Maine legislators have introduced legislation (LD 1120) to “close offshore tax loopholes.” The U.S. Public Interest Research Group’s report, "Closing the Billion Dollar Loophole," estimates that Maine could save $14 million over a two year budget cycle by enacting legislation that includes income of corporate affiliates located in so-called “tax haven” countries in the income subject to apportionment and tax by Maine. Currently, Maine uses “water’s edge combined reporting”, meaning that the tax computation includes only income subject to U.S. federal income tax.
Representative Goode, Chair of the Taxation Committee, and a sponsor of the bill, was quoted in a press release by the Maine Small Business Alliance: "This report shows that we don't have to wait for Congress to take meaningful action to ensure big companies are paying their fair share like the rest of us."
The bill introduced is a “concept draft”, meaning that it does not specify how it will “reduce the use of so-called tax havens” but the report strongly endorses the methods used by Montana and Oregon, both of which provide a black-list of “tax haven” countries. This legislation would impose significant burdens on businesses conducting operations in certain foreign countries through corporate affiliates.
Other co-sponsors of the bill include members of the Taxation, Appropriations and Education committees.
Some clients have already indicated that this legislation will create problems and unfairly penalize them for legitimate operations in countries that have been labeled “tax havens.”
If you have concerns about the possible implications of this legislation, please contact a member of Pierce Atwood’s State and Local Tax or Government Relations Group.