Foreign businesses, which include some of the major employers in the state of Massachusetts, are acting to transform a state law they state taxes their subsidiaries inappropriately and will discourage them from investment and growing here.
The law, put into practice as part of a wider rewrite of corporate and business tax regulations in 2008, makes Massachusetts one of the few states to tax royalties and interest paid by local subsidiaries to their corporate parents in other countries. Taxation of the payments raises about $40 million a year in additional revenue for the state, according to rough estimates by the state Department of Revenue.
Foreign-owned corporations claim the law is equal to double taxation, given that the corporate parents must pay taxes on royalties and interest in their home country. They also say it offends the spirit of tax treaties between the US government and more than 60 other nations that are targeted at stopping double taxation.
Massachusetts legislators are looking at legislation that would repair the problem for most foreign companies, but no action is imminent.
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