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Republican Legislature Legalizes Corporate Tax Evasion

Jeremy Sprinkle
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New loophole will cost NC tens of millions of dollars

North Carolina's revenue problems will get worse thanks to a bill rushed through the Republican-led General Assembly at the end of session. Passage of House Bill 619 "could have devastating consequences for key public investments while also putting locally owned North Carolina businesses at a disadvantage compared to big, multi-state corporate competitors," the NC Justice Center explains:

Under current laws, North Carolina’s Secretary of Revenue has the authority to require in-state and out-of-state subsidiaries to file a joint tax return if there is evidence of multi-state corporations shifting income to avoid paying state taxes. The new bill would only give the Secretary of Revenue the authority to require corporate subsidiaries to file a joint return if transactions between subsidiaries have no "reasonable business purposes" other than reducing the corporation’s tax liability. In turn, corporate accountants could restructure tax shelters and give them the appearance of "business purposes," even if the primary purpose was to, in fact, reduce corporate taxes. This provision also would likely cost the state $30 million a year.

Opening large tax loopholes for multi-state corporations is not an effective economic strategy for North Carolina, a state where business taxes are already the lowest in the nation. The bill would only stack the deck against local business and starve the critical public structures North Carolinians depend on. Instead of rushing to pass such a consequential piece of legislation at the end of the session, lawmakers should take adequate time to craft corporate tax rules that treat all businesses fairly while also ensuring that all pay their fair share to support the state's vital public investments.

While distressing for anyone who believes tax fairness begins with having corporations pay North Carolina taxes on North Carolina profits, this move by the legislature to fast-track passage of a bill that would ensure just the opposite for big, multi-national corporations is not surprising. Republicans owe their legislative majorities to a wave of corporate cash that flooded the 2010 election.

Of course knowing why our legislature would provide cover for corporate tax cheats who rob our treasury is no comfort to the tens of thousands of North Carolinians about to lose their jobs thanks to the new Republican state budget.

Click here to listen to some of the debate over HB 619: