Public Comments for 10/12/2021 Work Group to Assess the Feasibility of Transitioning to a Unitary Combined Reporting System for Corporate Income Tax Purposes
Last Name: Wodicka Organization: The Commonwealth Institute for Fiscal Analysis Locality: City of Richmond

The Commonwealth Institute (TCI) would like to thank Chair Watts, Sen. Marsden, the other work group members, and agency and legislative staff for their discussion and deliberations around the feasibility of unitary combined reporting in the commonwealth. We support policy changes that would modernize Virginia’s corporate tax system and minimize opportunities for aggressive tax avoidance by large multi-state corporations. TCI views unitary combined reporting as a sensible policy change that would accomplish this goal. In addition, TCI also supports other options, such as strengthening the state’s add-back statute and providing the Department of Taxation with greater authority to compel corporations to submit combined or consolidated returns where warranted. We believe that any recommendation around either combined reporting or other corporate tax changes should be enacted on a mandatory basis. Otherwise, as noted by staff, corporations would likely only opt in if it reduces their taxes, while corporations that would see a tax increase would likely not choose that option if given the choice. An optional policy would likely result in greater state revenue loss and add additional complexity to the system. This kind of issue has emerged in the case of the state’s single-sales factor apportionment for manufacturers, which is available as an option. The option has a larger negative impact on state revenues than requiring it for all manufacturers would, according to the Joint Legislative Audit and Review Commission. We also would like to note that many of the largest corporations continue to operate nationally, including with substantial presences in states that use combined reporting. We documented these findings in our report from earlier this year, Combined Reporting: A Widely Used Tool to Counter Corporate Tax Avoidance ( Our analysis of publicly-available information on 83 large corporate employers in Virginia found that: 79 operate in at least one combined reporting jurisdiction; 71 operate in multiple combined reporting jurisdictions; and 51 operate in at least 10 combined reporting jurisdictions. Establishing mandatory combined reporting for large multi-state corporations is an important tool to advancing fairness in our tax code. It would allow Virginia to generate new, sustainable revenue that is critically needed now to continue the General Assembly’s investments over the past two years. Thank you, Chris Wodicka Senior Policy Analyst The Commonwealth Institute for Fiscal Analysis

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