US Forgoes Billions in Tax on Citi
The U.S. government "quietly" agreed not to collect billions of dollars in potential taxes from Citigroup as part of its deal to allow the bank to repay its taxpayer bailout, The Washington Post reported.
The Internal Revenue Service issued a notice on Friday that extends the benefit to Citi and other companies in which the government owns a stake, the Post reported.
A Citigroup spokesman declined to comment.
The Washington Post said the precise value of the IRS ruling depends on Citigroup's future profitability and other factors, but the newspaper cited two accounting experts as estimating Citi would save at least several billion dollars.
A Treasury spokesperson told CNBC: "This rule was designed to stop corporate raiders from using shell losses to evade taxes, and was never intended to address the unprecedented situation where the government owned share in banks."
At the end of the third quarter, Citi said its past losses were valued at about $38 billion, allowing it to avoid taxes on its next $38 billion in profits, but under normal IRS rules, a change in control would have sharply reduced the amount the company could shelter from taxes, the newspaper said.
Under a deal announced Monday, Citi will sell $17 billion of common stock and about $3.5 billion of securities that turn into common shares in three years, helping the bank repay the bailout.
The government will also stop guaranteeing a pool of toxic assets against excessive losses, and will sell the nearly $30 billion in shares it owns.