First Wyoming Corporate Income Tax Encounters New Hurdles

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After passing the House with overwhelming support last month, a bill that would impose Wyoming’s first-ever corporate income tax faces new opposition from state retail, lodging, and restaurant associations.

The new tax is proposed through House Bill 220, the National Retail Fairness Act, which is sponsored primarily by Rep. Jerry Obermueller, R-Casper, with several other prominent legislators cosponsoring, including Gillette Republicans Rep. Eric Barlow and Sens. Ogden Driskill and Michael Von Flatern.

Provided it passes the Senate, the act proposes imposing a 7 percent tax on corporations in the hospitality and retail industries.

The proposed tax would lay claim to a portion of each corporation’s adjusted federal tax income.

All revenues generated by the tax would go to the state’s school foundation fund, to which it would add a projected $90 million by fiscal year 2022.

But there are some who feel that the National Retail Fairness Act is anything but fair to a very narrow and select group of businesses.

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Both the Wyoming Retail Association (WRA) and the Wyoming Lodging and Restaurant Association (WLRA), via joint press release, have openly stated their aversion to the bill.

“The bill arbitrarily targets the retail and hospitality industries and imposes a tax on corporations with more than 100 shareholders,” WRA Executive Director Chris Brown wrote in the release.

Neither the WRA nor the WLRA buy the net neutral presentation of the new tax either, which suggests that the proposed tax won’t increase a taxpayer’s total tax liability.

While some corporations may be entitled to a reduction in taxes owed to other states, there are many who are not depending on whether or not those state have implemented a “throwback rule.”

The throwback rule is a state statute adopted to cut out corporate tax evasion by ensuring corporations pay taxes on 100 percent of their profits.

A tax offset may be allowed, if the throwback rule is in place, but roughly half the states in the U.S. do not have such a rule, meaning corporations operating in those states would be subject to a tax increase, Brown said.

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“An income tax would be a new way of doing things in Wyoming, and it is important to be clear,” Brown wrote. “This is a new tax with potential unintended consequences and enormous implications.”

Brown followed up by implying the tax could hurt consumers in Wyoming and increase the costs of everyday items, and said the legislature needs to focus on options that are inclusive, fair, equitable, and thoroughly vetted.

“The (WRA) and (WLRA) strongly oppose the discriminatory new tax imposed under this bill,” Brown concluded.

Regardless of the misgivings, legislators have shown a strong support for National Retail Fairness Act which passed the House 44-14 last January.

Reps. Scott Clem and Roy Edwards, both R-Gillette, were among those who voted against the act, which has since been passed on to the Senate and is awaiting introduction.