Recent news accounts and editorials have repeated the claim that only half of large corporations pay corporate taxes to the State of Maryland. A recent commentary by two State Senators even stated that large companies use state services but “give nothing back to the state.”

The Chamber would like to set the record straight. We’ve submitted an op-ed to the Baltimore Sun. Here are a few facts courtesy of Maryland Chamber State Taxation Consultant Karen Syrylo, CPA.

-The Report: The recent hysteria about business taxes can be traced back to the misinterpretation and misuse of summary data on corporate tax payments issued by the State Comptroller’s Office. The data lists how many of the largest employer payroll tax accounts also had a corporate income tax payment made by that entity. It doesn’t list all companies, or all large companies, but only the payroll tax paying portion of a business.

-Loopholes in the Report: Disclaimers included with the current and previous reports show it has little value as an analytical tool. Previous similar reports by the Comptroller’s Office have acknowledged that (1) businesses frequently have many related entities; (2) the Comptroller’s Office cannot tie together related entities to show the total taxes paid by a “business”; (3) such a corporate structure does not imply tax avoidance; and (4) the report therefore “most likely does not provide a full picture of the corporate income taxes paid by many businesses as commonly perceived.”

-How can certain corporations pay no state corporate income taxes in a given year? The report itself hints at possible answers, none of which relate to an accusation of tax dodging. First, it is possible the company had no profits to tax. Second, the company may have had carry-back or carry-forward losses that could be legally applied. Third, the company may have had valid income tax credits that eliminated their tax liability. Just as individual taxpayers may take legitimate tax credits or deductions on their tax returns, such as mortgage interest, so may corporate taxpayers. These companies are doing nothing illegal.

-Corporate Income Taxes in Maryland: Corporate income taxes received by Maryland during the past three years are the highest ever received by the state. Corporate income tax receipts doubled from fiscal year 2003 to 2006. They have grown significantly over the last decade in spite of the fact that there are fewer corporations. There are fewer corporations because businesses are choosing non-corporate forms and their income taxes are reported in another category.

-Overall Business Tax Burden: In addition, Maryland businesses pay 40 percent of all sales taxes, and also are the largest property tax payers in each county. Businesses collectively paid over $9.4 billion in Maryland state and local taxes in fiscal year 2006.