Suzanne Ross McDowell Testifies Before Senate Finance Committee

On September 26, 2007, the Senate Finance Committee held a hearing on federal tax issues related to offshore reinsurance and the use of offshore entities as investment vehicles for tax-exempt investors and for deferral of some types of compensation.

Suzanne Ross McDowell provided testimony regarding the unrelated debt-financed income rules and investment by tax-exempt organizations in offshore or "blocker" entities. Ms. McDowell provided similar testimony before the House Ways & Means Committee earlier this month. Ms. McDowell said, "Rather than focusing on the use of blocker entities to avoid the unrelated debt-financed income rules, I urge Congress to evaluate the operation of the debt-financed income rules and to significantly restrict the application of these rules. Under current law, there is an exception for real estate transactions of pension funds and universities if the transactions meet certain requirements. This exception, and its requirements, should be used as the model for a broader exception applicable to all types of debt-financed property and available to all tax-exempt organizations."

Ms. McDowell added, "If Congress amends the unrelated debt-financed rules as suggested, tax-exempt investors will no longer be forced to invest offshore and use blocker entities to avoid the unrelated debt-financed income rules on legitimate investments. Further, the current disparate treatment between direct borrowing and leverage, and between different types of tax-exempt investors, will be eliminated."