Iowa Governor Chet Culver is usually committed to closing corporate tax loopholes. As in 2007, he is championing combined reporting legislation, which would reduce corporate tax avoidance by requiring a multi-state corporation to add together the profits of all of its subsidiaries, regardless of their location, into one report. This is better from a tax enforcement perspective than separate accounting, which allows companies to report the profit of each of its subsidiaries independently. Separate accounting is often cited by critics as an "open highway for tax avoidance." Despite studies from the Iowa Policy Project and the Center on Budget and Policy Priorities which show that combined reporting is an essential tool for policymakers looking to close tax loopholes and level the playing field for all types of businesses, the Iowa Legislature has reacted lukewarmly to the idea.
The state's legislature shows no such hesitation, however, when it comes to providing tax giveaways to large corporations like Microsoft. This week the Legislature passed HF 2233, which will expand certain property and sales tax exemptions for "web search portal business and property," apparently in a bid to lure the software giant to the state. The governor, despite his stance on other corporate tax issues, signed the bill on Thursday.