Governor Martin O’Malley today introduced his plan to adopt unitary combined reporting.

Combined reporting is a fundamentally different system of computing taxes with a new set of problems.

Under current state law, each corporation files a separate return based on that company’s books. Under unitary combined reporting, all of the income and expenses of related companies in a “unitary group” are combined, regardless of whether they have any connection to Maryland. This means that income and losses of these combined companies will be imported to Maryland with uncertain results for the State.

This is not a “loophole closer.” Some companies will pay more taxes, others less. How can a tax change that causes some companies to pay less tax be considered a “loophole closer?”

The Maryland Chamber believes that it’s a mistake to push such a major change to Maryland’s corporate income tax system when there is no accurate estimate of what the fiscal impact of such a change would be — for the state or for Maryland employers. Combined reporting is complex, costly and time consuming for businesses to administer.

The Comptroller’s Report

Much of this tax hysteria can be traced to the misinterpretation and misuse of a summary report 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.

The Facts About Maryland’s Employer Tax Burden:

The reality is that the 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. In addition, Maryland employers pay 40 percent of all sales taxes and businesses are the largest property tax payers in each county. Maryland employers collectively paid more than $9.4 billion in Maryland state and local taxes in fiscal year 2006.