WASHINGTON (AP) — The IRS failed to pursue mandatory audits of Donald Trump on a timely basis during his presidency, a congressional panel found on Tuesday, raising questions about statements by the former president and leading members of his administration who claimed he could not release his tax filings because of the ongoing reviews.
(Click here to watch Committee Chair Rep. Richard Neal's statement on the investigation or Click here to read the report.)
A report released by the Democratic majority on the House Ways and Means Committee indicated the Trump administration may have disregarded an IRS requirement dating back to 1977 that mandates audits of a president's tax filings. The IRS only began to audit Trump's 2016 tax filings on April 3, 2019, more than two years into Trump's presidency and just months after Democrats took control of the House. That date coincides with Rep. Richard Neal, the panel chairman, asking the IRS for information related to Trump's tax returns.
There was no suggestion that Trump, who has announced a third presidential run, sought to directly influence the IRS or discourage the agency from reviewing his tax information. But the report found that the audit process was “dormant, at best.”
The 29-page report was published just hours after the committee voted along party lines to release Trump's tax returns in the coming days, raising the potential of additional revelations related to the finances of the onetime businessman who broke political norms by refusing to voluntarily release his returns as he sought the presidency. The vote was the culmination of a yearslong fight between Trump and Democrats that has played out everywhere from the campaign trail to the halls of Congress and the Supreme Court.
Democrats on the tax-writing Ways and Means Committee argued that transparency and the rule of law were at stake, while Republicans countered that the release would set a dangerous precedent with regard to the loss of privacy protections.
“This is about the presidency, not the president,” Neal, D-Mass., told reporters.
Texas Rep. Kevin Brady, the panel’s top GOP member, said, “Regrettably, the deed is done.”
“Over our objections in opposition, Democrats in the Ways and Means Committee have unleashed a dangerous new political weapon that overturns decades of privacy protections,” he told reporters. “The era of political targeting, and of Congress’s enemies list, is back and every American, every American taxpayer, who may get on the wrong side of the majority in Congress is now at risk.”
Trump spent much of Tuesday evening releasing statements on his social media platform that were unrelated to his tax returns. The IRS didn't immediately respond to a request for comment.
But an accompanying report released by Congress' nonpartisan Joint Committee on Taxation also found repeated faults with the IRS’s approach toward auditing Trump and his companies.
IRS agents in charge of the audits repeatedly did not bring in specialists with expertise assessing the complicated structure of Trump’s holdings. They frequently determined that a limited examination was warranted because Trump hired a professional accounting firm that they assumed would make sure Trump “properly reports all income and deduction items correctly.”
“We must express disagreement with the decision not to engage any specialists when facing returns with a high degree of complexity,” the tax committee report states. “We also fail to understand why the fact that counsel and an accounting firm participated in tax preparation ensures the accuracy of the returns.”
The reports released Tuesday renewed scrutiny on one of the biggest questions that has surrounded Trump since he shifted from a reality television star to an unlikely presidential candidate: Why did he abandon the post-Watergate tradition of White House hopefuls releasing their tax returns? Trump and those around him have consistently said that IRS audits prevented him from doing so.
“I would love to give them, but I’m not going to do it while I’m under audit,” Trump said on April 10, 2019, before boarding the presidential helicopter.
There are no laws that would have barred Trump from voluntarily releasing his returns even if they were being audited. But when Trump spoke of being audited, it's unclear whether he was referring to the mandatory process specifically aimed at presidents or prior reviews that are more typical for wealthy individuals.
The New York Times found that before he entered the White House, Trump was facing an IRS audit potentially tied to a $72.9 million tax refund arising from $700 million in losses he claimed in 2009. The documents released Tuesday indicate that Trump continued to collect tax benefits from those losses through 2018.
“What happened?" said Steven Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center. "If it was not resolved, the IRS stalled. If it was resolved in Trump’s favor, then maybe the IRS rolled over and played dead. That’s what we have to find out.’’
The report raised multiple red flags about aspects of Trump's tax filings, including his carryover losses, deductions tied to conservation and charitable donations, and loans to his children that could be taxable gifts.
In response to the findings, the Ways and Means Committee is proposing legislation to beef up the IRS’s approach, requiring an initial report no later than 90 days from the filing of a president’s tax returns. House Speaker Nancy Pelosi said the chamber would “move swiftly” to advance the legislation.
Democrats argue that the IRS is ill-equipped to audit high-income, complex tax returns, and instead targets filers in lower-income brackets — something they have tried to remedy with their work on the panel.
“Because of the dismantling of funding to the IRS, they have not been able to do their job,” said Rep. Steven Horsford, D-Nev. “They did not have the specialized staff to do it for that high-income category — not just this person, but people who fall into that category.”
But Republicans have vowed to cut a recent influx of funding for more IRS agents. That's the first bill they will consider upon taking the House majority in less than two weeks.
The committee’s move represents yet another challenge for Trump. Just a day earlier, the House Jan. 6 committee voted to make a criminal referral to the Justice Department for Trump’s role in sparking the violent insurrection at the U.S. Capitol. He’s also facing an intensifying investigation in Atlanta for efforts to overturn the 2020 election results in Georgia. And he’s the subject of growing criticism from fellow Republicans for contributing to the party’s underwhelming performance in last month’s midterms.
Trump's family business, The Trump Organization, was convicted earlier this month on tax fraud charges for helping some executives dodge taxes on company-paid perks such as apartments and luxury cars.
Manhattan district attorney Alvin Bragg told The Associated Press in an interview last week that his office’s investigation into Trump and his businesses continues.
“We’re going to follow the facts and continue to do our job,” Bragg said.
Trump has argued there is little to learn from his tax returns even as he has fought to keep them private.
“You can’t learn much from tax returns, but it is illegal to release them if they are not yours!” he complained on his social media network last weekend.
-----------------
WASHINGTON (AP) — The Democratic-controlled House Ways and Means Committee voted along party lines Tuesday to issue a report on Donald Trump’s tax returns — likely offering a deeper look into financial records that the former president tried to shield from the public.
(Click here to watch House Ways and Means Committee Chair Rep. Richard Neal's statement of the investigation.)
Lawmakers indicated after the vote that the world could see redacted copies Trump's tax filings within a couple of days.
The dueling mix of animosity and loyalty inspired by Trump has made the release of the tax forms into a fever-pitched and yearslong grind, one that could continue well after the public learns more details about the finances, foreign dealings and possible net worth of the one-term Republican president.
The report shows how much of a grip Trump still holds over U.S. politics despite losing reelection in 2020. Democratic lawmakers argued that transparency and the rule of law were at stake by voting to issue the report that legally rests on questions about IRS audits of the wealthy. Republicans countered that the release would set a dangerous precedent with regard to the loss of privacy protections.
Tuesday's vote comes after a multiyear battle that ultimately resulted in the Supreme Court clearing the way last month for the Treasury Department to send the returns to Congress. The committee received six years of tax returns for Trump and some of his businesses.
Democrats faced pressure to act aggressively in the final stretch of this year. With just two weeks left until Republicans formally take control of the House, Tuesday’s meeting was an opportunity for Democrats to disclose whatever information they have on Trump, a reputed multibillionaire who used his wealth as a selling point with voters to win the presidency in 2016.
Committee Chairman Richard Neal, D-Mass., said supporting materials will be released along with the report. Texas Rep. Kevin Brady, the committee's top Republican, raised concerns about privacy as the documents could contain information such as Social Security numbers.
Republicans have railed against the potential release, arguing that it would set a dangerous precedent.
Before Tuesday’s meeting, Brady called any release of Trump’s tax records a “dangerous new political weapon” that “even Democrats will come to regret.”
“Our concern is not whether the president should have made his tax returns public, as is traditional, nor about the accuracy of his tax returns,” Brady said. “Our concern is that, if taken, this committee action will set a terrible precedent that unleashes a dangerous new political weapon that reaches far beyond the former president and overturns decades of privacy protections for average Americans that have existed since the Watergate reforms.”
Trump has long had a complicated relationship with his personal income taxes.
As a presidential candidate in 2016, he broke decades of precedent by refusing to release his tax forms to the public. He bragged during a presidential debate that year that he was “smart” because he paid no federal taxes and later claimed he wouldn't personally benefit from the 2017 tax cuts he signed into law that favored people with extreme wealth, asking Americans to simply take him at his word.
Tax records would have been a useful metric for judging his success in business. The image of a savvy businessman was key to a political brand honed during his years as a tabloid magnet and star of “The Apprentice” television show. They also could reveal any financial obligations — including foreign debts — that could influence how he governed.
But Americans were largely in the dark about Trump's relationship with the IRS until October 2018 and September 2020, when The New York Times published two separate series based on leaked tax records.
The Pulitzer Prize-winning 2018 articles showed how Trump received a modern equivalent of at least $413 million from his father's real estate holdings, with much of that money coming from what the Times called “tax dodges” in the 1990s. Trump sued the Times and his niece, Mary Trump, in 2021 for providing the records to the newspaper. In November, Mary Trump asked an appeals court to overturn a judge’s decision to reject her claims that her uncle and two of his siblings defrauded her of millions of dollars in a 2001 family settlement.
The 2020 articles showed that Trump paid just $750 in federal income taxes in 2017 and 2018. Trump paid no income taxes at all in 10 of the past 15 years because he generally lost more money than he made.
The articles exposed deep inequities in the U.S. tax code as Trump, a reputed multi-billionaire, paid little in federal income taxes. IRS figures indicate that the average tax filer paid roughly $12,200 in 2017, about 16 times more than the former president paid.
Details about Trump's income from foreign operations and debt levels were also contained in the tax filings, which the former president derided as “fake news."
At the time of the 2020 articles, Neal said he saw an ethical problem in Trump overseeing a federal agency that he has also battled with legal filings.
"Now, Donald Trump is the boss of the agency he considers an adversary," Neal said in 2020. “It is essential that the IRS’s presidential audit program remain free of interference.”
The Manhattan district attorney’s office also obtained copies of Trump’s tax records in February 2021 after a protracted legal fight that included two trips to the Supreme Court.
The office, then led by District Attorney Cyrus Vance Jr., had subpoenaed Trump’s accounting firm in 2019, seeking access to eight years of Trump’s tax returns and related documents.
The DA’s office issued the subpoena after Trump’s former personal lawyer Michael Cohen told Congress that Trump had misled tax officials, insurers and business associates about the value of his assets. Those allegations are the subject of a fraud lawsuit that New York Attorney General Letitia James filed against Trump and his company in September.
Trump’s longtime accountant, Donald Bender, testified at the Trump Organization’s recent criminal trial that Trump reported losses on his tax returns every year for a decade, including nearly $700 million in 2009 and $200 million in 2010.
Bender, a partner at Mazars USA LLP who spent years preparing Trump’s personal tax returns, said Trump’s reported losses from 2009 to 2018 included net operating losses from some of the many businesses he owns through his Trump Organization.
The Trump Organization was convicted earlier this month on tax fraud charges for helping some executives dodge taxes on company-paid perks such as apartments and luxury cars.
The current Manhattan district attorney, Alvin Bragg, told The Associated Press in an interview last week that his office’s investigation into Trump and his businesses continues.
“We’re going to follow the facts and continue to do our job,” Bragg said.
Trump, who refused to release his returns during his 2016 presidential campaign and his four years in the White House while claiming that he was under IRS audit, has argued there is little to be gleaned from the tax returns even as he has fought to keep them private.
“You can’t learn much from tax returns, but it is illegal to release them if they are not yours!” he complained on his social media network last weekend.