For first time in two decades major financial institutions admit to criminal acts, agree to pay more than $5 billion in penalties...but will they claim the write off?
This week the Department of Justice and state officials announced that five Wall Street banks will pay $5.6 billion for criminal activity that manipulated the currency market. In response, Rep. Peter Welch (D-VT) and Rep. Luis V. Gutiérrez (D-IL) reintroduced the Stop Deducting Damages Act of 2015 (H.R. 2486) to ensure that parties in this case and in any future settlements cannot shift the burden of their crimes to the taxpayer.
Under current law, a corporation required to pay damages is typically permitted to write off the portion of the settlement not paid directly to the government as a penalty or fine for a violation of the law because damages are classified as an ordinary business expense. The Welch-Gutiérrez legislation would ensure that no corporation, including the five major banks that pleaded guilty to felony charges this week, could deduct any portion of their penalties or settlement under the tax code.
The banks involved this week are: Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG. This case is believed to be the first time a major financial institution has pleaded guilty to criminal charges in over two decades.
"Allowing a financial institution found guilty of criminal activity and harming consumers the benefit of writing off related penalties is offensive and adds insult to injury to the taxpayer," said Welch. "This legislation is a no brainer and Congress should act on it promptly to protect the American taxpayer."
"Either they did wrong and they should pay a price, or not, but you can't have it both ways," said Rep. Gutiérrez. "No company should be able to claim a tax benefit for committing crimes against consumers or the government. I commend the Attorney General and regulators for ensuring that justice is served. Now we must go one step further and ensure that no American taxpayer will shoulder the penalty for these crimes."
Rep. Peter Welch represents Vermont's At-Large District, and is a Member of the House Oversight and Government Reform Committee and the Energy and Commerce Committee. He is also a Chief Deputy Whip for the House Democratic Caucus.
Rep. Luis V. Gutiérrez represents the Fourth District of Illinois, and is currently on leave from the House Financial Services Committee. He is a Member of the House Permanent Select Committee on Intelligence, is a Member of the Judiciary Committee and the Subcommittee on Immigration and Border Security, and is the Co-chair of the Immigration Task Force of the Congressional Hispanic Caucus.