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Paper Companies’ Bid to Cut Tax Bills Curtailed by IRS

A man enters the Internal Revenue Service (IRS) building in Washington, D.C., U.S., on Friday, May 7, 2010.

A man enters the Internal Revenue Service (IRS) building in Washington, D.C., U.S., on Friday, May 7, 2010.

By
Richard Rubin
Corrected

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.