Not everyone is as thrilled about Citigroup’s new tax breaks as, well, Citi.
Former presidential contender Rep. Dennis J. Kucinich (D-OH) counts himself of as one of those who has concerns about the Treasury Department’s decision to change the law so that Citigroup could keep billions of dollars in tax breaks. He went so far as to call it an “outrage” during a hearing yesterday. Kucinich has said that he intends to ask Treasury to defend its actions.
The Internal Revenue Service issued “guidance” last Friday in the way of a Rev Proc that would allow Citigroup to keep tax breaks that they would otherwise lose as they get out of TARP.
The old rule prohibited the use of losses if a company changed hands. But the Treasury has clarified that the government stake in the companies won’t affect their ownership for purposes of qualifying under the law. Hey – it’s just the government right? I mean, they totally don’t count.
Treasury said – wait for it – that without the break, Citi could not afford the loss.
Whew. Cause here I was worried that banks were doing things that they couldn’t afford. Like buying lots of toxic assets. And making risky loans. But that’s sooooo 2008.
This year, Treasury is rushing to their aid. With a wave of their magic Rev Proc wand, voila, tax breaks!
Kucinich said that the real losers in this race were the taxpayers:
This does a disservice to the taxpayers, it does not help the taxpayers recover the value of their investment and it raises troubling questions about how the administration is negotiating its role.
Kucinich also wants to know whether Treasury can do what it did in this case. I’ve wondered the same thing. This isn’t “guidance” so far as I’m concerned – it’s a massive shift in the law. And Treasury has been doing a lot of this lately. I’ve gone so far as to say that I think the government may be planning more tweaks since the speed with which banks are hurtling towards repayment is a bit suspect. But hey, that’s just me.