- The Washington Times - Monday, October 4, 2004

ANNAPOLIS (AP) — A proposal from state economic-development officials to weaken a new law that closed a corporate-tax loophole has drawn sharp criticism from Comptroller William Donald Schaefer.

“This is a bad idea, and in the strongest possible terms I urge you and your administration not to introduce or support it,” Mr. Schaefer said in a letter sent last week to Gov. Robert L. Ehrlich Jr.

The comptroller was responding to a proposal from the Department of Business and Economic Development to make several changes to the law that was passed by the legislature last spring. Mr. Ehrlich was urged by business leaders to veto the bill but allowed it to become law without his signature.

The law closed the so-called Delaware holding-company loophole that allowed corporations to shield some or all of their Maryland income from the state corporate income tax by shifting profits to holding companies outside Maryland, primarily in Delaware.

Aris Melissaratos, state business and economic development secretary, said his agency’s proposal is “still a work in progress.”

“We’ll keep working to get a fair agreement out of all the parties involved, including the comptroller,” he said.

Mr. Schaefer took issue with the department’s statement that the new law is “anti-business and would make Maryland the least-desirable location in the country to set up or operate a multistate corporation.”

“Nothing could be further from the truth,” the letter said. The comptroller said the state’s corporate income tax law is very favorable to businesses with many “business-friendly qualities.”

But Mr. Melissaratos said he is hearing from business leaders that “New Jersey is the worst and we may be No. 2” with regard to the Delaware holding-company law.

Sean Dobson, deputy director of the lobbying group Progressive Maryland, said the changes proposed by economic-development officials “would put us all the way back to square one again and send the terrible message that Maryland endorses tax cheating.”

“While siding with lawbreakers, [the governor] is declaring war on the comptroller and the General Assembly, trying to undo all the hard work they did last year to close that loophole,” he said.

Shareese DeLeaver, a spokeswoman for the governor, said he has not made up his mind whether to support the proposal from his economic-development department.

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