Jill Kozeny, 202/224-1307
Jill Gerber, 202/224-6522
Grassley Urges Fair Tax Treatment for Small Businesses Compared to Large Banks
WASHINGTON – Sen. Chuck Grassley is putting the Treasury Department, including the IRS, on notice that he will hold up all Treasury nominees until the agency treats small businesses fairly regarding certain tax penalties. Grassley’s action comes after the Treasury Department gave favorable tax treatment to government bailout participants, including Citigroup, while placing liens on small businesses contrary to congressional intent.
“Treasury is quick to help out big banks but slow to act when small businesses need fair treatment,” Grassley said. “There seems to be a double standard and a failure to recognize that small businesses are just as critical to the economy as big banks, if not more critical. Small businesses create 70 percent of all net new jobs. If we don’t recognize that, we’re shooting ourselves in the foot.”
Grassley has been working for months with Senate and House counterparts to enact legislation to moderate the amount of penalties assessed on small businesses that unknowingly invested in prohibited tax shelter transactions. Some of these businesses were assessed tax penalties as high as $300,000 per year but received a tax benefit for as little as $15,000 from the transaction. Grassley and his colleagues asked the IRS to provide temporary relief to small businesses facing these penalties until they can enact the bipartisan, bicameral legislation. As a result, IRS agreed to suspend collection enforcement action through December 31, 2009.
Regardless, the IRS continues to place liens on these small businesses. Even though the liens are not yet being enforced, they are a significant threat to the small businesses’ operations, Grassley said.
Meanwhile, Treasury just gave a tax break to Citigroup that may generate billions of dollars of tax savings for the bank. The tax break was said to help protect the government’s interest in the company, but the decision came without public scrutiny.
In November 2008, Treasury and the IRS came under fire from Grassley and others for giving a tax break that allowed banks to acquire one another. The Treasury ruling helped to accommodate the sale of the Wachovia Corporation to Wells Fargo. Grassley questioned whether Treasury had the authority to bestow such a tax break independently of congressional action.
Grassley is ranking member and former chairman of the Committee on Finance, with exclusive Senate jurisdiction over tax policy.
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