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Chicago – Statement by Dev Gowda, Illinois PIRG (Public Interest Research Group) Advocate, on reports that the $2 billion in fines JPMorgan will pay as part of the largest single-company settlement history will not be tax deductible.
“Illinois PIRG is pleased that, in its settlement with JPMorgan over toxic mortgages that contributed to the financial crisis, the Department of Justice saved taxpayers as much as $700 million by specifically prohibiting JPMorgan from taking a tax deduction for its $2 billion fine.
“Now that the DOJ has protected taxpayers by addressing the tax deductibility of the penalties, Illinois PIRG is calling on the agency to be fully transparent as to why the remainder of the settlement is deductible. If the remaining $11 billion is fully deducted, taxpayers deserve to know why they will end up picking up the tab for almost $4 billion in lost revenue.
“Just two weeks ago, Illinois PIRG and Americans for Tax Fairness presented 160,000 petitions to Attorney General Eric Holder urging him to block this tax deduction. The response was encouraging. By addressing tax-deductibility of the settlement, the DOJ fully acknowledged that taxpayers deserve protection when it comes to settlements for misdeeds against the American people.
“Ordinary citizens don’t deduct their parking tickets or library fines from their taxes. Corporations like JPMorgan shouldn’t be able to deduct their settlements for wrongdoing either. The settlement loophole costs taxpayers billions each year.
“The next step is for Congress to clarify the law so that taxpayers can never be put on the hook for corporate wrongdoing. Bipartisan legislation has been introduced in the Senate by Sens. Jack Reed (D-RI) and Chuck Grassley (R-IA), and in the House by Reps. Welch (D-VT) Gutierrez (D-IL) that goes a long way toward achieving this end.
“If this legislation were already law, then we could rest assured that future settlements for corporate misdeeds wouldn’t become a write-off. “
You can read Illinois 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.
See U.S. PIRG’s recent commentary in the Huffington Post for more information about how JPMorgan Chase could take advantage of the settlement loophole in other pending cases.
U.S. PIRG’s research and analysis of legal settlements has been featured in the New York Times, the Washington Post, and the Associated Press.
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