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ANNAPOLIS — As many as three dozen unnamed corporations doing business in Maryland could pay less in corporate tax filing fees but more in overall taxes under a bill proposed by a Prince George’s County senator.
“We’re leaving money on the table,” said Sen. Paul G. Pinsky, a Democrat.
Pinsky is the sponsor of Senate Bill 395, which would require affiliated companies doing business in Maryland to pay taxes using a combined reporting method. The senator said his bill would essentially close a loophole that allows companies to avoid paying taxes in the state.
In this undated photo, Sen. Paul G. Pinsky, D-Prince George’s, explains his bill to members of the Senate Budget and Taxation Committee. (The Daily Record/Bryan P. Sears)
Similar bills have been introduced every year since 2010, without success.
Pinsky said the unnamed corporations identified in a review done by the Office of the Comptroller found that 107 of 150 of the state’s top companies are paying taxes. The rest, the senator said, are engaging in what he described as a tax dodge.
“They are avoiding paying taxes,” Pinsky said, adding that this creates an “unfair playing field for other Maryland companies.
“If Maryland had used combined reporting between 2006 and 2010, the state would have collected an average of $59.8 million a year,” Pinsky said.
Excluding the recession years of 2008 and 2009, the state would have averaged $123.5 million a year in additional taxes, Pinsky said.
All of the figures were attributed to a report produced by the comptroller’s office.
“I don’t think combined reporting is the magic bullet people say it is,” said Sean Looney, a lobbyist for Comcast. Comcast, which is based in Pennsylvania but has substantial operations in Maryland, opposes the legislation.
The bill cuts the corporate filing fee in half, from $300 to $150. This would result in a loss to the state of $25 million over the next fiscal year, and Pinsky called the cut “a goodwill gesture” to small businesses.
Changes in how corporate taxes are calculated proposed in the bill kick in a year later and are expected to increase the state’s general fund revenue by about $60 million between fiscal 2016 and 2019.
Revenue earmarked for transportation would increase by $62.5 million over the next five years.
West Virginia, the District of Columbia and 22 other states have some form of combined corporate reporting.
The General Assembly did make changes to the corporate tax reporting laws in 2004 and 2007.
In 2004, the legislature passed laws addressing the use of Delaware holding companies to avoid paying taxes. Three years later, it passed legislation dealing with captive real estate investment trusts.
But Matthew Palmer, a lobbyist for the Maryland Chamber of Commerce, disagreed with Pinsky on the reasons companies are listed as not paying taxes.
“There are many other reasons why,” Palmer said.
Among those are that a company may not have made a profit in the tax year in question or may have carried over a loss from another year. In some cases, Palmer said, companies offset their taxes with tax credits passed by the legislature.
“This is not a loophole closer,” Palmer said of the Pinsky bill. “This is a completely different way of taxing. It’s a completely different way of figuring corporate taxes.”
