ITEP Testifies in Rhode Island on Corporate Tax Avoidance and Sunset Bills


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Last week, ITEP testified in front of the Rhode Island House Finance committee on two bills.  One would close down some of the most egregious tax avoidance schemes available to multi-state corporations by mandating “combined reporting.”  The other would ramp up the level of scrutiny applied to Rhode Island’s tax code by requiring that new tax breaks (or “tax expenditures”) be created with a seven-year expiration date, and a specific plan for gathering vital performance data.

The first bill, H5738, would level the playing field between large corporations and mom-and-pop businesses by greatly reducing the ability of multi-state corporations to avoid taxes by artificially shifting income (on paper) to low-tax or no-tax states.  Specifically, H5738 would mandate what’s known as combined reporting, an accounting procedure that’s already required in a majority of states with corporate taxes or similar taxes. 

As ITEP points out in its testimony, combined reporting is already very common in New England.  Massachusetts, New York, and Vermont were each part of a larger wave of states that recently implemented this reform, while two other nearby states—Maine and New Hampshire—have required combined reporting for over two decades.

The other bill, H5737, would require that legislation creating a new tax break include four things: a statement of purpose, detailed performance indicators, data collection requirements, and a provision forcing the tax break to sunset within seven years.  According to ITEP’s testimony, this bill combines a variety of tax expenditure best practices already in use elsewhere around the country. 

For example, Washington State is particularly good about analyzing its tax expenditures in order to judge their efficiency and effectiveness.  Oregon and Nevada, on the other hand, now make use of sunset provisions in order to ensure that tax expenditures are not allowed to continue indefinitely without reconsideration by elected officials.  H5737 combines these two approaches, and in doing so has the potential to produce a framework for scrutinizing tax expenditures more closely than in any other state.

Read ITEP’s testimony on combined reporting in Rhode Island.

Read ITEP’s testimony on tax expenditure procedural reform in Rhode Island.

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