To close a loophole that has allowed multistate corporations to evade their fair share of taxes in New Jersey, Senator Raymond Lesniak and Senator Linda Greenstein today introduced legislation to enact a “combined reporting” tax law to put an end to the “corporate shell game” that costs the state hundreds of millions of dollars in lost revenue each year.
“Some of these highly-profitable companies are exploiting tax laws like a corporate shell game to avoid paying their fair share,” said Lesniak. “They create phantom subsidiaries to ‘shift profits’ away from New Jersey. By closing this loophole the state could generate as much as $250 million a year. This will help address the fiscal needs of the state.”
“We need to close these loopholes, capture this revenue, and hold multistate companies to the same level of accountability as the rest of New Jersey,” said Greenstein. “This is an issue of fairness and shared responsibility.”
Recently, NJ Policy Perspective, a non-profit think tank, released a report siting New Jersey as losing up to $470 million per year in tax revenue due to the gaping loopholes that currently exist in New Jersey’s tax laws.
By enacting combined reporting New Jersey would join 25 other states plus D.C. in limiting the ability of multistate corporations to shift profits to other states that have lower tax rates, or no corporate taxation at all.
Corporations often do this by creating “subsidiaries” that exist only for tax purposes.
Combined reporting treats the parent company and subsidiaries of multistate corporations as one entity for state corporate income tax purposes.
Their nationwide profits are added together and the state then taxes the share of the combined income generated in the state.
Lesniak pinpointed Exxon as one of the worst offenders.
“Exxon’s average state tax rate over the previous five years was 2.2 percent,” said Lesniak. “That’s simply outrageous. They have contaminated the environment, worked out a proposed legal settlement that shortchanges the state and they have been exploiting this loophole to avoid taxes.”
According to the Institute on Taxation and Economic Policy Analysis of SEC Filings, ExxonMobil paid a low tax rate over the past five years, and received a tax rebate from New Jersey in 2014 in the amount of $507,000.
This resulted in a negative -5.6 percent tax rate last year.
Connect with NJTODAY.NET
Join NJTODAY.NET's free Email List to receive occasional updates delivered right to your email address!