Key Issues Affecting State Taxation of Multijurisdictional Corporate Income Need Resolving

GGD-82-38: Published: Jul 1, 1982. Publicly Released: Jul 1, 1982.

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GAO provided Congress with information on State taxation of multijurisdictional corporations. The report details the lack of uniformity among State income provisions covering these corporations.

The States which currently assess taxes on multijurisdictional corporations use a wide variety of rules to determine taxable income for the corporations, and this creates unacceptable levels of administrative burden and uncertainty. Moreover, some States include income from non-U.S.-based operations. This practice raises issues of international tax policy, interstate commerce, and States' rights. While the actual extent of overtaxation or undertaxation in unknown, the risk posed by the present degree of nonuniformity is unacceptable. Nonuniformity in State taxation has: led to numerous administrative and judicial disputes between States and corporate taxpayers, created a significant administrative burden, and generated high compliance costs. Greater uniformity in tax requirements would reduce the cost of compliance and the opportunity for disputes. GAO concluded that past problems indicate that States will not achieve a reasonable degree of uniformity in the near future. It is also unlikely that the issues will be resolved in the courts, especially those issues involving broad policy questions. GAO believes that only Congress has the capability to strike a balance between the States' right to tax and the Federal interest in the interstate and international tax policy issues arising from that taxation.

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