The Maryland Spending Affordability Committee met last month to kick off the fiscal year 2026 budget process, which will culminate in early April. During the committee meeting, several legislators discussed the difficult choices before the governor and the General Assembly in balancing the Maryland state budget. While we recognize the difficult choices ahead for the governor and General Assembly, growing Maryland’s economy through business investment and job creation offers the most sustainable path forward. One proposal that would move us in the wrong direction is combined reporting — a tax policy that would harm rather than help our state’s fiscal outlook.

Advocates for combined reporting — in which parent companies and their subsidiaries are treated as one organization for tax purposes — argue that it will generate much-needed revenue to meet the state’s financial obligations. They argue that combined reporting would import corporations’ profits into Maryland thereby providing additional revenues to tax under Maryland’s corporate income tax. However, during economic downturns, those same corporations could import losses into Maryland thereby providing less tax revenues.

In fact, the Maryland Bureau of Revenue Estimates studied combined reporting a decade ago and reported in 2013 this exact phenomenon to then-Gov. Martin O’Malley and the General Assembly. In this report, the comptroller’s office noted that during the economic downturn of 2008 and 2009, had Maryland adopted combined reporting, it would have suffered tens of millions of dollars of state tax revenue losses in each of those two years — approaching nearly $100 million in tax revenue losses in 2009 under one model.

Combined reporting is volatile. In some years, it may increase state tax revenues. In other years, it could lead to less state tax revenues.

Two prior Maryland commissions reviewed combined reporting and came to the same conclusion — that combined reporting is bad policy. Prior to the 2011 General Assembly session, the Maryland Business Tax Reform Commission recommended against implementing combined reporting because it “would lead to increased volatility in the corporate income tax.”

In January 2016, the Maryland Economic Development and Business Climate Commission similarly noted that “combined reporting can create revenue volatility and winners and losers among corporate taxpayers.” It further stated that such a policy can “lead to additional litigation … and create additional administrative costs for both taxpayers and the State.” The 2016 commission’s recommendation to the General Assembly was: “Do not adopt combined reporting and indicate clearly the intent not to do so,” noting that even such “debate causes uncertainty and sends a negative message to businesses considering expansion in or relocation to the State.”

In addition, Virginia recently looked at combined reporting and came to a similar conclusion. The Virginia Combined Reporting Work Group cited the “potential damage to Virginia’s business climate” with such a policy. Ultimately, neighboring Virginia has not pursued a combined reporting tax policy, and neither should Maryland.

Many advocates seem to believe that enacting combined reporting is a corporate loophole closer, which is not true. Maryland has already addressed many of the corporate loopholes that proponents claim combined reporting will address. In 2004, Maryland passed legislation to prevent companies from moving their income to out-of-state shell companies to avoid taxation. Three years later, in 2007, Maryland prohibited another tax loophole in which corporations deducted payments to “captive” real estate investment trusts as expenses.

Those prior policies effectively addressed specific tax avoidance strategies and closed genuine loopholes. Combined reporting, however, is fundamentally different. It’s not a loophole closer — it’s a dramatic shift in tax policy that would arbitrarily create winners and losers among Maryland businesses.

The Maryland Chamber of Commerce strongly opposes combined reporting — a policy that would signal Maryland is closed for business. Our state already struggles to compete, and we cannot afford to adopt a volatile tax scheme that would harm businesses of all sizes and discourage investment when we need it most. The solution to Maryland’s fiscal challenges lies in growing our economy by creating a more competitive business environment, not in adopting policies that could reduce state revenues during economic downturns.

Mary D. Kane (mkane@mdchamber.org) is president and CEO of the Maryland Chamber of Commerce, an organization that serves as the leading voice for business in Maryland and represents more than 7,000 member businesses in every industry across the state.