Legislation Follows on the Heels of JPMorgan Chase Tax Deduction of Up to $11 Billion in $13 Billion Settlement with Federal Government
WASHINGTON – Americans for Tax Fairness (ATF), a coalition of 325 national and state groups, U.S. Public Interest Research Group, Public Citizen, Americans for Financial Reform and the Coalition for Sensible Safeguards today announced that they are calling on Members of the U.S. Senate to support bipartisan legislation to prevent companies from claiming tax deductions for settlements made to avoid prosecution for violations of the law. The three groups, which include several hundred national and state organizations, sent a letter to lawmakers requesting that they co-sponsor the Government Settlement Transparency and Reform Act (S. 1654).
The legislation, introduced Nov. 5 by Senators Jack Reed (D-RI) and Chuck Grassley (R-IA), has already attracted additional bipartisan support from cosponsors Sens. John McCain (R-AZ), Lisa Murkowski (R-AK), Bill Nelson (D-FL) and Elizabeth Warren (D-MA).
The issue of whether corporations should be allowed to claim tax deductions for settlements received significant attention in late October, when it was reported that JPMorgan Chase planned to write off a large portion of a record $13 billion settlement that was being finalized with the U.S. Department of Justice. The settlement was negotiated as the result of allegations that JPMorgan had deliberately misled investors when it sold them mortgage-backed securities containing “toxic” assets.
The current statute prohibits deducting the cost of “any fine or penalty paid to a government for the violation of any law” but it does not prohibit deducting out-of-court settlements. Because current law does not prevent such deductions, JPMorgan could write off $11 billion of the $13 billion settlement, yielding almost $4 billion in tax windfalls that would ultimately be paid for by the public.
In the joint letter to the Senators, the groups describe the current situation in which “corporations routinely write off settlement payments for misdeeds as a regular business expense, forcing other taxpayers to subsidize a part of their wrongdoing and blunting the deterrent effect of the penalty.”
When the JPMorgan story was first reported, Americans for Tax Fairness, U.S. PIRG, and 72 other national and state organizations signed a letter to Attorney General Eric Holder requesting that he specifically bar JPMorgan from deducting any portion of the settlement. The organizations organized a petition which drew more than 160,000 co-signers. ATF and U.S. PIRG announced the letter and the petitions at a press conference Nov. 4 at the Department of Justice.
Americans for Tax Fairness is a diverse coalition of more than 350 national and state organizations that collectively represent tens of millions of members. The organization was formed on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. ATF is playing a central role in Washington and in the states on federal tax-reform issues.
For press inquiries, contact:
Harry Gural, Communications Director