Anger over potential tax break for JPMorgan deal goes bipartisan

A bipartisan pair of senators wants to bar corporations from using tax breaks to write off portions of penalties paid to the government for bad actions.

Sens. Jack ReedJohn (Jack) Francis ReedOvernight Defense: Senate sides with Trump on military role in Yemen | Dem vets push for new war authorization on Iraq anniversary | General says time isn't 'right' for space corps Senate sides with Trump on providing Saudi military support Overnight Defense: Trump unveils new sanctions against Russia | Key Republicans back VA chief amid controversy | Trump gives boost to military 'space force' MORE (D-R.I.) and Chuck GrassleyCharles (Chuck) Ernest GrassleyGrassley on Trump calling Putin: 'I wouldn't have a conversation with a criminal' Lawmakers zero in on Zuckerberg GOP senator blocking Trump's Intel nominee MORE (R-Iowa) did not name specific firms in unveiling their bill Wednesday, but the legislation appears to be aimed squarely at JPMorgan Chase, which is in the process of finalizing a record settlement with the federal government.

The nation’s largest bank is hammering out a $13 billion settlement with the government over charges of misleading activity leading up to the financial crisis. But lawmakers in both parties have expressed outrage at the notion that the bank might be able to write off billions of dollars of that settlement, and are ramping up pressure to try and stop it.

By co-sponsoring the bill, Grassley became the first Republican to openly criticize the potential tax break, as several Democrats and left-leaning groups have already cried foul.

“A penalty should be meaningful or it won’t have the deterrent effect it’s supposed to have,” he said in a statement.  “This issue comes up regularly, and this bill would make deductibility clear going forward.”

The bill introduced by Reed and Grassley would close what they argue is a tax code loophole. Corporations that settle with the government over charges of illegal activity cannot deduct the cost of penalties paid directly to the government. But the current code does allow them to write off additional sums paid out under the settlement, but not directly to federal agencies. For example, any amounts JPMorgan is ordered to pay to damaged investors or struggling homeowners would technically be deductible.

A portion of the settlement already finalized, a $4 billion deal with the Federal Housing Finance Agency, also appears to be deductible, as the bank agreed to paid the sums to housing giants Fannie Mae and Freddie Mac after facing charges of misleading them when selling mortgage-backed securities.

Earlier this month, a pair of liberal advocacy groups presented the Justice Department with more than 160,000 petitions urging them to bar any tax breaks for the bank. And Reps. Peter WelchPeter Francis WelchSo-called ‘Dem’ ethanol bill has it all wrong Overnight Regulation: Trump officials block GOP governor from skirting ObamaCare rules | House eases pollution rules for some coal plants | Senate vote on Dodd-Frank changes delayed Dem bill would overhaul ethanol mandate MORE (D-Vt.) and Luis Gutiérrez (D-Ill.) have introduced legislation similar to the Senate bill, barring companies from deducting the costs of settlements struck on federal charges.