By Kang Liu
Rep. Peter Welch, D-Vt., says he's upset over suggestions that a majority of JPMorgan's reported $13 billion settlement with the U.S. government could be tax-deductible.
Welch is circulating a letter to send to JPMorgan CEO James Dimon, asking the company "to accept full responsibility for the full payment of any fine related to its conduct in this matter."
JPMorgan reached a tentative deal last week with the U.S. Justice Department. If the deal is finalized, JPMorgan would pay a record $13 billion to settle a number of allegations concerning mortgage loans that the financial institution sold to federal agencies before the 2008 crash, according to published reports.
However, Welch says he has received news reports indicating that, apart from a $2 billion penalty paid to the government, the remaining $11 billion to be directed to homeowners and private investors could be considered a business expense. Under current law, the Internal Tax Code of 1986, that portion of the payment could be deducted from JPMorgan's taxes.
At a 38 percent tax rate, it could save JPMorgan as much as $4.18 billion, Reuters reported.
"Should a wrongdoer whose conduct caused harm to the taxpayer ask the taxpayer to help pay the fine for the wrong done? We think not," Welch says in the draft letter to Dimon.
Meanwhile, Welch is introducing an amendment to the Internal Tax Code of 1986 that would prevent future tax deductions in conjunction with financial settlements similar to the JPMorgan one.
"The taxpayer should not, therefore, be required to contribute a nickel towards the fines imposed for conduct that got America into this mess in the first place," Welch says in the letter.
Welch is also among 75 co-sponsors of a bill introduced by Rep. Marcy Kaptur, D-Ohio, that aims to resurrect the wall that existed between investment and commercial banking activities before the repeal of the Glass-Steagall Act in 1999.