HARRISBURG, Pa., Feb. 9, 2005 (PRIMEZONE) -- The Pennsylvania Chamber of Business and Industry today said Gov. Ed Rendell's call to require Pennsylvania businesses to adopt mandatory unitary combined reporting would negate any job creation benefits of reduced business taxes.
"Reducing the Corporate Net Income tax, implementing a single sales factor and eliminating the cap on net operating losses are tax changes long sought by the business community to improve Pennsylvania's ranking as one of the worst states for business," said Kirk Liddell, president and CEO of Irex Corporation, and first vice chairman of The Chamber's Board of Directors. "We applaud the governor for listening to the concerns of Pennsylvania's job creators by embracing these changes. Unfortunately, the single issue of combined reporting will offset the benefit that would otherwise result from the tax reductions that he has announced."
Liddell said mandatory unitary combined reporting is considered one of the most complex systems of reporting and is an issue that is not easily understood.
"Tax practitioners will tell you that Pennsylvania's competitiveness will be seriously harmed if this policy is implemented," he stressed. "Despite the governor's claim that this budget does not include any tax increases, the effect of implementing combined reporting will be a tax increase on business, despite his other proposed reductions."
Pennsylvania is currently a separate company reporting state. Each company and its subsidiaries doing business in Pennsylvania file separately. Under combined reporting, companies would be required to report all income for all companies associated with a "unitary group" (defined by a test) of businesses and then allocate income (based on a formula) to Pennsylvania.
Liddell said the proposed reporting change would significantly increase costs and administrative red tape for many businesses, and would undoubtedly lead to costly litigation for both the Commonwealth and business community. California adopted combined reporting in the 1970s and is still flooded with litigation as a result.
"Mandatory unitary combined reporting would also raise another red flag for businesses considering locating in Pennsylvania," Liddell stressed, noting that none of Pennsylvania's competitive states have adopted the requirement. "From a competitive perspective, the only way Pennsylvania can remain viable in the competition for jobs is if every state would adopt mandatory unitary combined reporting and applied all the same definitions, rules, tests for its implementation."
Liddell said a recent survey by Chief Executive magazine was the latest survey to rank Pennsylvania as one of the worst states in which to do business in the nation. High taxes were cited as a factor contributing to the poor ranking.
"The governor took welcome steps to reverse this trend by embracing tax cuts for the Commonwealth's job creators. We now urge him not to take a major step backward," he added. "Mandatory unitary combined reporting would result in a burden that most other states have refused to adopt. Pennsylvania should refuse as well."
The Pennsylvania Chamber of Business and Industry is the state's largest broad-based business association and the fastest growing state chamber in the United States, with more than 9,000 members covering all 67 counties. More information is available on the Chamber's website at www.pachamber.org
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