IRS gave Citigroup quiet exemption

Jeremy Hobson Dec 16, 2009
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IRS gave Citigroup quiet exemption

Jeremy Hobson Dec 16, 2009
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TEXT OF INTERVIEW

Bill Radke: It was just a couple days ago Citigroup said it’s ready to pay back its TARP money. And some analysts were warning, well Citi isn’t really ready to do that — it just didn’t want to be the last big bank with government bailout money. Well this morning, the Washington Post reports there may be more to the story than we thought. Marketplace’s Jeremy Hobson joins us live from New York. OK, Jeremy, what more is there to the story?

Jeremy Hobson: Well Bill, the Post reports that last Friday, the IRS quietly exempted Citigroup from some rules on tax breaks, and the point was to allow Citi and other firms that are partially owned by the government to get billions of dollars in tax breaks going forward. This is thanks to a rule that allows a company to use past losses as a reason it shouldn’t have to pay taxes on future profits. And since Citi has lost about $38 billion, it would potentially be able to skip the bill on that much going forward.

Radke: And so tell us about this quiet exemption the IRS gave?

Hobson: Well the thing is you don’t get the tax break if there’s a change in ownership. And remember, the government is about to sell its 34 percent stake in Citi, so that could be seen as a change in ownership. What the IRS did was say, no that’s not a change in ownership, end of story, keep your tax break, Citigroup.

Radke: Mmhmm, so Citigroup is paying back TARP, but still sort of getting a bailout?

Hobson: You could say that. The government officials, however, tell the Post this could be good for the taxpayer in the end, because it may keep the price of Citi’s stock higher as the government tries to sell its stake, Bill.

Radke: Marketplace’s Jeremy Hobson with us live from New York City. Thanks, Jeremy.

Hobson: Thank you.

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