Washington, DC – Today, U.S. PIRG and Americans for Tax Fairness presented over 160,000 signatures to the Department of Justice, calling for the agency to prohibit JPMorgan Chase from reaping a multi-billion dollar tax deduction on its expected record-breaking settlement over its sale of crisis-era mortgage securities.
Last month, reports emerged that the expected $13 billion settlement could be tax deductible. The bank separately settled with the Federal Housing Finance Agency last week, but a settlement for the bulk of the charges for mortgage lending abuses is reported to be finalized shortly with the Department of Justice. Unless the Department of Justice prevents it, the expected $9 billion in remaining settlements could be tax deductible – forcing taxpayers to pick up the tab for over $3 billion.
“A settlement has to mean something or it won’t have the deterrent effect it’s supposed to have,” said U.S. Sen. Chuck Grassley (R-IA). “Federal agencies should do everything they can in negotiating settlements to limit deductions.”
“Taxpayers should not be subsidizing more than $3 billion of JPMorgan’s penalties at a time when federal priorities like education, clean energy, infrastructure and other job creating investments are facing budget cuts. This settlement has to be meaningful if it is going to deter future abuses. I join the 150,000 people today who are urging Attorney General Holder to stand firm and fight for taxpayers and middle class families,” said Senator Mazie K. Hirono (D-HI), who led an effort in the Senate to ensure the Justice Department reaches a deal with JPMorgan that is fair to taxpayers.
“In its effort to protect consumers from financial crimes, the Justice Department should also protect taxpayers from getting stuck with the costs of JPMorgan’s mortgage misdeeds,” said Francisco Enriquez of the U.S. Public Interest Research Group (U.S.PIRG). “The DOJ should include language in its settlement barring the bank from deducting the cost of the settlement as a tax write off.”
A year ago, the Justice Department barred the oil giant BP from deducting its $4.5 billion settlement with the agency for the Gulf oil spill, preventing a potential $1.7 billion tax break for the company. Unfortunately, BP had already received a $10 billion tax windfall from earlier payments from the spill.
“Attorney General Holder has the power to stop this gross miscarriage of justice. The American people were already victimized once by Wall Street’s malfeasance. They should not be victimized again by having to pick up more of the tab,” said Frank Clemente, Campaign Manager for Americans for Tax Fairness. “The Obama Administration should be helping homeowners with underwater mortgages, not be giving tax breaks to the banks that put them there,” he added.
MoveOn.org partnered with U.S. PIRG to help collect a substantial portion of the 160,000 petition signatures.
On Tuesday, five U.S. Senators sent a letter to the Attorney General urging the Justice Department to explicitly prohibit the tax deductibility of settlement payments for harming the public.
In addition to the 160,000 petitions and the Senators’ letter, 74 groups sent a letter to the DOJ, urging the agency to prevent JPMorgan from deducting a settlement.
The prospect of a potential tax deduction to settle charges of mortgage financing abuses has been widely reported in the media and ridiculed on the Daily Show.
“For every dollar that JPMorgan claims in tax deductions for its wrongdoing, the public must pick up the tab in the form of cuts to public programs, higher taxes or higher government debt,” said Enriquez. “After the damage to the economy wrought by JPMorgan’s abusive mortgage practices, giving them a tax deduction for it would add insult to injury.”
You can read U.S. PIRG’s research report on the tax implications of legal settlements, “Subsidizing Bad Behavior: How Corporate Legal Settlements for Harming the Public Become Lucrative Tax Write-Offs.”