‘Unitary tax’ may push GE to relocate HQ to R.I. from Conn.

HARTFORD – As General Electric’s self-imposed deadline looms on whether to move its headquarters from Connecticut, some legislators in the Nutmeg State are growing increasingly pessimistic, according to a report by the Hartford Courant.
“I think they’re going to go,” said Sen. L. Scott Frantz, a Greenwich Republican and the ranking member on the legislature’s tax committee.
“I think it’s slim,” said Ridgefield Republican Rep. John Frey when asked to rate the chances that the company would keep its corporate headquarters in the state.
Spurred by increased taxes – specifically, the unitary tax, which affects major companies with operations in multiple states and which the legislature passed in June – and what it calls an unfriendly business climate, GE has announced it would decide by the end of the year whether to leave. GE’s corporate headquarters have been in Fairfield for 40 years.
The unitary tax, known as combined reporting in Rhode Island, was enacted in the Ocean State in its last legislative session. For tax year 2014, corporations subject to Rhode Island’s corporate income tax file separate returns, as separate entities. For tax years beginning on or after Jan. 1, 2015, Rhode Island has adopted combined reporting for corporate income tax purposes. As a result, a business treated as a C corporation – and which is part of a combined group engaged in a single business enterprise (a ‘unitary’ business) must file a combined report with Rhode Island.
Thus, a corporation will generally have to treat all of its affiliates as if they were a single company, and combine all of their taxable income in a single pool. A formula will be used to apportion combined income to Rhode Island for tax purposes.

In addition to the “unitary tax” issue, Connecticut is one of several states across the nation facing the arduous task of funding its defined benefit pension payouts. Rhode Island, faced with the same issue, enacted pension reform in 2011, which after years of lawsuits and court-ordered negotiations, was finalized in July when Superior Court Judge Sarah Taft-Carter entered a judgment on the state public employee pension settlement. The Courant story notes that Frey says that GE officials were impressed with Gov. Gina M. Raimondo’s handling of the pension issue, which began while she was still the state’s general treasurer.

In addition, the top marginal rate for personal income tax in Rhode Island is 5.99 percent, a decline from the previous rate of 9.9 percent, a change that was enacted in 2010 by the General Assembly. That is a full percentage point lower than the recently enacted increase of the top marginal rate in Connecticut of 6.99 percent.

A spokeswoman for Raimondo – who led the pension reform project while state general treasurer – said, “the governor’s principal focus – as it has been for a year – is attracting companies to invest in Rhode Island and put people back to work here. She and [Commerce] Secretary [Stefan] Pryor are continuously in conversations with companies in and outside Rhode Island regarding potential expansions and relocations, and are working aggressively to bring more jobs to the state. In fact, we recently announced that Lighting Science Group is moving here, and the governor just returned on Friday from a trip to California focused on this mission.

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“As a general matter, it would be unwise for us to comment on the existence or status of any individual conversations unless and until such time as the projects, if any, are far enough along to discuss publicly,” said Marie Aberger.

Officials in at least 11 other states are trying to lure one of the nation’s best-known companies, attracted not only by GE’s prestige but also by the financial benefits to a state and its communities provided by hundreds of highly paid executives and their families moving in.

The most public suitors have been Atlanta, Texas and New York, but Frey, who has deep personal ties inside GE, said Rhode Island is also strongly in the running.
But Frantz and Frey seem almost resigned to the loss.
“Senior management has put up with a lot of taxation and regulation from the state of Connecticut for years,” Frantz said. “The last enactment of the [state] budget appears to be the final straw.”

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