It will take time for lawmakers and the public to digest the wealth of documents relating to former President Donald Trump’s tax returns released Tuesday night by the House Ways and Means Committee.
Trump has repeatedly defied convention and refused to release his tax returns as both a presidential candidate and a sitting president.
The committee, which is responsible for overseeing the IRS and writing tax policy, had long sought and finally obtained Trump’s 2015 through 2020 tax returns just weeks ago. Its stated goal was to examine “how the IRS enforces federal tax laws against, and ensures compliance by a President.
Here are some of the key initial takeaways from the committee’s report, which includes both its analysis of the IRS presidential audit program and an analysis of Trump’s statements by the nonpartisan Joint Committee on Taxation.
The Ways and Means Committee says the IRS presidential audit program was “dormant” during Trump’s tenure.
The report found that during Trump’s tenure, the IRS only opened one “mandatory” audit – for his 2016 tax return. And that didn’t happen until the fall of 2019, after President Neal first sent a letter asking the IRS for Trump’s tax returns and information.
He also notes that the agency opened an audit earlier that year for its 2015 filing, but it was not designated as mandatory.
The 2017 tax return, meanwhile, was marked as “assessed and retrieved for review, if necessary.”
It remains unclear why the IRS has not been more active in auditing Trump’s statements while he was president.
“Despite knowledge of an ongoing congressional investigation and the playbook, no priority was given to the mandatory audit program by the previous administration,” the report asserts.
Sen. Ron Wyden, who chairs the Senate Tax Drafting Committee, said Wednesday that “the IRS is asleep at the wheel and the presidential audit program is broken. There is no justification for not conducting the required presidential audits until a congressional investigation has been made. I have additional questions about the extent to which resource issues or fear of political retaliation from the White House contributed to the failures here.
Many Democrats, including those on the committee, as well as tax policy experts suggest a lack of resources, including manpower to handle highly complex audits like Trump’s, may also be a factor.
“It’s easy to find the IRS deficient. They lack resources. The wealthy can take advantage of the tax law because the IRS doesn’t have the resources to prosecute them,” said Steven M. Rosenthal, senior fellow at the Urban Institute’s Urban-Brookings Tax Policy Center.
CNN contacted the IRS, which did not immediately comment.
‘Millions of unfounded deductions’: Lawmaker on Trump’s tax returns
After years of deferring big losses to dramatically reduce or even eliminate his federal income tax, Trump reported a sizable tax bill midway through his presidency, according to tables in the JCT report.
Trump paid a combined total of $1.1 million in federal income taxes in 2018 and 2019, a stark contrast to the $750 he paid in 2017 and $0 in 2020.
His taxable income in 2018 was around $23 million, including a capital gain of $22 million.
The following year, he declared almost $3 million in taxable income, with a capital gain of $9 million.
However, in 2020, Trump reported losses of over $16 million, large enough to reduce his federal income tax bill that year to $0.
For many years before he ran for president, a New York Times investigation showed that Trump had claimed huge net operating losses that he was allowed to carry forward and apply to future tax years. who has significantly reduced or simply eliminated his annual income tax. responsibility.
“He’s the 2,000 pound gorilla. … He always uses net operating losses to reduce his tax liability,” Rosenthal said.
For example, the JCT noted that Trump carried forward $105 million in losses on his 2015 return, $73 million in 2016, $45 million in 2017, and $23 million in 2018.
The JCT report raises questions about the accuracy of some huge charitable deductions claimed by Trump on several of Trump’s tax returns. Deductions can limit the amount of income tax payable.
In 2015, Trump claimed a $21.1 million deduction for donating 158 acres of his 212-acre property called Seven Springs in North Castle, New York. The donation, which was made to a land trust, is at the center of the Manhattan District Attorney’s criminal investigation into the finances of the Trump Organization.
The IRS allows an income tax deduction for landowners who donate rights to their land for conservation purposes, but the IRS has raised questions about whether the value of Trump’s land donation was swollen.
The JCT report noted that an IRS agent verifying Trump’s taxes suggested disallowing the entire $21.1 million deduction because Trump did not obtain a qualified appraisal for field. The agent also suggested reducing the value of the deduction by more than half and said the appraiser could be fined for potentially misstating the value of the land.
Since Trump had no taxable income in 2015, the deduction was limited — but it can be carried forward and deducted in future years.
The IRS audit of the Seven Springs donation is underway. A site visit took place in January and officers met with assessors as recently as November, according to the JCT report.
The report also raised questions about cash donations that Trump claimed as charitable deductions.
In 2016 and 2017, Trump claimed nearly $1.2 million and $1.9 million, respectively, in charitable contributions, most of which was paid in cash. Trump, again, had no taxable income in both years, but he was able to defer the deduction to future years, further limiting the amount of federal income tax he had to pay. The JCT said the large cash contributions deserved consideration.
Trump had taxable income in 2018 and 2019 and declared cash donations of just over $500,000 each year. This means that he was able to claim a deduction for charitable contribution in those years. The JCT suggested that Trump should be asked to justify these large cash donations.
The authors of the JCT report wrote that while it identified a number of items worth reviewing, they “express no opinion that review of these items would have resulted in increases in proposed taxes”.
Shortly after the New York Times published a bestselling article on September 27, 2020, which detailed Trump’s tax returns, the IRS met internally to discuss how to handle a tax review of the president at the time.
During the meeting, mention was made of the “history of difficult negotiations” between IRS staff and Trump’s attorneys, according to the JCT report.
IRS regulators also presented a strategy at that meeting to assess Trump’s finances, setting out criteria to make the process manageable given the large number of flow-through entities. Trump’s trust owns various flow-through entities, the income and deductions of which feed into Trump’s federal income tax return.
In March 2021, the IRS contacted Trump’s representatives that an audit had begun for his 2017 and 2018 tax returns.
Around the same time, Trump’s team called the IRS to discuss the size of the team to assess the tax returns. Three agents were assigned, compared to the typical single agent.
IRS team leader told Trump officials the agency considered the 2017 tax return ‘high risk’, requiring additional team members to review the more than 400 entities intermediaries. The review would represent most or all of the workloads of the three IRS officers.
Trump’s team also expressed concern about the scope of the review, which dates back to 2014 due to deductions Trump claimed that year that deferred and reduced his tax burden in subsequent years.
The Ways and Means Committee said it intended to release Trump’s tax returns at issue in its report.
The release could take place in a few days. First, Neal said, sensitive personal information such as social security numbers and account numbers must be redacted.
Meanwhile, Neal has proposed legislation that would codify the mandatory audit program “to require the IRS to perform mandatory audits while a president is in office and publicly disclose statements and related return information.”
House Speaker Nancy Pelosi said the House “will act quickly to move forward” this bill.
Speed will be required for the bill to pass and become law. Democrats hand over control of the House to Republicans on January 3.