Both chambers of Maine’s legislature gave initial approval this week to a bill that adds the state to a growing list of those seeking to recover revenue lost to offshore tax havens.

The bill, which has to pass each chamber once again, is expected to recover some $10 million annually, according to Senate Democrats. The measure passed the Senate on Wednesday after the House approved it Tuesday. The bill is relatively simple: It requires corporations to report income from a list of 38 known offshore tax havens, a portion of which would be taxed by the state.

A decade ago, Montana became the first state to implement such a policy, according to a January report from U.S. PIRG, a consumer-interest group. Last summer, Oregon implemented a similar policy. Corporations are required to report profits of their subsidiaries in 23 states, but only Montana and Oregon close the so-called “water’s edge” loophole by declaring lists of known tax havens from which taxes can be recovered. The Maine bill would do the same.

In 2010, Montana recovered $7.2 million, while state analysts expect Oregon to recover $18 million this year. The problem costs states about $1 billion, according to the PIRG report. The nation loses anywhere from 10 to 90 times as much annually in federal taxes, according to a report from the nonpartisan Congressional Research Service.

Policies like the ones in place in Montana and Oregon (and, potentially soon in Maine) involve three basic steps, as we’ve reported in the past:

  1. Identify known tax havens. As it stands, many states only require businesses to report profits up to the “water’s edge” — or within the United States. To fix that, states would first need to identify known tax havens. Fortunately, several groups, including the National Bureau of Economic Research and Internal Revenue Service, already do this. States could easily rely on these lists.
  2. Make businesses report income of subsidiaries in those havens. The federal government already requires this, so it wouldn’t be much of a stretch for states to add this mandate, US PIRG argues in the report.
  3. Pick a formula to calculate how much of that income should be taxed. States don’t want to tax national corporations 50 times on all income, so they’ve devised formulas to calculate what share of a multi-state business’s income can fairly be taxed. These same formulas could be used to calculate the same for foreign income.

In its January report, U.S. PIRG calculated how much in revenues a number of states could recover. Its estimate for Maine was $7.2 million, but state Senate Democrats peg the expected amount of potential revenues at $10 million.

State tax revenue  had recovered from the recession during the second quarter of last year, but revenue  in Maine and Montana is still more than 3 percent below its recession peak. Revenue in Oregon has fully recovered and is more than 1.5 percent above the peak.