House Votes to Ban Verizon Tax Loophole

Thanks to CWA's successful Verizon Strategic Industry Fund campaign, the House of Representatives voted to close the Reverse Morris Trust tax loophole that has allowed Verizon and other companies to spin off parts of their operations tax-free.

The tax loophole ban was sponsored by Rep. Paul Hodes (D-N.H.) and included co-sponsors Reps. Alan Mollohan and Nick Rahall (D-WVa.) and Louise M. Slaughter (D-N.Y.).

Verizon took advantage of this tax loophole to sell landlines to FairPoint Communications, a much smaller company that just couldn't meet service requirements and later declared bankruptcy, costing jobs and resulting in deteriorating customer service.

The Small Business and Infrastructure Jobs Act, passed by a vote of 246-178, now heads to the Senate. Verizon wants to sell 4.8 million landlines in 14 states to Frontier Communications, but Frontier will be forced to borrow $3.3 billion to pay for the deal. Verizon would realize $600 million in tax savings.

"The Reserve Morris Trust was designed by Wall Street, not West Virginians," said District 2 Vice President Ron Collins. "We're happy that Congress shares our view that the Reverse Morris Trust is a tax break for corporations, not a job-creating tool. Without this tax provision, I don't believe Verizon would be so eager to sell to Frontier."