The Use of Foreign Blocker Corporations by U.S. Nonprofits: Should Blockers Be Blocked?

21 Pages Posted: 28 Oct 2016

See all articles by Norman I. Silber

Norman I. Silber

Hofstra University School of Law; Yale University - Law School

John Wei

Yale University

Date Written: October 27, 2015

Abstract

Many U.S. nonprofits use offshore blocker corporations to avoid paying the debt-financed unrelated business income tax (UBIT). Some law-makers and commentators, however, criticize the practice as abusive. This article takes a closer look at the issue. It concludes that the use of offshore blocker corporations does not undermine the main purposes of the debt-financed UBIT, but that the practice nevertheless raises some serious policy concerns. The article thus recommends that Congress reform this tax: either by eliminating the blocker corporation workaround to the debt-financed UBIT or, alternatively, by repealing the debt-financed UBIT completely but leaving in place or even expanding the debt-financed UBIT’s reporting requirements.

Keywords: UBIT, UBTI, tax haven, blocker, tax

Suggested Citation

Silber, Norman I. and Wei, John, The Use of Foreign Blocker Corporations by U.S. Nonprofits: Should Blockers Be Blocked? (October 27, 2015). Available at SSRN: https://ssrn.com/abstract=2860107 or http://dx.doi.org/10.2139/ssrn.2860107

Norman I. Silber (Contact Author)

Hofstra University School of Law ( email )

121 Hofstra University
Hempstead, NY 11549
United States
516 463 5866 (Phone)
516 463 4962 (Fax)

Yale University - Law School

P.O. Box 208215
New Haven, CT 06520-8215
United States

John Wei

Yale University ( email )

New Haven, CT 06520
United States

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