The Erosion of the States' Tax Base—A Whopper of a Problem? An Examination of Possible Solutions to Corporate Inversions

The Bloomberg BNA Tax Management Weekly State Tax Report filters through current state developments and analyzes those critical to multistate tax planning.

In the past 10 years, there has been a surge in corporate inversions, with 47 companies engaging in these transactions between 2004 and 2014. Estimates show that legislation to tighten rules to limit inversions could save taxpayers nearly $20 billion over 10 years. However, inversion transactions are only the tip of the iceberg, as corporations use a variety of mechanisms to shift income abroad, leaving the states and the federal government with a dwindling tax base. This article explores how states are addressing income-shifting strategies used by multinational corporations and examines the effectiveness of employing these methods to combat the effects of corporate inversions as well.