Combined reporting needs support
Published 3:00 am Thursday, April 27, 2017
As the state enters another General Fund Budget crisis and its lawmakers scramble to find ways to fund Medicaid, prisons, education and senior services, the Republican lead Legislature refuses to support new revenue generating measures, such as Combined Reporting.
Other states have closed this loophole, which allows multi-state corporations to shift money made in Alabama to accounts in other states without paying any tax.
“Alabama is being used as a tax shelter state for companies which operate in multiple states, because there is no combined reporting,” said Sen. Linda Coleman-Madison (D-Birmingham), who has sponsored a combined reporting bill for a second year.
The senator introduced the bill during a previous legislative session after speaking to a concerned Alabama constituent.
Susan Kennedy, who brought the issue to Coleman-Madison, spoke in favor of the bill at a public hearing held on the issue at the Alabama State House. Kennedy is a former general counsel for the Alabama Revenue Department as well as the daughter of small business owner parents.
“Growing up I watched my parents work hard and care about their employees, but after I started working for the Revenue Department I got to see what major corporations got to pay in taxes and it was disturbing,” Kennedy said. “My father and mother actually paid more in taxes than most of the Fortune 500 companies operating in Alabama. This is not good for the small businesses in Alabama because it gives large businesses a significant tax advantage.”
Each time the bill has been introduced lobbyists for big corporations have filled the room to speak against the measure, saying that combined reporting would hurt existing businesses and would cause others to rethink opening shop in Alabama.
Yet, Coleman-Madison contends that by not supporting this bill, “mom and pop” shops, along with small and mid-sized businesses are being adversely impacted.
“They end up paying higher taxes that are necessary to make up for the large corporations who avoid paying any taxes,” Coleman-Madison said. “Twenty-six states already have combined reporting.”
During the April 5 public hearing on SB67 the Fiscal Responsibility and Economic Development Committee heard from Coleman-Madison, who told the committee that based on 2013 federal tax records, there were 1,202 businesses which reported more than $5 million in federally taxable revenue with locations in Alabama, but paid no taxes in Alabama; adding that another 94 companies reporting more than $1 billion in federally taxable revenue, but also paid zero taxes in Alabama.
Although the senator wasn’t suggesting that these companies would be taxed in Alabama based on those entire amounts, she was pointing out that these are companies which could clearly afford to pay their fair share of taxes based on their current business activities conducted within Alabama’s state borders.
“If we just could have recouped 1 percent of those profits in taxes, we would be better off financially as a state, without creating any new taxes on citizens,” she said. “By not having combined reporting, it causes Alabama to place an additional burden on local businesses, which are required to pay taxes on all of their profits and revenues. The inequity creates millions of dollars in lost corporate tax revenues, which could be used for the General Fund and our Education Budget.”
She said the state needs to seriously reconsider combined reporting as a new revenue stream.
“Our state is at a crossroad. We can continue on this same path of protecting big businesses by being a sanctuary state, while asking more of in-state business entities that have been stable in our communities,” Coleman-Madison said. “But how long can we maintain the status quo at the expense of lost revenue and services to our state?”
Kirsten J. Barnes is a professional journalist who currently works as communications director for the Alabama Senate Minority Leader. She holds degrees in communications from Alabama State University and The University of Alabama and was previously a reporter and editor for the Montgomery Advertiser and the Columbus Ledger-Enquirer.