By Julian Hattem - 11/04/13 03:36 PM EST
Critics from both sides of the aisle are raising their voices to make sure taxpayers aren’t responsible for footing part of JPMorgan Chase's record $13 billion penalty.
Unions, lawmakers and public interest groups say the department should prevent the bank, which is the country’s largest, from writing off a portion of its settlement as a tax deduction. Letting it deduct billions of dollars would penalize consumers who have already been hurt by the financial crisis, they say.
“As your enforcement actions unfold, it is important that the American people—already victimized once by Wall Street’s malfeasance—not be forced to pick up more of the tab,” a group of 74 organizations wrote to Attorney General Eric Holder on Monday.
Also on Monday, Americans for Tax Fairness and the U.S. Public Interest Research Group delivered to the department a petition with 160,000 signatures asking it to specifically prevent JPMorgan from claiming a tax deduction on the penalty.
“A settlement has to mean something or it won’t have the deterrent effect it’s supposed to have,” Sen. Chuck Grassley (R-Iowa) added in a statement. “Federal agencies should do everything they can in negotiating settlements to limit deductions.”
But a significant portion of the penalty is reportedly scheduled to go toward aid for mortgage borrowers, and those payments are tax deductible as part of normal business expenses.
That means that, depending on how the settlement is worded, the bank may be able to write off as much as $4 billion of it as a tax deduction.
The Justice Department could specifically prevent the bank from deducting the portion of its settlement. That's what it did for the $4.5 billion deal with BP over its role in the Gulf oil spill, or as the Securities and Exchange Commission did in a 2010 agreement with Goldman Sachs.
Last week, Sens. Mazie Hirono (D-Hawaii), Bill Nelson (D-Fla.), Elizabeth Warren (D-Mass.), Martin Heinrich (D-N.M.) and Sheldon Whitehouse (D-R.I.) wrote to the department asking for a final agreement that “explicitly prohibits J.P. Morgan Chase from claiming a tax deduction for any part of the settlement amount.”
At the Justice Department’s headquarters on Monday, Attorney General Eric Holder said that negotiations with the bank weren't over
But he said they would conclude shortly, whether the two sides are able to hammer out a deal or not.
"One way or the other we will resolve this soon," Holder said, without elaborating on the timeline. "We'll either have an agreement or we will be filing a lawsuit."
Ben Goad contributed.