Arguing that a tax loophole used by Verizon Communications in its 2007 sale of New England landlines to Fairpoint Communications saddled Fairpoint with enough debt to force Fairpoint into bankruptcy, Representative Paul Hodes (D-NH) introduced legislation that would repeal the Reverse Morris Trust provisions used by Verizon and other companies to avoid payment of capital gains taxes that stem from corporate mergers. Signed into law by President Clinton in 1997, the Reverse Morris Trust law exempts sellers in a merger transaction from paying capital gains taxes if shareholders from the selling firm retain a majority of shares in the post-merger entity. Although the Reverse Morris Trust enabled Verizon to save an estimated $300 million in taxes that otherwise would have accrued from the Fairpoint transaction, the deal left Fairpoint with a debt load of $1.7 billion. Fairpoint sought Chapter 11 bankruptcy protection last October. Critics have voiced similar concerns about Verizon’s pending sale of rural landlines in West Virginia and 13 other states to Frontier Communications. Verizon is expected to save $600 million in taxes through that transaction. While acknowledging that a repeal of the Reverse Morris Trust law could bring “significant” amounts of revenue to the U.S. government, Hodes stressed that his motive in introducing the bill is to promote consumer fairness, as he maintained: “saddling small companies with a huge amount of debt creates real problems for consumers.” Noting that the Reverse Morris Trust has “nothing to do with the protection of phone service and poses no threat to phone customers,” a Verizon spokesman replied, “there is no public policy reason to change this law.”