Massachusetts is facing a budget shortfall that has been estimated at $3 billion for FY 2004, the direct result of the deterioration of the state?s tax base during the last decade. While much of that deterioration can be attributed to personal income tax reductions adopted during the 1990s, declining corporate tax revenue, due in no small part to the widespread use of tax avoidance schemes devised by corporate accountants and lawyers, has contributed as well. The corporate income tax provided just four percent of total state tax revenue in 2002 one half of the share it comprised in 1990, about one third of the share it produced in 1980, and a little more than one quarter of the share it constituted in 1970. In recent weeks, both Governor Romney and the Legislature have effectively acknowledged that corporate tax avoidance has exacerbated the state?s fiscal problems. The deficit reduction bill proposed by the Governor in late January and then approved in slightly different form by the Legislature at the end of February closes several loopholes in the state?s corporate income tax and impairs businesses? ability to shift profits out of Massachusetts in order to avoid their fair share of the state tax burden. This paper examines a more comprehensive approach to closing corporate tax loopholes namely, combined reporting. It describes what combined reporting is, explains the impact it would have in Massachusetts, and discusses the success other states have enjoyed in using combined reporting.