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Senate Co-Sponsorship Memoranda

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Senate of Pennsylvania
Session of 2017 - 2018 Regular Session


Posted: June 5, 2017 10:58 AM
From: Senator Christine M. Tartaglione
To: All Senate members
Subject: Combined Reporting
In the near future, I plan to introduce legislation that, reflecting the Governor’s budget proposal, would lower Pennsylvania’s Corporate Net Income (CNI) Tax from 9.99% to 6.49% by 2022 and require combined reporting for all Pennsylvania businesses.

Recently it has come to my attention that some chain retail stores transfer their profits to different types of subsidiaries in order to avoid paying Pennsylvania’s CNI. The most common practice that a large chain retail uses is to set up a subsidiary in a state that does not tax certain types of income. The subsidiary, which is typically nothing more than an address or P.O. Box, has all of the large chain retailer’s trademarks transferred to that address. Some states, such as Delaware, do not tax companies on earnings on trademarks because they are deemed “intangible assets,” and therefore they are able to evade taxes in both Pennsylvania and in Delaware. The best way to block corporate tax evasion is to enact “combined reporting.”

Combined reporting requires a company to combine profits from all related subsidiaries so as to determine what portion of their profits are taxable. According to the Institute for Local Self-Reliance’s 2015 policy brief on combined reporting, Pennsylvania would be effectively able to tax the percentage of an out of state subsidiary’s profits that can legitimately be attributed to a large chain retailer’s in state operations. In addition to this, it also helps Pennsylvania’s small and locally owned businesses ensure that larger retails stores are paying their fair share in CNI.

As of 2016, 25 states along with the District of Columbia, have adopted combined reporting and they are as follows: Alaska, Arizona, California, Colorado, Connecticut, Hawaii, Idaho, Illinois, Kansas, Maine, Massachusetts, Michigan, Minnesota, Montana, Nebraska, New Hampshire, New York, North Dakota, Oregon, Rhode Island, Texas, Utah, Vermont, West Virginia, and Wisconsin.

Please join me on co-sponsoring this important piece of legislation.

Introduced as SB812