Reps. Hodes, Slaughter Working To Close RMT Tax Loophole

Reps. Paul Hodes, D-NH, and Louise Slaughter, D-NY, are asking their House colleagues to close the Reverse Morris Trust (RMT) tax loophole, a massive corporate giveaway that threatens consumers and workers alike. RMT is a tax-avoidance technique that companies such as Verizon use to sell off unwanted assets without paying taxes on their gains.

State regulators and legislators in several states currently are warily eyeing a proposed $8.6 billion landline deal, which would allow under-financed Frontier Communications to acquire from Verizon 4.8 million landlines in 14 states.

“One recent Reverse Morris Trust transaction provides a prime example of the dangers of this loophole,” Hodes and Slaughter write in a “Dear Colleague” letter. “Despite serious concerns from the public and members of the New Hampshire, Maine and Vermont Congressional delegation, Verizon used the Reverse Morris Trust to avoid taxes on a similar transaction with FairPoint Communications in the three New England states two years ago. The result has been unprecedented consumer complaints being lodged with state regulators. Last October, FairPoint declared bankruptcy, leaving uncertainty for the future of telephone service across all three states, and potentially putting at risk the compensation and benefits of thousands of employees.”

We at CWA believe it is ridiculous to use federal tax dollars to underwrite the sale of telephone lines to a financially weaker company which threatens our job security and leaves customers worse than before. Instead, federal tax dollars should be used to finance a world class broadband network.