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

Silber Norman I. () and Wei John C. ()
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Silber Norman I.: Maurice A. Deane School of Law, Hofstra University Senior Research Scholar, Yale University
Wei John C.: Yale, CT, USA

Nonprofit Policy Forum, 2015, vol. 6, issue 3, 353-370

Abstract: Many U.S. nonprofits use offshore blocker corporations to avoid paying the debt-financed unrelated business income tax (UBIT). Some lawmakers 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 (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1515/npf-2015-0010

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