Considerations for States Currently Contemplating Combined Reporting
The article was authored by Philip M. Zinn, Sabra Faires, Eileen P. McAnneny, and Fred Nicely and is 28 pages in length. It was originally published in the State and Local Tax Lawyer 2008 Symposium Edition.
The articles and essays included in this Edition offer an overview of the group reporting schemes in use across the country and examine the economic origins and the evolution of the unitary business principle that underlies combined reporting. They explore the policy considerations that states assess in choosing whether to adopt combined reporting and the conflicting policy goals of different jurisdictions. Additionally, they examine single vs. aggregate taxpayer theory, analyze procedural issues raised by combined reporting, explore the ultimate (but apparently unreachable) goal of uniformity, and, finally, weigh all the pros and cons of combined reporting. The day-long program from which these pieces are adapted was held at Georgetown University Law Center on May 14th, 2008.
For information on the State and Local Tax Lawyer 2008 Symposium Edition, click here.
Many states are considering a switch from separate company reporting to unitary combined reporting. In the last few years alone, at least a dozen states have had legislative proposals that would institute this filing methodology, and five have enacted it. Proponents of this filing methodology say combined reporting increases state tax revenues by reducing the benefits of income shifting attributable to tax planning. Detractors note that the impact of combined reporting will vary by taxpayer group and will create significant additional compliance and other administrative burdens. Regardless of the ongoing policy debate on the benefits of combined reporting, there are a number of common practical issues any state must consider when contemplating a switch to combined reporting. This Article will briefly examine some policy considerations behind the push toward combined reporting and then take an in-depth look at the practical issues with a goal of providing a better understanding of the ramifications of the decisions state legislators must make when enacting combined reporting laws. Among these decisions is the manner in which combined reporting is implemented. As this Article makes clear, there are a number of different approaches that may be taken, and the approaches could potentially produce different results.
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