Massachusetts lawmakers are working on a bill that would close corporate tax loopholes and bring in more revenue for the state, yet a recent amendment to the measure could hinder the initiative’s goal of decreasing the private sector’s ability to avoid certain state taxes.
According to a letter dated April 18 that Revenue Commissioner Navjeet K. Bal, sent to Senate President Therese Murray, the state could lose $100 million to $200 million each year in corporate tax revenue due to an amendment that House lawmakers tagged on to the corporate tax reform bill. That amendment would allow companies with overseas U.S. subsidiaries to avoid taxation on funds that flow through those subsidiaries.
“These changes primarily benefit a limited group of very large, sophisticated, multinational businesses,” Bal wrote. “If left unchanged, these changes will materially reduce the additional revenue anticipated from the governor’s combined reporting bill by at least $100 million to $200 million annually. For fiscal 2009, the impact is projected to be a revenue reduction of between $60 million and $120 million.”
The House approved the bill April 10 after adding on the amendment. The bill now sits in the Senate Ways and Means Committee.
Critics of the amendment say it could limit the commonwealth’s ability to collect corporate taxes. Conversely, the overall goal of the corporate tax reform bill is to close tax loopholes for the private sector through two major reforms, an initiative that could generate $500 million annually at current tax rates, according to the Massachusetts Budget and Policy Center.