State Corporate Tax Shelters and the Need for “Combined Reporting”


Publication Date: October 2007

Publisher: Center on Budget and Policy Priorities (Washington, D.C.)

Author(s): Michael Mazerov

Research Area: Banking and finance; Business

Keywords: Economic projections; Tax code; Corporate finance; State budgets

Type: Report


Almost half the states with corporate income taxes have adopted combined reporting. Five states have enacted the reform in the last three years, and several others have seriously considered doing so. A major reason for states’ growing interest is their recognition of how badly corporate tax shelters that exploit the lack of combined reporting are eroding state corporate tax payments. Corporations have devised a wide variety of strategies to artificially shift profits to out-of-state subsidiaries. Combined reporting largely negates these strategies by enabling the state to tax a fair share of the profit shifted into a related, out-of-state corporation.