A new report reveals Maryland losing between $144 and $197 million in corporate tax revenue rather than the previously reported $109 to $170 million. The lost revenue is a result of large corporations avoiding state income taxes by creating subsidiaries in other states, diverting revenue out of Maryland. Additionally, preliminary results for 2007 show the trend continuing with lost revenue of $92 million to $144 million. This number is also likely to rise as complete data is analyzed. “Our current tax policy which allows large Fortune 500 companies to avoid paying taxes in Maryland while small and medium size businesses act responsibly and pay their fair share is an abomination,” said Senator Paul G. Pinsky, the sponsor of combined reporting legislation and the Legislature’s long-time leading proponent.

Twenty three states have now adopted combined reporting, a majority of those states that collect corporate income tax. Under combined reporting, all related corporate entities, including shell companies report income as a single group. According to the most recent report from the Bureau of Revenue Estimates, one third of the largest for-profit companies in Maryland paid no corporate income tax for year 2007. In recent years, the General Assembly closed two of the known tax avoidance schemes (Delaware Holding Company loophole and the REITs (Real Estate Investment Trust) loophole, but many more are known to exist. “With the announced budget reductions and cuts to crucial state programs, it is indeed unfortunate to leave uncollected tax revenue on the table,” said Pinsky.

The report is available here.