I am writing today to announce the closure of the New Mexico Independent. After three and a half years of operation in New Mexico, the board of the American Independent News Network, has decided to shift publication of its news…
State lawmaker wants to reform NM’s corporate income tax
With a $660 million state budget shortfall, Sen. Peter Wirth, D-Santa Fe, says he knows where to find $40 million to $50 million in new money.
During the special legislative session that starts Saturday, Wirth plans to introduce a bill dramatically altering the way the state collects corporate income tax. It’s called combined reporting, and if passed, it would require multi-state companies with stores in New Mexico to pay taxes on income earned here.
As it is now, large, multi-state corporations often designate individual stores as subsidiaries that then make large payments to a home office in another state for use of, say, a logo. Those large payments funnel earned corporate income out of New Mexico that should be taxed here, Wirth says. He says it’s a loophole that gives big corporations a leg up on local businesses.
According to the Washington-based Center on Budget and Policy Priorities, combined reporting is a trend on the march. An April 2009 report by the organization says 23 of the 45 states with corporate income and similar business taxes have implemented “combined reporting.”
Seven of them, including Texas, have adopted the legislation since 2004. Massachusetts recently implemented combined reporting and is now looking to further tighten tax rules for large corporations. The District of Columbia did it for the 2010 budget year and similar proposals are being called for in Maryland.
“We have made the decision to give multi-state businesses, many of whom are already doing business in New Mexico, preferential tax treatment all to the detriment of our local companies,” Wirth has said. “It’s time for this to stop.”
But if the past is any indication, Wirth’s bill will run into a buzz saw of opposition. The bill has been defeated each time it’s been introduced in recent years, although with the state’s financial difficulties it’s unclear if the bill’s chances are increased.
Opponents say requiring combined reporting would send an anti-business message to corporations and industries at a time when New Mexico should be doing everything to entice businesses to relocate here or expand their operations.
“This is a global economy,” said Terri Cole, president and CEO of the Greater Albuquerque Chamber of Commerce, which has publicly opposed combined reporting. “We want to be a state that is open to business that exists around the globe, It works just the opposite to the way the world is moving.”
Under current New Mexico state law, large multi-state corporations may be composed of a “parent” corporation and a number of “subsidiary” corporations owned by the parent. The subsidiaries — in some cases, that means individual stores for big box retailers like Toys R Us — are allowed to pay a royalty to a home office headquartered in another state for use of a logo, a payment that is deducted from that subsidiary’s taxable income in New Mexico.
Under unitary combined reporting, a corporation’s nationwide profits are combined — that is, added together — and the state then taxes a share of that combined income, according to the Center.
New Mexico’s share would be calculated by an apportionment formula that weighs the corporate group’s level of activity in the state as compared to its activity in other states.