New legislation would close tax loophole, shut down $600 million Verizon windfall

A new piece of legislation has the potential to shut down a $600 million corporate tax windfall in the Verizon-Frontier deal - and protect consumers, workers, and communities.

Rep. Paul Hodes (D-NH), with co-sponsors Rep. Louise Slaughter (D-NY) and Rep. Alan Mollohan (D-WV), will introduce legislation this week that would eliminate the Reverse Morris Trust (RMT), the tax loophole that allows large companies to offload its assets onto a smaller one. Typically, the new company gets loaded with debt, and can't provide quality service to customers.

CWA hosted a teleconference on the proposed bill with Rep. Hodes, Rep. Mollohan, CWA President Larry Cohen, IBEW President Ed Hill, and Ben Scott from Free Press.

Verizon has previously taken advantage of the RMT to sell its landlines to FairPoint Communications in 2007. Since that time, customer service has plummeted, and the smaller company is now asking regulators to back off broadband commitments. FairPoint filed for bankruptcy in October. Verizon, in turn, avoided hundreds of millions of dollars in taxes.

Rep. Hodes, whose New Hampshire constituents were burned by the FairPoint selloff, intends to stop the cycle from repeating. "Now more than ever, our corporations should be paying their fair share in taxes," Hodes said. "By closing this loophole, we can prevent corporations from taking advantage of the system and protect consumers."

"The Reverse Morris tax loophole tax means the government is spending hundreds of millions of dollars to subsidize large companies to exit the business of investing in our network," said CWAs Cohen. "That money would be better spent on broadband build-out."

Rep. Mollohan's West Virginian constituents would be directly affected by the Frontier deal. Mollohan pointed out that Verizon would avoid $600 million with the RMT - meanwhile, West Virginia ranks in the bottom five states for broadband service.

"This money could bring our states telecom infrastructure to parity with the rest of the country," he said, "Instead, it's lining the pockets of one of the most profitable companies in the nation."

CWA organized a rally against the Verizon-Frontier deal in Charleston, West Virginia. West Virginia regulators begin hearings on the deal this week. CWA and the IBEW represent more than 10,000 Verizon workers in the 14 states affected by this deal.

CWA and IBEW also blasted the deal before the Ohio Public Utilities Commission.

Lawmakers Aim to Stop Verizon Sale to Frontier (PC World)

Proposed Verizon-Frontier merger is bad for consumers (Speed Matters)

CWA rallies against Frontier Verizon sale (The Charleston Gazette)

Risky Verizon-Frontier merger hinges on tax break (