Proposed “Business Activity Tax Nexus” Legislation Would Seriously Undermine State Taxes on Corporate Profits and Harm the Economy
A bill recently reintroduced in the U.S. House of Representatives would strip states of their current authority to tax a fair share of the profits of many corporations that are based out-of-state but do business within their borders. Representative Bob Goodlatte reintroduced the “Business Activity Tax Simplification Act” (“BATSA”), H.R. 1439, on April 8, 2011. The Subcommittee on Commercial and Administrative Law of the House Judiciary Committee held a hearing on the bill on April 13.
BATSA defines many activities that corporations commonly conduct within a state as being no longer sufficient to obligate the corporation to pay several different kinds of taxes to the state (or to its local governments). Moreover, it defines these “safe harbors” from taxation in a highly ambiguous, arbitrary and inconsistent manner. These new restrictions on state and local taxing authority would have far-reaching, adverse impacts on the revenue-generating capacity and fairness of state and local tax systems.