Combined Reporting Resurfaces in Subcommitee

The Senate subcommittee on combined reporting, SSB3122, met this morning in an information gathering session. The committee consists of Senator Pam Jochum (D-Dubuque), Senator Herman Quirmbach (D-Ames), and Senator Randy Feenstra (R-Hull).

Combined reporting would require corporations with entities outside the state of Iowa to combine their total incomes from all those entities on their Iowa state income taxes. In theory, this would increase state corporate income tax revenue $42-109 million dollars said Jim McNaulty of the Iowa Department of Revenue. Eight to ten-thousand corporations in Iowa would be adversely impacted by this.

Currently, Iowa only imposes income taxes on corporations within the state’s borders. It is one of the key benefits to doing business in the state of Iowa. Ed Wallace, president of the Iowa Taxpayers Association, which represents 154 Iowa companies, said ITA is adamantly opposed to combined reporting as it frustrates stability and predictability in an already shaky economy. Increasing corporations’ tax burdens does nothing good in this economic climate, and when companies see combine reporting, the decision to move or expand elsewhere is easily made.

Combined reporting is the equivalent of anti-economic development John Gilliland, representing the Iowa Association of Business and Industry, stated. ABI is comprised of 1,400 companies and over 300,000 employees statewide. ABI members are united in their belief that combined reporting is not good for the state. Iowa should aspire to have more business growth not less Mr. Gilliland concluded.

The only advocate to speak for the bill was from the Child and Family Policy Center. Their representative, Mr. Elias, expressed the group’s desire to raise revenues for Iowans by closing the “significant tax loopholes.” Companies consider “more important” things than the corporate tax structure of state when considering whether to do business there, he claimed.

Senator Feenstra, responded to the comment by Mr. Elias, by asking what is the number one reason corporations move in or out of a state. Government interference, Senator Feenstra stated. A study by Ernst & Young found that combined reporting negatively impacts states’ economic climates. Maryland recently withdrew its combined reporting statute after finding they did not take in the expected increase in revenue. Senator Feenstra, a small business owner himself, concluded by saying that he was really disappointed that this bill was even coming forward.

Senator Quirmbach ended the subcommittee meeting by exclaiming he could not be “more diametrically opposed” to Senator Feenstra. The current unitary tax system discriminates against small business in Iowa and it is small businesses that provide for the bulk of employment. Senator Quirmbach made the diabolical reference to the “Walmarts” of the world who shift around their income taxes to avoid paying corporate taxes at all, as the claim goes.

CSG sides with ABI and ITA in being adamantly opposed to combined reporting reporting legislation.