Treasury Secretary Jacob Lew was urged by U.S. Congress members to deny a favorable tax ruling to Caesars Entertainment Corp (NASDAQ: CZR) relating to the plan by the casino operator to create a casino operator and creditor-controlled trust to own its resorts and hotels. Congress members say that allowing Caesars to do so would amount to a taxpayer subsidy.

On Wednesday, Reuters viewed a May 26 letter in which 15 lawmakers said Caesars’ reorganization plan for its bankrupt main operating unit abuses the original intent of the unit, which is permitting small investors to diversify into real estate. The unit was placed into bankruptcy by Caesars, the fourth largest gaming company in the world, early last year.

Favorable tax treatment is provided by the proposed real estate investment trust (REIT) spinoff, which means that trusts such as the one proposed are valued more by investors, thereby increasing the recovery for creditors who the company owes $18 billion. Last year the company applied to the Internal Revenue Service for a private letter ruling to get confirmation that the REIT would be handled as a tax-free separation. If it does not receive tax-free status, Caesars has warned that significant liabilities could be incurred which could undermine the reorganization’s value. The letter stated, “The REIT would effectively shelter a considerable portion of the casinos’ profits, thus functioning as a taxpayer-funded subsidy to one of the largest casino companies in the U.S. and its private equity owners,” according to Reuters.

Last year, steps were taken by Congress to curb REIT’s, but because Caesars had already applied to the IRS for a ruling the company was exempt. Apollo Global Management and TPG Capital controls Caesars. The company was created by the former from the 2008 $31 billion leveraged buyout of Harrah’s Entertainment. Its hedge fund creators and the two have been caught up in an expensive and bitter legal battle over the Caesars bankruptcy.

In the letter, the members of Congress also note that Caesars could use the REIT structure to sidestep antitrust review. Fourteen Democrats and one Republican, Rep. Frank LoBiondo, signed the letter to Treasury Secretary Lew. LoBiondo represents Atlantic City, New Jersey, where the Bally‘s and Caesars casinos are owned by Caesars. The Harrahs casino in Atlantic City is also owned by an affiliate of Caesars.

On May 6, Caesars announced that it had appointed retired bankruptcy judge Robert Gerber to the newly created position of chief restructuring officer. The announcement came on the heels of the warning by the parent company that it may be forced into Chapter 11 bankruptcy in the face of billions of dollars in creditor claims that stem from the company’s failed operating unit (CEOC).