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  • Writer's pictureThe San Juan Daily Star

Despite mandate, IRS delayed auditing Trump in office, House panel finds

Rep. Richard Neal (D-Mass.), center, the House Ways and Means Committee chairman, speaks with Reps. Bill Pascrell (D-N.J.), left, and John Larson (D-Conn.) before a hearing where the committee voted to publicly release the tax returns of former President Donald Trump, in Washington on Tuesday, Dec. 20, 2022.

By Charlie Savage, Emily Cochrane, Stephanie Lai and Alan Rappeport

The Internal Revenue Service failed to audit former President Donald Trump during his first two years in office despite a program that makes the auditing of sitting presidents mandatory, a House committee revealed earlier this week after an extraordinary vote to make public six years of his tax returns.

Trump filed returns in 2017 for the two previous tax years, but the IRS began auditing those filings only in 2019 — the first on the same day in April the Ways and Means Committee requested access to his taxes and any associated audits, a report by the panel said. The IRS has yet to complete those audits, it said, and the agency started auditing his filings covering his income while president only after he left office.

The revelation could transform the political context of the committee’s nearly four-year fight to obtain information about Trump’s taxes and any related audits. Its chair, Rep. Richard E. Neal of Massachusetts, had said the panel needed the data to assess the IRS’ mandatory presidential audit program, but Trump’s lawyers and Republicans called that a pretext for a politically motivated fishing expedition.

The suggestion of dysfunction in the auditing program was an early takeaway in what could be a series of disclosures related to the release of Trump’s returns. Democrats said it might be several days before thousands of pages of tax filings from Trump and several associated businesses from 2015 to 2020 became public as they redacted sensitive details, like street addresses and bank account numbers.

But a Joint Committee on Taxation staff report released Tuesday night included some details from his tax filings.

When combined with tax records previously obtained by The New York Times, the records show that in 2018, Trump had positive taxable income for the first time in more than a decade. That change occurred largely because he had sold properties or investments at a gain of $22 million, and he appears to have exhausted the business losses he had been rolling over year after year. As a result, he paid $999,466 in federal income taxes for 2018. But his long-term pattern of reporting negative income returned by 2020, and he paid no federal income taxes for that year.

The party-line vote to release the materials came during the last weeks of Democratic control of the House after Republican gains in the midterm election. The committee invoked a century-old statute that allows it to lawfully make public otherwise confidential tax information involving Trump, who had defied tradition by refusing to disclose his financial information as a presidential candidate and sitting president.

The committee debated behind closed doors for more than four hours before voting to make public Trump’s returns. The move brought to an end a prolonged battle by the House to obtain Trump’s returns.

After the vote, Neal, who as the committee’s chair requested Trump’s tax returns from the Treasury Department, praised the panel’s handling of the documents.

“This was not about being punitive,” he said. “This was not about being malicious. And there were no leaks from the committee. We adhered carefully to the law.”

But Republicans on the committee portrayed the decision as unjustified, setting a dangerous precedent and eroding a norm against exposing private taxpayer information that risked paving the way for lawmakers to routinely expose political adversaries’ private finances.

Rep. Kevin Brady of Texas, the top Republican on the panel, condemned the vote afterward. “So regrettably, the deed is done,” he said. “What was clear today is that public disclosure of President Trump’s private tax returns has nothing to do with the stated purpose of reviewing the IRS presidential audit process.”

It was not immediately clear why the IRS delayed starting auditing the tax returns Trump filed as president.

After a scandal related to former President Richard M. Nixon’s taxes, the agency under the Carter administration adopted a program that requires the agency to audit such filings every year.

Its regulations state that “individual tax returns for the president and the vice president are subject to mandatory review.”

John A. Koskinen, the former IRS commissioner who served during the first year of Trump’s presidency, said in an interview that he was not involved in the presidential audit process and that he did not know why the audits did not occur.

“It does seem to me to be a legitimate question: If the IRS had the responsibility and wasn’t auditing, what’s the explanation?” he asked.

Starting in 2018, the IRS was run by a Trump appointee, Charles P. Rettig, who left the post last month. In 2016, Rettig, then a tax lawyer in Beverly Hills, California, published a column in Forbes that defended Trump’s decision not to release his taxes as a candidate.

The IRS did not immediately comment on the matter after the disclosure late Tuesday. But Neal said that when the committee had inquired, “Rettig said at different points that they were simply outgunned” and that the IRS said it lacked specialists capable of assessing Trump’s filings.

Neal’s report called for Congress to codify into law that the IRS conduct mandatory audits of presidents while they are in office and to publicly disclose related information. It also said the IRS “should provide adequate and appropriate staffing and resources necessary for a full and timely audit of the president,” including specialists on matters like partnerships, foreign income and financial products.

Neal had first requested access to Trump’s tax returns in 2019, after Democrats won control of the House in the midterm elections and began trying to perform oversight of Trump. But the Trump administration would not let the Treasury Department comply with the request.

The panel eventually filed a lawsuit seeking to enforce its request, setting off a legal battle that played out over nearly four years. A U.S. District Court judge and a federal appeals court ruled in favor of the committee, and last month, the Supreme Court declined to block the release of the returns to the panel.

Speaker Nancy Pelosi of California praised the effort in a statement, and the House scheduled a vote this week on legislation proposed by Neal to require an annual audit of the president’s finances, according to a notice from Democratic leaders.

“The Ways and Means Committee’s solemn oversight work has revealed the urgent need for legislation to ensure the public can trust in real accountability and transparency during the audit of a sitting president’s tax returns — not only in the case of President Trump, but for any president,” she said. “The American people deserve to know without question that no one is above the law.”

It is not clear whether the release of the records would reveal major findings given past disclosures about Trump’s finances.

Before the vote, Republicans also criticized Democrats for issuing an analysis of Trump’s taxes, portraying them as hasty and noting that they had only studied them for a few weeks.

But House Democrats faced a time squeeze because Republicans on the committee will most likely drop the matter when they take over next month, and Trump had used the slow pace of litigation to run out the clock on their oversight efforts.

That effort faced further delay after the committee’s lawsuit landed before a Trump appointee, Judge Trevor N. McFadden of the U.S. District Court for the District of Columbia.

McFadden waited nearly 2 1/2 years before ruling on the matter. When he finally issued a decision in late 2021, he acknowledged that the law was on the committee’s side but warned that he thought putting out Trump’s taxes would be a bad idea.

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