Verizon Sale to Frontier Communications

 

Verizon Sale to Frontier Places Consumers, Workers and Communities at Risk…

Proposed Sale to Frontier Communications Takes Advantage of Obscure, Reverse Morris Trust Loophole

 

Congress Should Repeal This Tax Loophole!

Verizon's proposed sell off of its wirelines in 14 states to Frontier is all about corporate greed.  Frontier will give Verizon shareholders $5.3 billion in Frontier stock and give Verizon $3.3 billion in cash.  The deal is structured to take advantage of the Reverse Morris Trust tax loophole so that Verizon will not have to pay any taxes on the $3.3 billion it gets. 

·          Verizon has a bad track record with similar sales. 
FairPoint (the company that bought Verizon's northern New England wirelines) is floundering as it tries to integrate operations.  It is choking on the debt it incurred to finance the transaction.  Hawaiian Telcom, the company to which Verizon sold its Hawaii operations in 2005, filed for bankruptcy.  And Idearc, the yellow pages company that Verizon spun off, has also filed for bankruptcy. 

·        Frontier's ability to provide high-speed Internet is questionable. 
High speed broadband is now an economic necessity enabling such activities as economic development, telemedicine, e-commerce and interactive distance learning.  These benefits require truly high-speed Internet access.  However, the operations that Verizon is selling are woefully lacking in slow copper-based technologies such as DSL, much less high-capacity fiber networks.  The Frontier transaction will not bring the impacted states any closer to the high speeds needed to take full advantage of the telecommunications super highway.

Verizon will avoid paying any taxes on the $3.3 billion it will get from Frontier by using the "Reverse Morris Trust" tax loophole. 

This "loophole" allows businesses to reorganize and sell assets without having to pay taxes.  Thus, taxpayers are subsidizing this transaction at a time when money is needed to expand broadband and expand jobs.  Verizon only picked Frontier in order to qualify for the tax loophole.  Verizon could only obtain "tax free" treatment by selling its operations to a smaller company – no matter the consequences to consumers, workers or communities.

Verizon could only obtain "tax free" treatment by selling its operations to a smaller company – no matter the consequences to consumers, workers or communities.

In tough times with soaring budget deficits we need to close corporate tax loopholes!