The corporate tax changes proposed by
the Massachusetts House and Senate have some serious differences that a newly
formed conference committee will have to sort out, according to an analysis by
the Massachusetts Budget and Policy Center.
Both sides of the Legislature passed
bills this year calling for “check-the-box” conformity and
“combined reporting,” measures intended to prevent companies from
avoiding taxes by shifting income from one state to another or using different
tax designations at the federal and state level. But the MBPC suggests that the
House proposal would create some significant opportunities for companies to
avoid taxes that do not exist in the Senate version.
According to the MBPC, the House bill
would create a new policy allowing corporations to reduce their taxes by
shifting profits to U.S. subsidiaries that have most of their employees outside
the country. The Senate bill has no such provision. Several other aspects of
the Senate bill would also put more limits on companies’ ability to avoid
taxes, the analysis indicates.
Another difference in the two proposals
is in changes to the corporate tax rate. The House proposal would reduce it
from 9.5 percent to 7.5 percent by 2012, while the Senate version would cut it
only to 8 percent.
The MRPC says state Department of
Revenue estimates show the House bill generating $135 million in FY 2009 and
$41 million when the rate cuts are fully phased in, while the Senate version
would generate $297 million in FY 2009 and $169 million when fully implemented.
