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Citi Wins Massive Tax Break

Firm will use dodged fed taxes to repay fed bailout bucks

By Rob Quinn, Newser Staff

Posted Dec 16, 2009 3:11 AM CST | Updated Dec 16, 2009 5:45 AM CST

(Newser) – The government will be collecting billions of dollars less in taxes from Citigroup as part of Citigroup's deal to pay back federal bailout money. The IRS has granted an exemption from tax rules relating to Citigroup and other companies partially owned by the government. The future taxes being forfeited will likely amount to several billion dollars, accounting experts tell the Washington Post.

Without the exemption, Citigroup would have lost billions of dollars in tax exemptions when the Treasury sold off its stake in the bank. A Treasury spokeswoman insists that the rule Citigroup is being exempted from was never meant to apply to this "unprecedented situation." The exemption means the Treasury will likely get a higher price for its Citi shares, although experts believe the tax loss will erase any profit it makes on the sale.

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The American flag and the Citigroup flag fly together outside Citigoup's headquarters in New York. (AP Photo/Mary Altaffer)

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I've been doing taxes for almost 40 years, and I've never seen anything like this, where the IRS and Treasury acted unilaterally on so many fronts. - Tax accounting expert Robert Willens

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Citi Wins Massive Tax Break