Corporate close-up : Three legislative tax trends to watch for in 2016
The “power of three” is a principle of writing and joke telling that suggests that events or items presented in threes are somehow funnier or more satisfying than tales organized around other numbers. It will be interesting to see if the theory holds true for the current state legislative sessions because three themes regarding state corporate income taxation are expected to emerge. While unlikely to produce many laughs, the fate of legislative proposals aimed at requiring combined reporting, denying tax benefits deriving from “tax havens” and implementing rate cuts will be closely watched by multistate corporations.
1. Combined Reporting Proposals
“For separate return states – Alabama and New Jersey in particular – we expect states to entertain unitary combined reporting for corporate income tax,” Ferdinand Hogroian, senior tax & legislative counsel for the Council On State Taxation recently told Bloomberg BNA via email.
But considering combined reporting legislation does not necessarily mean a state will make the leap. In Indiana, for example, a combined reporting bill was amended to provide instead for a study, and in Maryland, the“Augustine Commission” recommended against combined reporting adoption, Hogroian noted.
2. Combatting ‘Tax Havens’
State “tax haven” measures will also likely be considered this year. But states may stop short of adoption there too, Hogroian said. Last year, the District of Columbia abandoned a tax haven list earlier included in its budget, and Connecticut made substantial changes to its new combined reporting statute and accompanying tax haven provisions, Hogroian said.
3. Rate Cuts
The state legislative news isn’t all bad for multistate corporations. Some states are tinkering with the corporate income tax as a means of spurring economic development. Virginia Governor McAuliffe is spearheading the most notable of these, as he seeks to reduce the rate from 6.0 percent to 5.75 percent, Ryan Maness, Senior Policy Analyst and Tax Counsel forMultiState Associates Inc. recently told Bloomberg BNA. Florida, he said, is also considering a plan that would provide corporate tax breaks for manufacturers.
