Action Alert | Proposed Tax Increases on Corporations

The House Ways and Means Committee is considering legislation intended to increase taxes on corporations with affiliated facilities or operations in foreign countries.  AIV is coordinating opposition to this proposal and urges Vermont manufacturers and other companies with any ties to multinational corporations and operations to contact us at to learn more and stay informed about developments and options to engage on the issue.


As the name implies, the proposal to require “worldwide combined reporting” would require corporate taxpayers to report on the worldwide activities of any operations within their larger corporate family and use that as the basis for determining Vermont tax liability.  Currently, Vermont law requires “water’s edge” unitary combined reporting, or essentially US operations only, as the basis.

Under recent reforms spearheaded by AIV, starting with the 2023 tax year, Vermont corporate income tax liability is based on the percentage of sales in Vermont relative to combined US sales, applied to total US (water’s edge) taxable income.  This reform, called “single sales factor”, is a significant improvement on the previous formula, which also factored in the Vermont share of property and payroll, and should reduce the tax liability of companies with Vermont facilities and employees but sales that are largely out of state, particularly manufacturers.

However, although single sales factor can mitigate tax liability for companies with Vermont employees and facilities under either combined reporting approach (either the current water’s edge/US requirement or the proposed worldwide requirement), moving to worldwide reporting could still increase taxes for Vermont corporate taxpayers over current law. The extent to which it could increase Vermont taxes is driven in part by the relative profitability of affiliated operations in other countries (it is possible for some companies to actually benefit from worldwide reporting, and some states allow it as a voluntary election, but it is seen as generally negative overall).

In addition to the risk of increased tax liability, worldwide reporting would significantly increase administrative and compliance burdens and uncertainties for both corporations and the state’s Tax Department.  There is also the specter of litigation over disputes about defining the worldwide corporate family and activities/income.  When the possibility of worldwide reporting has come up in the past, there have also been concerns about or outright threats of retaliatory actions by other countries.

Advocates for mandating worldwide reporting claim that it is necessary to capture profits that multinational corporations are artificially shifting out of the US and into lower tax countries. However, worldwide reporting increases taxes on companies regardless of whether they are trying to “shift profits” for whatever reason. It also ignores the changes, including very recent changes, to adjust tax rates and laws in both the US and other countries that have reduced both the incentives and the opportunities to mitigate taxation across boarders. Finally, particularly for Vermont, it ignores the fact that Vermont has arguably the most aggressive taxation of foreign income among US states, including how it taxes foreign dividends, “Subpart F” income, and piggy backing on the recent federal taxation of “Global Intangible Low-Taxed Income” (GILTI).

Although there are roughly a dozen states that allow companies to voluntarily elect to file with worldwide reporting, no state makes it mandatory (technically Alaska requires worldwide reporting for oil and gas companies, but this benefits those companies and so this arrangement is widely considered to be effectively voluntary).  The few states that have actively considered adopting mandatory worldwide reporting in recent years have decided against the move, including most recently New Hampshire, Maine, and Minnesota.

Next Steps/Call to Action

The House Ways and Means Committee has held some initial hearings on this proposal and is expected to continue work on it in the coming weeks.  AIV is working to bring together and coordinate interested companies and organizations.  Even if companies might not want to testify on this issue directly, it is still important for them to be fully informed and aware of other options to engage in other ways.  We would strongly encourage any Vermont company with any international corporate ties, as well as companies that work with corporations on tax related issues, to contact us at to learn more about options for keeping up to date and other ways to consider getting involved as best works for you.