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In a potential paradigm shift, several U.S. states are exploring the introduction of worldwide combined reporting for corporate taxation in 2024. As of now, no U.S. state mandates worldwide combined reporting, but a few states are actively considering this substantial tax policy change.

States That Explored in 2023:

• Minnesota: Initially, Minnesota considered a worldwide combined reporting proposal in 2023 but later withdrew it, opting for GILTI Conformity.
• Hawaii and New Hampshire: Both states entertained the idea of worldwide combined reporting proposals in 2023, but neither received approval.

States Proposing Worldwide Combined Reporting in 2024:

• Tennessee: House Bill 2043 and Senate Bill 1934 have been introduced in 2024, aiming to adopt worldwide combined reporting.
• Vermont: While no formal bill has been proposed yet, Vermont legislators are reportedly studying a draft bill for implementing worldwide combined reporting. This follows prior legislative changes that incorporated U.S. organized corporations with significant foreign activity into the combined group from the 2023 tax year.
• Colorado: Colorado House Bill 24-1134 seeks to make the state’s corporate income tax more uniform. It proposes replacing the current combined reporting standard with the Multistate Tax Commission’s standard and modifying the computation of the receipts factor to align better with the unitary business principle.
• New Mexico: Senate Bill 181 aims to modify the composition of the water’s-edge combined group, excluding only “foreign” corporations with less than 20% of their property, payroll, and sales sourced to locations within the United States. It also proposes eliminating the exclusion for Subpart F income.
• South Carolina: Senate Bill 298 introduces specific standards allowing the Department of Revenue to require a combined return or adjust a taxpayer’s income, particularly when intercompany transactions lack economic substance or are not at fair market value. The bill passed the House on February 2, 2024, and is now under consideration in the Senate.

These proposed changes signify a potential shift in the landscape of corporate taxation, impacting businesses operating on a global scale. Stakeholders and businesses are advised to stay abreast of these developments as they unfold.