The House of Representatives Main Tax Committee voted Tuesday evening to release former President Trump’s tax returns for the release of tax returns from former President Trump for the release of tax returns for six years as part of an investigation into the audit program of the president of the IRS. The vote was 24 to 16 and was in line with party lines, with the Democrats voting in favour and the Republicans against.
The returns include personal returns from six years as well as returns for eight of Trump’s companies. They will be published within a few days of editing, committee members announced on Tuesday.
Reports from the Ways and Means Committee on the IRS presidential audit program and the Joint Committee on Taxation (JCT) on the content of tax returns have already been published.
Here is what we know from their reports and the statements made by the legislator.
The IRS didn’t audit Trump in 2017 or 2018, and Democrats want to know why
The IRS has a mandatory audit program for incumbent presidents, but did not audit Trump until more than two years after he took office. Trump filed two tax returns in 2017 and one in 2018, but received his first audit only when he was in office in 2019.
“There were no timely audits,” said Richard Neal (D-Mass.), chairman of the Ways and Means Committee, on Tuesday.
“As soon as employees [on the committee] visited the IRS, when employees had the opportunity to visit some of the… locations that fall within the purview of the IRS, they quickly concluded that the audit did not actually take place,” he said.
Senate Finance Committee Chair Ron Wyden said in a statement Wednesday that the “IRS slept at the wheel.”
“The president’s audit program is broken. There is no justification for failing to carry out the required presidential audits until a congressional investigation is initiated. I have further questions about how resource issues or fear of political retaliation from the White House contributed to the failures here,” he said.
Trump’s two audit-free years could be one reason why no presidential audits were completed during his term of office and that the audits begun in the second half of his term of office have not yet been completed. Tax experts say complex audits typically take several years.
“No wonder,” Steve Rosenthal, an analyst at the Tax Policy Center who testified before Congress about Trump’s tax returns, said in an interview that these audits remained incomplete. “It takes the IRS years to complete complicated audits.”
The President’s audit program is an IRS policy set forth in the agency’s regulatory handbook, not a federal law. Neal introduced legislation he introduced Tuesday evening to turn the policy into law, but the future of that proposal is uncertain as the House of Representatives is on the verge of moving from Democratic to Republican control.
The IRS began auditing Trump the same day that Neal asked for Trump’s tax returns
Trump was selected for audit by the IRS on April 3, 2019, the same day that Neal wrote a letter to then-IRS Commissioner Charles Rettig asking for Trump’s tax returns.
This is the result of a letter from the IRS to Trump and his wife Melania, published online Tuesday evening by Ways and Means Democrat Don Beyer (D-Va.), parts of which were redacted.
“On April 3, 2019, Ways and Means Committee Chairman Richard Neal wrote to the IRS to request Trump’s tax returns. This is part of our committee’s oversight of the mandatory audit of presidential tax returns by the IRS. On the same day, the IRS initiated its first audit of Donald Trump’s tax returns,” Beyer wrote.
Other Democrats sounded the alarm about this on Tuesday.
“There was only one time in the Trump years that the mandatory audit was triggered, and that was when Chairman Neal wrote a letter,” Ways and Means Democrat Judy Chu (California) said during a news conference Wednesday.
“Something is clearly wrong here,” said Chu.
Trump paid $0 in income tax in 2020
Trump’s tax liability fluctuated widely in the years that his tax returns were audited by the Ways and Means Committee and the JCT.
The JCT found that Trump paid no taxes in 2020, $558,000 in 2019, $5.3 million in taxes in 2018 and nothing again in 2017.
His taxable income in those years was also a rollercoaster ride. Trump had a taxable income of $0 in 2020, a taxable income of $3 million in 2019, $23 million in 2018 and $0 again in 2017.
According to tax experts, these ups and downs were made possible by the strategic distribution of corporate losses, which drive up income levels and therefore tax liability.
According to Rosenthal, Trump reported business losses of $105 million in 2015, left over from losses of more than $700 million reported in 2009.
These were spread over the years in which the JCT audited Trump’s tax returns. For example, Trump wrote down a loss of 76 million dollars in his “other income” category in 2015, ending up at 30 million dollars.
This accounting trick resulted in a taxable income of $0 and a tax liability of $0 for this year.
“Trump hasn’t paid any taxes for years. How does he do that? Through losses. By using losses as a means of protection,” Rosenthal said.
“Donald Trump’s tax returns are an example of the flaws in our tax code,” Wyden said Wednesday. “These are issues that are much bigger than Donald Trump. Trump’s returns are likely similar to those of many other wealthy tax fraudsters — hundreds of partnership interests, highly questionable deductions, and debts that can be deferred to pay off tax liabilities.”
“Donald Trump had big deductions, big loans and big losses — but rarely a big tax bill,” Representative Lloyd Doggett (D-Texas), a member of the Ways and Means Committee, said in a statement Tuesday. “Trump claimed tens of millions of dollars in losses and loans without the kind of evidence that an ordinary taxpayer would likely provide.”
Trump made his money with investments, not with companies
The JCT report shows that Trump’s real estate companies and other companies consistently lost money and were written off as losses, and that most of his actual income came from interest on his investments.
For 2020, Trump earned more than $10.6 million in taxable interest. In the same year, he reported a $15 million loss from his rental properties and other businesses structured as S companies, partnerships, and similar pass-through companies.
His total income for this year amounted to a loss of 4.7 million US dollars.
2019 tells almost the same story. Trump reported $11.3 million in interest and $16.5 million in losses from his real estate deals and other companies. His capital gains from this year totalled $9.26 million, meaning he was in the black with a total of $4.4 million.
His tax liability for this year was therefore positive at over 558,000 USD.
The pattern of interest income reported as net income and business income reported as net loss applies to all returns in the years reported to the Ways and Means Committee.
Republicans say the release of Trump’s tax returns is a “political weapon”
Republicans have said that the release of Trump’s tax returns should be seen as a new precedent, and some commentators read the threat of direct retaliation as Republicans prepare to take over the Ways and Means Committee in the new Congress.
“Ways and means, Republicans could come out and say, ‘You started it. That’s both-side-ism. “That’s why they’re going to ask for information about Hunter Biden and Joe Biden’s tax returns and whomever else they want to embarrass,” Rosenthal said in an interview.
Ways and Means Republican Chairman Kevin Brady (Texas) said he didn’t want to speculate in the next Congress about what Republican control would mean for the committee, but he mentioned tax returns on Wednesday in connection with the upcoming Congress.
“I’m not going to speculate on what the next Congress and this committee will focus on when it comes to tax returns,” he said.
— Updated at 3:26 p.m.