Paper Companies’ Bid to Reduce Tax Bills Curtailed in IRS Rule
2015-05-05 15:19:08.701 GMT
By Richard Rubin
(Bloomberg) -- Packaging companies including International
Paper Co. and Rock-Tenn Co. won’t be able to separate their
containerboard operations into tax-advantaged vehicles, under
rules proposed Tuesday by the IRS.
The rules include a narrow definition of the timber-related
activities that can be housed inside a master limited
partnership, which doesn’t pay corporate-level taxes in the U.S.
That language limits paper companies’ ability to mimic the tax
structure used by oil pipelines.
Under the new IRS rule, processing of timber includes
making sawdust, untreated lumber and woodchips. The tax break is
unavailable once chemicals or foreign substances are added and
it’s turned into paper, pulp and plywood.
“This is something that no one really expected,” said
Robert Willens, a tax consultant in New York. “This is the
biggest surprise by far, the narrow definition of processing and
the fact that it certainly by any reading of this it certainly
eliminates the possibility of putting containerboard activities
into an MLP.”
Shares of Rock-Tenn declined as much as 3.37 percent before
reaching $61.63 at 11:04 a.m., down 2.94 percent. Shares of
International Paper declined as much as 4.71 percent, before
reaching $51.55 at 11:05 a.m., down 4.08 percent.
“The proposed regulations are largely consistent with the
rulings the IRS has issued in the past, with some exceptions,”
the IRS said in a statement. “Where the new guidance interprets
the law more narrowly than in the past, Treasury and IRS believe
the regulations more accurately reflect congressional intent.”
Last month, Mark Sutton, the CEO of International Paper,
said the company was analyzing the potential move to an MLP
structure and waiting for the IRS rules.
For Related News and Information:
Top Stories:TOP<GO>
News about the IRS: NI IRS <GO>
U.S. Federal Budget: BUDG <GO>
Tax News: NI TAX <GO>
To contact the reporter on this story:
Richard Rubin in Washington at +1-202-654-7307 or
rrubin12@bloomberg.net
To contact the editors responsible for this story:
Jodi Schneider at +1-202-654-7362 or
jschneider50@bloomberg.net
Laurie Asseo
2015-05-05 15:19:08.701 GMT
By Richard Rubin
(Bloomberg) -- Packaging companies including International
Paper Co. and Rock-Tenn Co. won’t be able to separate their
containerboard operations into tax-advantaged vehicles, under
rules proposed Tuesday by the IRS.
The rules include a narrow definition of the timber-related
activities that can be housed inside a master limited
partnership, which doesn’t pay corporate-level taxes in the U.S.
That language limits paper companies’ ability to mimic the tax
structure used by oil pipelines.
Under the new IRS rule, processing of timber includes
making sawdust, untreated lumber and woodchips. The tax break is
unavailable once chemicals or foreign substances are added and
it’s turned into paper, pulp and plywood.
“This is something that no one really expected,” said
Robert Willens, a tax consultant in New York. “This is the
biggest surprise by far, the narrow definition of processing and
the fact that it certainly by any reading of this it certainly
eliminates the possibility of putting containerboard activities
into an MLP.”
Shares of Rock-Tenn declined as much as 3.37 percent before
reaching $61.63 at 11:04 a.m., down 2.94 percent. Shares of
International Paper declined as much as 4.71 percent, before
reaching $51.55 at 11:05 a.m., down 4.08 percent.
“The proposed regulations are largely consistent with the
rulings the IRS has issued in the past, with some exceptions,”
the IRS said in a statement. “Where the new guidance interprets
the law more narrowly than in the past, Treasury and IRS believe
the regulations more accurately reflect congressional intent.”
Last month, Mark Sutton, the CEO of International Paper,
said the company was analyzing the potential move to an MLP
structure and waiting for the IRS rules.
For Related News and Information:
Top Stories:TOP<GO>
News about the IRS: NI IRS <GO>
U.S. Federal Budget: BUDG <GO>
Tax News: NI TAX <GO>
To contact the reporter on this story:
Richard Rubin in Washington at +1-202-654-7307 or
rrubin12@bloomberg.net
To contact the editors responsible for this story:
Jodi Schneider at +1-202-654-7362 or
jschneider50@bloomberg.net
Laurie Asseo