A measure the legislature enacted earlier this year to make business taxation more equitable in Connecticut and raise needed resources is still the right course for the state to take, even as some big corporations that benefitted from the old system step up their attacks.
After a decade of serious discussion, the Connecticut General Assembly conformed our state’s corporate income tax policy to that of 24 other states and D.C. – a majority of all states that have a corporate income tax, including every other New England state – by adopting a common sense policy known as mandatory combined reporting.
Combined reporting treats corporations composed of a parent and one or more subsidiaries as a single corporation for tax purposes. The profits of the parent and subsidiaries are added together, and then apportioned among the states where the money was earned by a simple formula. As these 25 jurisdictions and Connecticut have now recognized, mandatory combined reporting is an essential policy aimed at preventing corporations from using accounting gimmicks to shift profits actually earned within their borders to states and foreign countries where they will be taxed at lower rates or not at all.