Center on Budget and Policy Priorities: States Can Fight Corporate Tax Avoidance by Requiring Worldwide Combined Reporting

To reduce their federal corporate income taxes, every year large multinational corporations shift hundreds of billions of dollars in profits earned in the United States onto the books of subsidiaries formed in foreign tax havens like Bermuda, the Cayman Islands, and Ireland. Because nearly all state corporate taxes are based on the taxable profits a corporation reports on its federal return, each year states lose at least $10 billion — and perhaps as much as $15 billion — of revenue due to this profit-shifting, estimates suggest. This is substantial revenue states could be using to provide K-12 teachers with better pay and smaller class sizes, low-income college students with more adequate financial aid, uninsured individuals with health coverage, residents and businesses with better road maintenance, and other critical services.

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