With Fidelity shipping more jobs to neighboring states this week the question has come up, well “what exactly did Deval Patrick do to drive Fidelity away?” Here’s one. In 2008 Deval Patrick signed into legislation the misnamed, “An Act Relative to Tax Fairness and Business Competitiveness”. As Jamie Downey of Boston.com told us in 2009.
Under this new method, affiliated corporations with 50 percent or greater common ownership will be required to file a unitary combined tax return. In this system, the income of all corporations in the group (including those not doing business in the state) is aggregated. Transactions between these entities, or intercompany transactions, are eliminated. The total income of the group (or unit) is then allocated to the state based apportionment factors.
A unitary group will include all corporations under common ownership that are engaged in a “unitary” business. Corporations are considered under common ownership if more than 50% of their voting stock is controlled by the same beneficial owners. A unitary business is defined broadly to include two or more corporations whose business activities are interrelated and result in mutual benefit or a sharing of value between the corporations. As you would expect, the law specifies the Legislature’s intent that the term “unitary” be construed to the broadest extent permissible under the U.S. Constitution.
The bill was entitled “An Act Relative to Tax Fairness and Business Competitiveness”. This may be a misnomer since the reason for this change was to extract more taxes from businesses. Not many people would consider increasing corporate taxes something that will make Massachusetts more business competitive. However, under the new reporting structure, it is estimated that Massachusetts will extract some $400 million in additional corporate taxes annually.