REVERSAL OF FORTUNE

Fine Print on New Treasury Rules Gives Banks Big Tax Break

GOP tax bill made “financial services” ineligible. Mnuchin decision would hand some of them billions.

A new Treasury Department proposal would give U.S. banks a huge tax cut by somehow no longer classifying them as “financial services.” When it was being argued in late 2017, the Republican tax bill stated that financial services companies were not eligible for massive tax cuts given to other corporations in order to silence critics who noted the bill would give more money to big banks. A joint report from Splinter News and the investigative-reporting blog Capital & Main notes the fine print of a rule issued by Treasury Secretary Steve Mnuchin on Wednesday would change some 2,000 banks’ classification to S corporations, making them eligible for the tax cut. “Commenters requested guidance as to whether financial services includes banking,” the Treasury Department rule now states. “The Treasury Department and the IRS agree with such commenters [that] financial services should be more narrowly interpreted here.” “Financial services” would now only include services like those provided by investment bankers and financial advisers. “The notion that financial services excludes banking should be quite a surprise to members of the House Financial Services Committee, which thought that it had jurisdiction over banking,” Daniel Hemel, a University of Chicago tax law professor, told Capital & Main.