In the closing months of the Ford administration, the Treasury Department quietly issued a complicated ruling that already has saved the nation's biggest banks millions of dollars in corporate income taxes.

Citicorp, parent firm of the First National City Bank of New York, the second-largest bank in the country, will have its 1976 taxes reduced an estimated $9 million because of the Treasury action, according to one tax "reform" group's calculations. Sixteen other U.S. banks will realize large savings as well.

The ruling, first disclosed by Tax Analysts and Advocates, a "reform" group here, was reportedly approved by then Treasury Secretary William E. Simon over the objection of a number of Treasury tax technicians, who regarded it as unwarranted.

Simon said yesterday he could not recall making a policy decision on the tax ruling. "I could have, but it doesn't stick out in my mind," said Simon, now a New York City investment banker, when reached in Chicago, where he was making a speech.

The ruling, when is apparently on the edge of being overturned by the Carter administration, deals with the foreign tax credit, which allows corporations to reduce their U.S. taxes by the amount of income taxes they pay to foreign governments.

Treasury's ruling said the U.S. banks could claim full foreign tax credits for a 25 per cent tax withheld on interest the banks earned in Brazil.

This was allowed even though 85 per cent of the withheld tax is routinely rebated to the Brazilian borrowers.

The internal Treasury objections to the ruling were based in part on the fear that it would set a precedent for subsidizing loans by U. S. banks in other countries.

Opponents also say the Brazilian tax is not genuine.

The way the system works, experts said yesterday, is that the banks raise their interest rates in Brazil to allow at least in part for the tax that has to be paid; thus, they lose nothing or less than the full amount to the Brazilian tax collector.

The Brazilian government collects the tax and rebates most of it to the borrower; the borrow thus also loses relatively little.

But the bank has in its records a foreign tax payment against which it can claim a credit to cut its U. S. taxes.

Opponents say this is merely a method by the Brazilian government to encourage U. S. banks to make loans in that country.

Supporters, on the other hand, claim that the U.S. banks are actually paying the Brazilian taxes, and that it is the Brazilian government's business what it does with the revenues.

Highly placed Treasury officials involved in international tax policy-making said yesterday the IRS rulings, the first of what was issued in last last November, are being reconsidered by the Carter administration and probably will be revoked, although not retroactively.

"We had another look at it, and decided if the tax was being rebated, it wasn't a tax that was paid to the [Brazilian] government and, therefore, shouldn't be subject to a tax credit," one Treasury official said.

The Brazilian situation emerged with the disclosure by Tax Analysts and Advocates that the IRS had handed down 16 unpublished rulings favoring major U.S. banks with substantial interests abroad.

The rulings, on the surface, seem to be an attempt by the U.S. government to accommodate a developing nation's desire to attract foreign investment capital, while at the same time being responsive to the American banks' desire to reduce their tax burden.

The tax-and-rebate mechanism stems from a 1974 decision when Brazil's National Monetary Council, seeking to stimulate investment, reduced the traditional 25 per cent tax on interest to 5 per cent. But foreign banks failed to pass along the savings to borrowers through reduced interest rates, Treasury experts said.

When the foreign banks failed to adjust their interest rate to the reduced tax, the Brazilian government then reinstated the 25 per cent rate, coupled with the rebate to the local borrowers. The 85 per cent rebate comes out to 21.25 per cent of the total tax on the U.S. banks' interest charges, meaning that only 75 per cent of the total is a true tax collected and retained by the Brazilian government, according to U.S. experts.

Initially, the Central Bank of Brazil approached the IRS for a ruling that the full withholding tax was eligible for the U.S. foreign tax credit, but Treasury said it could not issue an IRS ruling to an non-citizen.

Later, a New York banks, which a former Treasury official identified as Bankers Trust Co., asked for and got the ruling that holds that the Brazilian withholding tax is fully creditable against U.S. corporate income taxes. The 16 rulings issued this week were merely duplicate decisions handed down in response to requests by other American banks operating in Brazil.

Multinational banks of many countries have credit operations in Brazil, but none larger than the U.S. banks. Citicorp officials refused to divulge the extent of their banks' loans in Brazil, but a spokesman said that in all South America the firm's average assets - the bulk of which is loans - totaled $3.5 billion during 1976.

A Treasury official said IRS based the ruling on a 1957 precedent involving tax credits given U.S. firms operating in the Virgin Islands, in which rebates similar to Brazil's were employed. Other precedents cited included a tax ruling involving rebated taxes in Mexico in the 1960s, Treasury officials said.

The U.S. government apparently regards the policymaking decisions surrounding the tax credit as sensitive. Whe Tax Notes, a weekly publication of Tax Analysts and Advocates, requested a copy of a memorandum containing comments on U.S.-Brazilian negotiations. Treasury classified the document in an attempt to immunize it from disclosure under the Freedom of Information Act, according to Thomas Field, of Tax Analysts and Advocates.

Field said Tax Notes plans to file an administrative appeal and, if necessary, a lawsuit to obtain the document.