FAQs on Claims Regarding President Trump’s Tax Returns

October 2, 2020 — Blog   

Here are the facts to help you understand the media coverage of a purported leak of the President’s tax return information. Context matters.

HEADLINE MESSAGE

  • There’s absolutely no independent confirmation the New York Times story is true. The Trump Organization said that “most, if not all, of the facts appear to be inaccurate.” The President has stated he paid millions of dollars in taxes, and experts question the conclusions the Times has drawn on complex tax issues. Even Democrat Chairman of the House Ways and Means Committee refutes the Times claim that the Joint Committee on Taxation has been holding the President’s refund audit for four years, saying, “[t]o my knowledge they are not sitting on the forms.
  • The New York Times did not accuse the President of illegal behavior. However, there is a strong prospect that a felony crime was committed by the individual releasing the private tax return information of an individual without their consent – in this case the President’s.
  • This potential illegal release of private tax returns should trouble every American. Former chairman of the Ways and Means Committee Rep. Kevin Brady and Oversight Subcommittee leader Rep. Mike Kelly have called on the Department of Treasury and Department of Justice to investigate the source of the release and to prosecute if privacy laws were broken “to ensure every American is protected against the illegal release of their tax returns for political reasons.”
  • Kelly says “ The unethical, perhaps illegal, leaking of any American’s tax returns is a stunning breach of public trust. That doesn’t change because it happened to President Trump. If it can happen to the President, it can happen to any American.”
  • Does this last-minute hit job on the President impact the election? No. Americans aren’t so concerned about the President’s taxes, they’re concerned about their own. Joe Biden will raise your taxes, President Trump and Republicans will keep them low.

BACKGROUND

What are the main concerns with the purported leak of the President’s taxes?

Every American is protected by law against having their personal tax return information leaked without their consent, especially for political advantage. While we need to be certain that no federal crimes were committed, the fact that it can happen to the President of the United States means it can happen to anyone. This is just a blatant attempt to embarrass the President weeks before the election.

What type of information was disclosed to the news media and has it been verified?

Allegedly 20 years of President Trump’s tax returns and associated financial records, although claims can’t be verified because source documents are being withheld from the public. The Trump Organization and the White House Press Secretary have described the claims as “inaccurate” and “wrong.”

Is there criminal liability associated with the disclosure?

Criminal penalties for this kind of leak apply to:

  • Officers and employees of the United States, including IRS employees.[1]
  • State employees.[2]
  • Any person or entity that knowingly and willfully prints or publishes unauthorized tax returns or return information that originated from the IRS.[3]
  • Any person engaged in the business of preparing, or providing services related to, tax returns when such a person makes an unauthorized disclosure of any tax return or tax return information.[4]

However, not all unauthorized disclosures would lead to criminal liability. Someone who received the tax information directly from the taxpayer and not the IRS, and had no role in preparing the President’s taxes, would have no criminal liability. That person could still be sued for breach of contract and/or breach of professional ethics standards.

The Biden campaign has pointed out that President Trump paid only $750 per year in federal income tax in 2016 and 2017 compared to the thousands of dollars hardworking Americans pay in federal income taxes – isn’t this unfair?

There is no indication or claim that President Trump did anything illegal. Businesses pay different types of taxes not mentioned in the news reports, including real and personal property taxes, excise taxes, self-employment taxes, alternative minimum taxes, sales and transfer taxes, payroll taxes, and Medicare taxes, among many others.[5]

If it is true that President Trump only paid $750 in income tax in 2016 and 2017, does that mean he has not contributed financially to the operations of the federal government? 

No. President Trump has donated nearly his entire presidential salary to the operations of the federal government. Since taking office in January 2017, the President has signed over each paycheck, totaling nearly $1.4 million. These voluntary donations include a donation to HHS to “develop new therapies for treating and preventing COVID-19 so that we can safely reopen” and a donation to the Veterans Administration to assist with improving health care for our veterans.

Do the reports on the President’s taxes undermine confidence in the tax system?

We know that the IRS spends billions of dollars each year on enforcement of our tax laws. In fact, the allegations make clear that the President was indeed under audit by the IRS, as required by statute when a taxpayer is issued a large refund. On the other hand, Americans are likely more concerned about their tax privacy than ever before.

Has the President’s refund audit been pending with the Joint Committee on Taxation for more than four years as alleged in the reporting?

According to Ways and Means Chairman Richard Neal (D-MA), the answer is no. Mr. Neal stated, “To my knowledge, they are not sitting on the forms.”[6]

Is it unusual for businesses like President Trump’s to use a tax provision such as the tentative carryback provision?

No. This provision is used by businesses large and small across America, often in response to economic challenges like the 2008 financial crisis and the coronavirus epidemic today. It provides cashflow to businesses so they can maintain payroll and business operations. In fact, offering loss carrybacks is one of the most valuable tax policy decisions Congress can make to help struggling businesses during unprecedented economic times.

Both parties have supported this. The Obama Administration and the Democrat-controlled Congress established this provision in 2009. The Trump Administration and Congress revived it again in the bipartisan CARES Act.

Is it unusual for a business like the President’s to use historic rehabilitation tax credits, deductions for conservation easements, and other business expense deductions?

No. It is routine for businesses of all sizes to take deductions for ordinary and necessary business expenses, and to use credits like the historic rehabilitation tax credit.

Congress generally grants tax deductions or credits to taxpayers to promote specific behavior. As an example, according to JCT, each year taxpayers claim more than $1 billion of tax credits for renovating historic buildings.

Is it a national security risk for President Trump to owe $300 million in loans due in the next few years?

No—most Americans have debt, and debt should be viewed in the context of one’s assets. According to the Associated Press,[7] the President has a number of business assets with values much higher than the amount he owes in loans. “He’s going to be able to roll these loans over. They have collateral backing them up. They’re not that risky to the lenders,” said Phillip Braun, a finance professor at Northwestern University’s Kellogg School of Business.

Has the President kept his debts secret?

No. A list of the President’s creditors is publicly available in his financial disclosure forms. This information is not hidden or secret, and it’s strange that some news outlets are sensationalizing these numbers.

Shouldn’t the President release his tax returns to put this all behind him?

The President has already filled out financial disclosures, and the decision to release his tax return information is his own to make. But most Americans are likely concerned about their own private tax information and want to be sure they are not also subject to some unlawful breach of privacy in the future. If this can be done to a president, it can be done to anyone.

[1] 26 U.S.C. § 7213(a)(1).

[2] 26 U.S.C. § 7213(a)(2).

[3] 26 U.S.C. § 7213(a)(3). (See e.g., Kim Barker and Justin Elliot, IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups, Pro Publica, May 13, 2013, available at https://www.propublica.org/article/irs-office-that-targeted-tea-party-also-disclosed-confidential-docs.

[4] 26 U.S.C. § 7216(a).

[5] See, e.g., Internal Revenue Service SOI Tax States – Collections and Refunds by Type of Tax – IRS Data Book Table 1, 2018; Ernst & Young LLP, Total state and local business taxes, State-by-state estimates for FY18, October 2019. Businesses typically also must pay state and local business and corporate license taxes, state and local public utility taxes, state and local insurance premium taxes, state and local severance taxes, and a number of other local taxes depending on the particular jurisdiction. Id.

[6] Brian Faler, Neal: Congressional tax office doesn’t have Trump’s tax returns, Politico, September 30, 2020.

[7] Bernard Condon, Trump Facing Devastating Debt Load? Experts Say Not So Fast, Associated Press (Sept. 29, 2020), https://apnews.com/article/virus-outbreak-donald-trump-new-york-san-francisco-archive-4475833ffad7162a460374f695786f27.

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