In a new discovery, little-known U.S. telecom company Windstream (WIN) found a new strategy to shield billions of dollars from tax collectors. The Internal Revenue Service cleared the company to reclassify most of its copper and fiber-optic lines as real estate, potentially allowing it to cut millions of dollars from its annual tax bill. Per The Wall Street Journal:
As it stands, these lines can technically be reclassified as real estate.
Asked about real estate, few people would intuitively come up with phone lines. But in legal terms, the fit is reasonably clear, said Steven Rosenthal, a senior fellow at the nonpartisan Tax Policy Center. Real estate basically involves income-earning assets that can't be moved. Still, he said, the deal shows how the definition of real-estate investment trusts has expanded at the expense of the government's revenue collection from companies.
However, not everyone is in favor of this strategic loophole.
President Barack Obama jumped into the debate last week, calling such relocations "wrong" and urging legislation to halt them. The companies argue that they are following the law and have criticized the relatively high 35% U.S. corporate tax rate and the policy of levying taxes on income earned overseas.