The news media jumped on a press release from Sen. Paul Pinsky yesterday entitled, “New Report Shows Nearly Half of MD Corporations Paid No Tax.”

According to Maryland Chamber Vice President of Government Affairs Ron Wineholt, this is the same misleading report that we have seen in 2004 and 2005 and discredited in each case. Among the report’s many problems are:

• The report provides “preliminary” data for tax year 2005, even though the cover page acknowledges that “tax year 2005 information remains incomplete, as returns for many corporations whose tax year begins after July 1 are not yet due.” Any attempt to draw conclusions from such incomplete data is meaningless.

• The report omits disclaimers that were part of the 2004 and 2005 reports which stated that the Comptroller’s Office is unable to match related corporate entities from their data system and, therefore, “this information most likely does not provide a full picture of the corporate income taxes paid by many “businesses” as they are commonly perceived…such a structure does not necessarily imply tax avoidance.”

• The fact is that Maryland has collected record amounts of corporate income taxes in recent years:

  • FY 2003 $397 million
  • FY 2004 $432 million
  • FY 2005 $673 million
  • FY 2006 $820 million

• Maryland’s corporate income tax system is consistent with that used by most other states.

• The Comptroller’s Office already has ample authority under existing law to combine related entities under “Section 482” authority granted to his office in 2004. Moving to a “combined reporting” standard for corporate income taxation would merely create new complexity and uncertainty for Maryland businesses without a clear understanding of the fiscal impact on businesses or the state.”