“Making the Massachusetts Corporate Tax Code More Competitive”

 

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In January 2013, the Chamber released a report titled, “Making the Massachusetts Corporate Tax Code More Competitive.” Prepared with statistical and tax technical assistance by PricewaterhouseCoopers US, the report analyzes key drivers of Massachusetts’ economic performance and proposes four key tax reforms designed to enhance the state’s overall business competitiveness.

Current policy makes Massachusetts’ corporate tax burden the 5th highest in the country. Since corporate tax policy is one of the primary tools state governments have to influence economic development, Massachusetts is at a significant disadvantage in the never-ending competition for jobs and investment.

To strengthen the competiveness of our corporate tax system, the Chamber is recommending action on the following four tax reforms:

  1. Adopting the elective single sales factor for all industries, so the tax code doesn’t penalize companies for locating facilities and jobs in Massachusetts, thereby increasing the incentive to locate jobs here;
  2. Adopting net operating loss (NOL) carryforwards for the state’s financial services and utility sectors, placing these key sectors on an equal footing with all other Massachusetts sectors and with their peers in nearly every other state;
  3. Aligning the state’s economic substance doctrine, which is extreme in both substance and process, with related federal provisions to make the tax process clearer and more predictable for companies in all industries;
  4. Phasing-out the balance sheet tax, a second corporate tax on inventories and financial assets that few comparable states utilize, and which must be paid even if a company is losing money or the economy is in a steep recession.

The Chamber recommends that each reform adopted begin on or after January 1, 2015, with all but the economic substance reform being phased-in over multiple years.

As policymakers at the federal level work to make the US corporate tax code more competitive, Massachusetts can and should do the same. The Chamber will work to advance legislation at the Massachusetts State House to enact these tax proposals.