ataxingmatter Linda Beale makes a statement:
The International Banking Association wants more tax goodies from Uncle Sam–for branches of foreign banks. The idea seems to be that anything that has been done for domestic banks ought to be available to them too–even when it is Treasury’s decision not to enforce a clear statement of Congress in section 382 against domestic banks that acquire loser banks. They insist that Treasury shouldn’t enforce the law in regards to foreign banks, either, so that they can save even more in their tax payments to the US.
The House already has a bill out to undo (though only prospectively) the Treasury override of Congressional law, sponsored by Lloyd Doggett, the nemesis of the corporate anti-tax lobbying group because of his dogged (no pun intended) support of a bill to codify the economic substance act. See this release. Senator Bernie Sanders’ bill would apply retroactively, possibly affecting some of the deals done to garner the benefit, like Wells Fargo’s takeover of Wachovia or PNC’s of another loser bank. See, e.g., Lawmakers Try to End Tax Break on Bank Mergers, DealBook, Nov. 24, 2008.
I think the Notice should be made retroactively null and void, as in Sanders’ bill (rather than Doggett’s). But of course all the corporate lobbyists will holler that the world will come tumbling down if these deals aren’t allowed to garner the tax benefits that they expected because of Treasury’s invalid notice. Congress should ignore that. Corporate lobbyists are paid to whine and cry about the awful things that will happen to their patrons if Congress acts responsibly. Congress, on the other hand, is paid to act responsibly. And, if fact, these deals won’t necessarily fall through without the section 382 tax break–Wells Fargo even claims in public documents that the tax breaks were of little consequence in its decision. See Another Bank Deal Uses Treasury’s Tax Break, DealBook, Dec. 4, 2008.
The longer Congress waits to act, the more deals there will be, and the more the lobbyists will whine about “deal expectations” and dire consequences. The DealBook piece above indicates a deal between Capitol One and Chevy Chase Bank, where the TARP assets to which Capita One will gain access exceed the cash it will spend to get the bank, and then there are the tax losses–with the 2008-83 tax break–thrown in as a special extra sweetener. Nutto. Treasury’s TARP program is basically serving the same greedy interests that speculated us into the mess we’re in, and not doing much at all for ordinary taxpayers.
Whether or not the House and Senate act soon to undo the damage Treasury did with Notice 2008-83, Treasury should not take its action one step further. There is no reason at all to legitimize telling foreign banks that they too can disregard the law. At that rate, Treasury might as well decide to “enact” whatever tax policy it wants, whether Congress has done so or not. How about a freeze on all corporate taxes, since the Bush Administration professes to believe that such tax cuts are a good antidote to any ill. Or a zero percent tax on all capital gains (not just the first $32,550 for those who have no other income, which is scandalous enough in itself), since most of the Bush administration professes to believe that zero taxation on capital income would be good for the economy. If Treasury can simply decide not to enforce any particular law against any particular taxpayer, we are no longer a democracy governed by the rule of law. This is the same point that many have been making throughout this administration about the White House preference for “signing statements”–there represent a similar statement of executive intransigence and intention not to comply with the constitutional role of executing the laws enacted by Congress.