State Tax Haven Legislation (Update and Resources)

The number of states introducing or enacting some form of state tax haven legislation is increasing annually. To help you keep track of it, I have included links to several resources that may be helpful:

• PwC State Tax Haven Legislative Tracker
• Reaching for Revenue Offshore, States Push Tax Haven Laws
• State Tax Haven Legislation: A Misguided Approach to a Global Issue
• Tax Haven Legislation is Growing in Popularity
• Connecticut Limits New Tax Haven Law
• Tax Haven Legislation Was a Hot Topic in State Legislatures in 2015
• State and Local Tax Policy Statement Regarding State Tax Haven Laws
• States Eye Tax Havens
• “Tax haven” state enactment status, with 2015 proposals
• Recent Trends in Combined Reporting and Apportionment

According to EY, arguments for tax haven legislation:

• $20b in state tax revenue loss – multinational corporations hide profits in “island economies.”
• Big business does not pay its “fair share.”
• Small business disadvantaged, unable to use tax haven “loophole.”

According to EY, arguments against tax haven legislation:

• Is it even constitutional?
• Japan Line vs. Los Angeles – US S. Ct. (1979) – US must “speak with one voice” in international relations
• Tax haven “blacklisting” is arbitrary.
• Can’t prove its $20b in state tax losses
• States are adopting a go-it-alone approach, out of sync with the rest of the international community
• (OECD Base Erosion and Profit Shifting project rejects approach these states want to follow!)

Based on reviewing the above resources, 6 states plus D.C. have enacted some form of tax haven legislation (Alaska, Connecticut, Montana, Oregon, Rhode Island, and West Virginia). A multitude of states have proposed some type of tax haven legislation. Most of the proposals have been connected to combined reporting proposals or revisions. Some of the proposed legislation has not gotten very far along in the process before being declared 'dead.' Other proposals were eliminated from the legislation or changed to provide that the state perform a 'study.' States that have introduced legislation include:

1. Alabama (HB 142/ S 202 / S 51 / S 12
2. Colorado (HB 1275 / HB 1346)
3. Florida (HB 1221)
4. Illinois (HB 4300)
5. Indiana (S 323)
6. Kansas (HB 2680)
7. Kentucky (HB 861 / HB 342 / HB 374 / HB 132)
8. Louisiana (HB 74a / HB 775)
9. Massachusetts (HB 2477 / HD 1234 / SD 1699 / S 1524  / H 4200 / HB 3400)
10. Maine (HB 1110 / LD 1634 / HB 235 / LD 341 / HB 273 / LD 407 / S 392 / LD 1120)
11. Minnesota (SF 3318 / HF 3898)
12. New Hampshire (HB 551)
13. New Jersey (A 1720 / S 982 / A 4826)
14. Pennsylvania (HB 1758 / S 117)
15. Vermont (S 138 / HB 489) - enacted, but not*

* Note: Vermont never enacted tax haven legislation. Vermont HB 489, as proposed and introduced, had language requiring the Commissioner of Taxes to make recommendations on how to include income from tax havens in the calculation of Vermont’s corporate tax. That language was struck and not part of HB 489 that was eventually enacted in June 2015. Thus, Vermont never repealed it because it was never enacted.