars. The most effective approach to combating corporate tax avoidance is the use of combined reporting, a method of taxation currently employed in more than half of the states with a corporate income tax. Eight states have enacted legislation to institute combined reporting within the past five years. Commissions and lawmakers in several other states, such as North Carolina, Maryland, Rhode Island and Kentucky, have recently recommended its adoption. This policy brief explains how combined reporting works.
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report June 16, 2011 Illinois Must Ignore CME’s Tax Tantrum
How much is enough? On top of the close to $500 million in corporate tax breaks Illinois doles out each year, Governor Pat Quinn now finds himself confronted by a… -
report May 19, 2011 ITEP’s Testimony on Combined Reporting Legislation
My testimony today examines the erosion of Rhode Island’s corporate income tax, and the multistate tax avoidance schemes that have contributed to this erosion. In addition, it discusses the single… -
report November 9, 2010 Testimony before the Maryland Business Tax Commission: Combined Reporting
I’m here to talk about combined reporting, which ITEP views as a vital step towards ensuring the vitality of the Maryland corporate income tax going forward. I’d like to use… -
report July 9, 2009 Testimony before the Maryland Business Tax Commission
Consequently, combined reporting represents the most comprehensive option available to states seeking to halt the erosion of their corporate tax bases and to curtail corporate tax avoidance. It ensures that… -
report May 21, 2009 ITEP Testimony on Corporate Tax Reform before the New York State Senate Select Committee on Budget and Tax Reform
The stated purpose of this hearing is to evaluate the impact of New York’s business taxes on equity and economic growth. These are laudable concerns: the most basic questions to… -
report March 5, 2008 ITEP Testimony on Combined Reporting, Before the Massachusetts General Court Joint Committee on Revenue
Over the past few months, a strong consensus appears to have developed here in Massachusetts, a consensus that the Commonwealth should put a stop to tax avoidance by large and… -
report October 31, 2007 ITEP Testimony on Governor’s Plan: Corporate Tax Reform
My testimony examines a problem facing not just Maryland, but a number of different states – the erosion of the corporate income tax and the related emergence of profitable “zero-tax… -
report April 15, 2007 Combined Reporting – How Does Your State Stack Up?
Over the past few years, a number of states, seeking to address longstanding flaws in their corporate income taxes and significant declines in the revenue they yield, have instituted a… -
brief March 1, 2007 Broad-Based Gross Receipts Taxes: A Worthwhile Alternative?
States currently face a number of fiscal challenges, ranging from unresolved structural deficit, to underlying flaws in their existing tax systems, to the demands posed by ambitious initiatives such as improved access to health care. In response, some policymakers are casting about for new alternatives for generating revenue that do not seem to require visible or difficult changes in law. One such alternative that has gained in popularity in the past few years is a broad-based gross receipts tax.
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report February 28, 2007 ITEP Testimony on Combined Corporate Income Tax Reporing in Maryland
My testimony today examines a problem facing not just Maryland, but a number of different states – the erosion of the corporate income tax and the related emergence of profitable… -
report December 15, 2006 Why Large Corporations Can Do Business in Your State Tax-Free – The “Substantial Nexus” Test
The holiday season is in full swing — and chances are you’re buying gifts on the Internet or over the phone, from people you will never meet and companies that… -
report March 9, 2005 ITEP Testimony on SB 403 and SB 748 – Combined Reporting & Corporate Minimum Tax
My testimony today focuses on a trend in the Maryland corporate income tax that is becoming increasingly visible—the emergence of profitable “zero-tax corporations”—and on two effective and complementary solutions to… -
report February 15, 2005 State Corporate Income Taxes 2001-2003
Last September, Citizens for Tax Justice and the Institute on Taxation and Economic Policy published Corporate Income Taxes in the Bush Years, an in-depth look at the taxes that 275… -
brief May 1, 2004 State Corporate Tax Disclosure: Why It’s Needed
Corporate income taxes are in decline. Corporate tax revenues represent a smaller piece of the federal and state tax pie than at almost any time since World War II. While it is possible to diagnose some of the reasons for this decline on the federal level, very little public information is available to help policymakers evaluate the health of the corporate taxes collected by state governments. For this reason, some policymakers have called for better public disclosure of how much the biggest corporations are paying in state taxes. This policy brief evaluates arguments in favor of (and against) requiring detailed state corporate tax disclosure.