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Lawmakers write Paulson about bank loss tax breaks

December 5, 2008

Lloyd Doggett D-Texas
A couple of weeks ago, Texas Congressman Lloyd Doggett introduced legislation to roll back some of the tax breaks given banks in connection with financial bailout activities.

However, given that there realistically is no way the measure will make it into law with so few days remaining in the 110th Congress, Doggett and several of his colleagues have decided to appeal directly to Treasury Secretary Henry Paulson.

Bill would limit tax advantage of losses: Specifically, the Lone Star lawmaker is concerned about IRS Notice 2008-83, which was ordered by Paulson and which changed application of Internal Revenue Code Section 382 to allow some financial institutions to deduct
unlimited losses from loans, bad debt, or additions to loss reserves
that are from a bank acquired in a merger or takeover.
about

As blogged here, Doggett and several of his fellow Democrats on the tax-writing Ways and
Means Committee say H.R. 7300 "sets
reasonable boundaries" on "Treasury's back-door giveaway" to banks. The notice, argue the Representatives, effectively amounts to a tax break worth more than
$100 billion.

Follow-up letter to Treasury: On Thursday, Doggett and eight other Ways and Means members urged Paulson to reject requests to further expand the Section 382 loophole. Soon after Notice 2008-83 was published on Sept. 30, the Institute of
International Bankers requested that Treasury also make this option available to foreign banks.

"We strongly believe that you have already overstepped your authority in issuing the original guidance and urge you not to compound this mistake by further widening this illegal loophole," wrote Doggett. "At a time when we should be working together to identify and limit tax
loopholes — not creating and then expanding them — this backdoor
bailout is precisely the wrong approach."

Letter co-signers included Democrats Chris Van Hollen of Maryland, Pete Stark of California, Jim McDermott of Washington, John Lewis of Georgia, Mike Thompson of California, Earl Blumenauer of Oregon, Bill Pascrell of New Jersey and Shelley Berkley of Nevada. 

In addition, the Ways and Means members told Paulson that "we strongly believe that you have
already overstepped your authority in issuing the original guidance."

"It is disappointing
when those who are charged with administering the tax laws demonstrate
this contempt for them," wrote the tax-writing Representatives.

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

Comments
  • Too little, too late for sure. But at least he’s trying, which is more than my useless Lone Star congressman is doing.

  • Totally agreed. But at this point, I think Paulson feels like the evil mad scientist who suddenly figures out mind control; he’s drunk on power and most likely feels like he doesn’t even have to answer to anyone.
    Sad.
    Great post though!

  • Dog — I’m in your same useless Congressional representative boat (and possibly district! so I too appreciate Doggett’s efforts.
    Adrienne — LOL. I will forever now view Paulson in a lab coat with Dubya as his Igor! Thanks for the chuckle during this definitely tragic financial time.
    Thanks both for reading and writing! — Kay

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