Combined Reporting: Everybody's Doing It

With state budgetary problems, it seems almost every state is considering combined reporting. As stated in a post a few days ago, Wisconsin recently enacted combined reporting. Before Wisconsin, twenty-one states required combined reporting. Some of the other states with recent enactments of combined reporting are Texas, Michigan and New York.

West Virginia enacted combined reporting back in April, 2008 for tax years beginning after 2008. In West Virginia, waters-edge combined reporting is mandated for unitary business groups, unless worldwide unitary combined reporting is required or an election is made to report on that basis. A worldwide unitary combined reporting election is binding for 10 years once it is made. (S.B. 680, Laws 2008)

Massachusetts enacted legislation recently as well, that requires corporations that are engaged in a unitary business to file combined returns. Like West Virginia, Massachusetts allows an election to file on a worldwide basis. If the election is made, it is binding for 10 years. (Ch. 173 (H.B. 4904), Laws 2006, effective July 3, 2008)

Other states have proposals to require taxpayers engaged in a unitary business with one or more other corporations to file a combined report:

* Tennessee (H.B. 1350 / S.B. 502; introduced 2/12/09 and 2/10/09)

* Maryland (S. B. 603, introduced 2/6/09)

* Missouri (S.B. 241, introduced 1/26/09)

* Connecticut (S.B. 807, introduced 2/3/09)

* New Mexico (S.B. 389, assigned to Corporations and Transportation Committee (S), 1/30/09)

States are obviously moving to combined reporting in the hopes of eliminating tax loopholes and raising revenue due to their state budgets. Some of the states listed above have introduced similar bills previously without passage; however, something tells me the bills mentioned above may have a better chance of passing due to the financial condition of each state. Just as businesses are now open to new ways of doing things to survive or "stop the leaking," states may now be open to legislation that perhaps they weren't in the past.

Be on the lookout for more legislative activity among the states as revenues continue to decline.