Tax haven legislation passes with study of worldwide combined reporting

The perennial tax haven legislation, LD 428, An Act to Prevent Tax Haven Abuse, sponsored by Rep. Denise Teppler (D-Topsham), passed as a Resolve, c. 170 without the Governor’s signature. The law directs Maine Revenue Services (MRS) to look at the impact on the State’s income tax and economy if Maine adopted worldwide combined reporting for corporations that are part of an affiliated group with members outside of the United States.

LD 428 was a carryover bill that the Maine State Chamber of Commerce testified in opposition to last session and many previous sessions. As originally drafted, LD 428 would have required corporations that file unitary income tax returns in Maine to include income from certain jurisdictions from outside the U.S. in net income when apportioning among tax jurisdictions. The bill would have established a “blacklist” of countries considered to be tax havens. Many international embassies located in Washington, D.C., submitted letters in opposition to the bill to members of the Taxation committee and to Governor Janet Mills. Passage of the bill would have resulted in double taxation in many cases.

The bill as amended and passed eliminates language that blacklisted certain countries. The MRS will be required to look at what statutory and administrative changes would need to be made to adopt worldwide combined reporting with a water’s edge elective. The law requires MRS to report back to the Joint Standing Committee on Taxation by February 1, 2023. If you have any questions, please contact Linda Caprara by calling (207) 623-4568, ext. 106, or by emailing lcaprara@mainechamber.org.