Closing Corporate Loopholes

While official Washington was focused on congressional debate over the Wall Street bailout last September, the Treasury Department quietly changed an obscure corporate tax rule. The under-the-radar maneuver produced a massive windfall to American banks. Sen. Bernie Sanders will introduce legislation to close the loophole. In a letter to colleagues, he wrote, "the Bush administration is changing long-established tax code interpretations resulting in an up to $140 billion tax break for the bank

While official Washington was focused on congressional debate over the Wall Street bailout last September, the Treasury Department quietly changed an obscure corporate tax rule. The under-the-radar maneuver produced a massive windfall to American banks. Sen. Bernie Sanders will introduce legislation to close the loophole. In a letter to colleagues, he wrote, "the Bush administration is changing long-established tax code interpretations resulting in an up to $140 billion tax break for the banking industry." The IRS changed a rule Congress created in 1986 to prevent large, healthy companies from merging with unhealthy ones as a way of avoiding tax liability. Many tax lawyers have questioned whether this change is even legal. Asked about it by the Washington Post, George Yin, the former chief of staff of the Joint Committee on Taxation, said: "Did the Treasury Department have the authority to do this? I think almost every tax expert would agree that the answer is no. They basically repealed a 22-year-old law that Congress passed as a backdoor way of providing aid to banks."

The legislation would rescind Treasury Notice 2008-83, which "would provide an estimated $140 billion windfall to healthy banks who take-over weaker financial institutions," according Sanders letter to colleagues.

To read the Washington Post article, click here.

To read Sanders' legislation, click here.

To read the complete Dear Colleague letter, click here.