(Updated) For at least 15 years, the state legislature has introduced legislation that some say will close corporate tax loopholes and allow the state to collect hundreds of millions of dollars in taxes. This year is no different.
Advocates of bill that would require businesses to practice what’s called combined reporting say that 32 out of the 37 companies they researched already operate in states with mandatory combined reporting. They say it would stop multi-state corporations from artificially shifting profits to subsidiaries in states without corporate income taxes, like Nevada.
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“If Connecticut’s largest companies are subjecting themselves to combined reporting in other states it’s hard to believe they’re going to pick up stakes and leave Connecticut if we adopt this important good governance measure,” Jeffrey Tebbs of Connecticut Voices for Children said Monday morning.
Tebbs said there are 23 other states that require combined reporting.
Rep. Cam Staples, co-chairman of the Finance, Revenue, and Bonding Committee, said the bill is not going to “detrimentally impact a large number of companies in the state that pay their fair share of taxes.”
“It takes care of those circumstances where those are sham transactions constructed with the sole purpose to avoid paying taxes,” Staples said Monday.
How much money has the state been losing because this practice is not in place?
“It’s in the hundreds of millions of dollars, at least with the shams that have been identified,” Staples said. But “I don’t think we know for sure.”
Joe Brennan, senior vice president of public policy for the Connecticut Business and Industry Association, said Connecticut already has protections for these types of sham transactions.
“We put protections in place,” Brennan said Monday. “The Commissioner of Revenue Services can throw out an apportionment scheme used by a company. This whole notion that all these terrible things are happening and all these sham transactions costing the state millions of dollars I don’t believe are true.”
One of the examples advocates held up as a reason why the legislature should support the legislation was a royalty payment Connecticut’s AT&T paid to an AT&T trademark holding company in Nevada.
“While some may cite the use of royalty payments as a reason to pass a law requiring combined or unitary reporting, Connecticut law already requires companies to add back expenses, like royalty payments, to their tax filings,” AT&T spokesman Chuck Coursey said Monday.
He said these types of bills are what drive businesses out of the state of Connecticut.
“The truth is AT&T is an excellent corporate citizen and one of the largest taxpayers in the state, paying tens of millions in state taxes annually, while also paying local property taxes in every Connecticut municipality. Any assertion that we don’t pay taxes is flat wrong. Our political leaders need to stop bashing businesses – including many of the state’s major employers – and get serious about retaining and growing jobs.”
The bill was one of more than a dozen heard by the legislature’s Finance, Revenue, and Bonding Committee Monday.