The Washington Post reports that a House panel will be investigating a Treasury Department decision “to change a long-standing law so that CitiGroup could keep billions of dollars in tax credits.” The panel will be headed by Representative Dennis Kucinich (D-OH), who called the Treasury’s actions a “farce” and an “outrage” at a House Committe of Oversight and Government Reform hearing this week.

The Internal Revenue Service (IRS) allowed CitiGroup to keep $38 billion in tax breaks, usually reserved for companies in good years to recuperate losses from bad years, despite a provision in the law that negates those tax breaks if a company’s ownership changes hands. The Department of Treasury is planning on selling back it’s estimated $25 billion shares of CitiGroup stock over the next year, despite this week’s deal falling through. Any sale of the stock would amount to  the company’s ownership changing hands.

Treasury officials said the government needed to grant the tax break in order to sell its shares in Citigroup because the company could not afford the loss. Officials also said that preserving the tax break would help the government sell its shares at a higher price. And they said the law was never intended to apply to deals involving the government.

Kucinich tore into that logic Thursday, questioning why the government needed to sell its shares immediately. He said that the government was inherently conflicted by its roles as a tax collector and as a shareholder in the company. He said it appeared that the shareholders had gotten the upper hand.

“This does a disservice to the taxpayers, it does not help the taxpayers recover the value of their investment and it raises troubling questions about how the administration is negotiating its role,” Kucinich said in an interview Thursday.

Kucinich also said that he planned to investigate whether the IRS had the legal authority to issue the ruling that benefited Citigroup.

“The idea that the government is using its authority to pick winners and losers is very dangerous,” Kucinich said.

Hearings over the next couple of months will determine the fate of those tax breaks and potentially determine the fate of CitiGroup.

Photo (via AllGov)