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 major reform: combined reporting. Combined reporting requires multi-state corporations to report the income earned by both the parent corporation and all of its subsidiaries and to determine their income tax liabilities on that basis. As a result, combined reporting is the single most effective means of preventing corporations from avoiding taxation through accounting techniques designed to shift income from one state to another.
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