‘Sham Transactions’ Trigger States to Crack Down on Tax Havens

Lawmakers in a half-dozen states are considering measures that would tighten their statutes for taxing large multistate corporations and crack down on tax avoidance strategies involving intercompany transactions.

Proposed legislation in Florida, Maryland, Pennsylvania, and Virginia would bring mandatory unitary combined reporting into their corporate income tax codes. The change would ensure multistate businesses file a single return featuring the income and expenses of parents and their affiliates, regardless of location. Legislation pending in Hawaii and New Hampshire would take an additional step, moving to worldwide combined reporting.

The bevy of bills reflects mounting frustration with tax losses primarily in ...