Citigroup Accused of Improperly Avoiding $800 Million in New York State Taxes

By LYNNLEY BROWNINGOCT. 19, 2015

An economics professor has filed a lawsuit against Citigroup accusing the bank of using an unusual federal tax break during the financial crisis to avoid paying $800 million in New York State taxes.

In a lawsuit transferred to Federal District Court in Manhattan on Oct. 2, Eric B. Rasmusen, a professor of business economics and public policy at the Kelley School of Business at Indiana University, challenged the validity of the unusual federal tax break for the bank’s New York State returns. His claim, originally filed under seal in New York State Supreme Court in 2013, seeks treble damages, or $2.4 billion, under the False Claims Act.

The case says that Citigroup used the federal government’s $45 billion taxpayer-funded bailout to improperly reduce its New York State franchise taxes in 2010 and 2011. New York levies the annual tax — effectively a general corporate income tax — on businesses registered in or doing business in the state.

"We believe the claims are without merit,” a Citigroup spokesman, Mark Costiglio, said on Monday. The bank is expected to respond to the lawsuit by Dec. 7. A spokesman for the New York attorney general’s office said that “we are not involved in the case” and declined to comment further. The lawsuit was earlier reported in The Buffalo News.

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