The proposed mandatory unitary combined reporting bill in Maryland that ruffled some critics’ feathers last week might have some backers after all. The idea of corporations filing consolidated income tax returns isn’t anything new since most states with corporate income taxes require combined reporting, Carl Davis, senior policy analyst at Institute on Taxation and Economic Policy told Morning Tax. “Most of the large companies that would be impacted by the Maryland law already have experience complying with combined reporting in other states,” he said.
ITEP thinks that it’s difficult to get a true picture of a corporation’s in-state profits under separate reporting because there are so many tax avoidance strategies that can be used. Davis said it can actually create an incentive for companies to claim that their profits are being earned in states with lower corporate tax rates.