A clever reason to get Trump's taxes
by digby
I've been hard on Richard Neal for dragging his feet on the tax return question but I think I was unfair. This is actually very clever. He's wrapped his request for the returns around Trump's fatuous insistence that he's being audited, apparently for every year since the beginning of time, so he can't release them:
But being under audit does not preclude Trump from releasing his tax returns — he could go ahead and release them anyway. There’s also precedent for a president releasing his tax returns while under audit — Richard Nixon did it. What’s more, part of what Democrats are looking to do in requesting Trump’s tax returns is find out if the IRS is properly vetting them.
The IRS’s administrative manual lays out guidance for processing the tax returns of the president and vice president and says they are subject to “mandatory examinations” by the agency. The IRS isn’t legally bound to audit the returns but is supposed to. What we don’t know is if it’s ignoring that guidance, or probing the returns the sufficient amount.
Neal pointed that out in his letter to IRS Commissioner Charles Rettig on Wednesday, explaining that one of the purposes of his request is to conduct oversight of “the extent to which the IRS audits and enforces the Federal tax laws against a President.”
“The IRS has a policy of auditing the tax returns of all sitting presidents and vice-presidents, yet little is known about the effectiveness of the law,” Neal said in a statement about the request.
It’s not clear whether Trump’s pre-presidential tax returns are being audited, and his claims that they are could be fake. But the 2017 and 2018 returns, if the IRS is following its own procedures, are supposed to be audited.
An IRS spokesperson didn’t return a request for comment on Neal’s request.
We already kind of know what the IRS commissioner thinks about Trump’s tax returns
The IRS commissioner is a presidential appointee, meaning Trump tapped Rettig for the job he has right now. Part of what Democrats want to find out is whether, as a political appointee, he’s unbiased in doing his job.
“Is the IRS capable of auditing the president is a legitimate question,” Joseph Thorndike, a tax historian and director of the Tax History Project, told me when discussing the process for requesting Trump’s tax returns earlier this year.
We actually have some insight into what Rettig thinks of Trump’s tax returns, including whether he should release them while under audit. The longtime tax attorney wrote for Forbes in 2016 that he wouldn’t advise Trump to release his returns.
“Is there any legal impediment to Trump publicly releasing his tax returns? Absolutely not,” Rettig wrote. “Would any experienced tax lawyer representing Trump in an IRS audit advise him to publicly release his tax returns during the audit? Absolutely not.”
We don’t know if Trump is actually under audit — the IRS could not be reviewing his presidential tax returns, and he could be lying about his pre-presidential tax returns being audited. Trump’s former attorney, Michael Cohen, in a hearing before Congress in February said he didn’t believe Trump was being audited. In fact, Cohen said that what made Trump nervous was the idea that releasing his returns like previous candidates would prompt extra scrutiny from the IRS.
“What he didn’t want is to have an entire group of think tanks that are tax experts run through his tax return and start ripping it to pieces, and then he’ll end up in an audit and he’ll ultimately have taxable consequences, penalties, and so on,” Cohen said.
If Trump’s returns are indeed under audit — whether those from before his term began or after— they’re likely being probed by the IRS’s “Wealth Squad,” a specialized group that is supposed to conduct audits on very rich taxpayers, which Trump claims to be. At Forbes, Rettig laid out the process the Wealth Squad follows in its work, meaning that theoretically, if Trump’s returns are being audited, he knows what to do. He also hypothesized what might be in the returns:
So, what is in Trump’s Returns? Likely information prepared by many very well-qualified tax professionals who were quite aware the general public might be looking at the returns at some future date. It’s unlikely an accurate overall financial picture will surface by simply reviewing his returns. He likely pays taxes at a lesser rate than many of us given the nature of his real estate and similar investments being subjected to lower tax rates than salaries earned by the rest of us. Certainly, his tax professionals have not advised him to overpay his taxes.
The IRS could be conducting a fair, complete audit of Trump’s tax returns while he’s president, before he was president, or not at all. That’s part of what Democrats are trying to find out. So when the White House gives the excuse that it’s not releasing Trump’s tax returns because of the audit, it might be inadvertently helping Democrats build their case.
It should be pretty easy to get an answer to this question. As far as we know, there's no reason a person can't release his tax returns if they are under audit. Richard Nixon's taxes were under audit when he reluctantly agreed to release his under threat of the congress obtaining them. It ended up costing him half a million dollars in back taxes and fines. And that is obviously what Trump is afraid of.
As for finding out if the "wealth squad" is auditing the president's returns as the IRS is required to do, keep in mind that the main reason the law was written back in 1924 was because there were suspicions that the IRS was doing Treasury Secretary Andrew Mellon favors.
Turns out Neal is very well prepared to take this case to court if he has to. The parallels are obvious.
Update:
President Trump earlier this year asked Senator Mitch McConnell, the majority leader, to prioritize a confirmation vote for his nominee to be the chief counsel of the Internal Revenue Service, indicating that it was a higher priority than voting on the nomination of William P. Barr as attorney general, a person familiar with the conversation said.
White House aides insisted for months that the confirmation of the nominee, Michael J. Desmond, a tax lawyer from Santa Barbara, Calif., was a top priority after passage of the tax bill in 2017.
But the request by Mr. Trump, made to Mr. McConnell on Feb. 5, raised questions about whether the president had other motivations. For months, the president has seethed over vows by congressional Democrats that they would move to obtain his tax returns from the I.R.S. And this week, the House Ways and Means Committee chairman, Representative Richard E. Neal, Democrat of Massachusetts, formally asked the I.R.S. for six years of the returns, using an obscure provision in the tax code to do so.
On Thursday, asked if he would direct the I.R.S. not to disclose his tax returns, Mr. Trump said Democrats would have to talk to his lawyers.
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