The House Ways and Means Committee released its much-anticipated report on the Internal Revenue Service’s handling of former President Donald Trump’s tax returns Tuesday night, and it turned out to be a bombshell: Notwithstanding the IRS’s stated policy of annually examining the president’s returns, the agency didn’t initiate an audit of Trump’s tax filings until more than two years into his term. Indeed, according to the committee report, the IRS didn’t start to examine Trump’s returns until House Ways and Means chair Richard Neal (D-Mass.) requested that the agency provide his panel with copies of the president’s tax filings and a status report on the IRS’s audits of Trump.
This should have been an I-told-you-so moment for Neal and the other Democrats on the House tax committee, who for nearly four years had argued that they needed to see Trump’s tax returns in order to conduct a thorough review of the IRS’s presidential audit program. But rather than a triumphant I-told-you-so, the report released Tuesday told the American people surprisingly little. Was the breakdown of the presidential audit program a Trump-specific deviation from a policy that the agency otherwise followed, or was it a system-wide malfunction that pre-dated and post-dated Trump? And given the committee’s stated purpose of evaluating the presidential audit program, why does it feel the need to publish six years of Trump’s tax returns—including returns that he filed after he left the White House?
The New York Times shed light on the first of those questions Wednesday night, when—citing information from spokespeople for former President Barack Obama and President Joe Biden—the newspaper reported that the IRS annually audited Trump’s predecessor and successor. The Times’ report suggests that the breakdown of the IRS’s presidential audit program started—and ended—with Trump. But only the committee can explain its reason for publishing six years of Trump’s returns. And Tuesday’s report is strangely silent on that critical question.
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To be fair to Neal and his fellow Ways and Means Democrats, the only reason we’ve reached a juncture at which the committee even has the option of releasing the former president’s returns is because House Democrats fought long and hard to obtain Trump’s tax filings (albeit after a slow start and with several missteps along the way). To get to this point, Democrats had to endure years of litigation stall tactics and what now appears to have been gaslighting by the Trump administration.
In April 2019, Neal invoked his statutory authority under section 6103(f) of the Internal Revenue Code to request Trump’s tax returns from the IRS, saying that his committee was “conducting oversight related to … the extent to which the IRS audits and enforces the Federal tax laws against a President.” Trump’s Treasury secretary, Steven Mnuchin, refused, saying that the request “lacks a legitimate legislative purpose.” As consolation, Mnuchin offered “to provide information concerning … how the IRS conducts mandatory examinations of Presidents, as provided by the Internal Revenue Manual.” The Office of Legal Counsel in Trump’s Justice Department backed Mnuchin with an opinion concluding that the Ways and Means Committee’s stated interest in the IRS’s presidential audit program was “pretextual.”
Today, it’s clear that House Democrats were barking up the right tree. By the time of Neal’s April 2019 request, Trump had filed three tax returns while in office and according to the Ways and Means Committee’s report, the IRS hadn’t initiated any examination of those returns until the day that Neal asked for the filings. Meanwhile, the IRS told Neal’s committee in a June 2019 briefing that the agency had conducted mandatory examinations of presidential and vice presidential returns since 1977 and that it was “not aware of any reports of improper bias or partiality in the conduct” of those exams “in the more than 40-year history of mandatory procedures.”
To break through the stonewalling, Neal took the Trump administration to court. What ensued was the litigation equivalent of trench warfare, with Trump trying to prolong the battle at every step. Late last month, the Supreme Court denied Trump’s final bid to block the release of the returns, without any of the nine justices noting dissent.
By that point, it was clear that Ways and Means Democrats didn’t have time to conduct a top-to-bottom review of the presidential audit program before the GOP gained the gavel on Jan. 3. As I wrote here in Lawfare on Dec. 2:
Plainly, the House Ways and Means Committee is not going to be able to carry out a thorough evaluation of the IRS’s presidential audit program in the four and a half weeks between now and the GOP takeover. … [T]he committee will need to know how the IRS’s handling of items on Trump’s tax returns compares to the service’s treatment of similar items on returns filed by other high-net-worth business owners who weren’t president of the United States. … The committee also will likely need to hear testimony from IRS examiners involved in the presidential audit program. Did they personally experience improper political influence? And the committee will need to compare the audits of Trump’s returns to audits of other presidents and vice presidents.
That left Ways and Means Democrats with two viable options. First, they could have gathered basic facts from the IRS about the presidential audit program and dashed off a bird’s-eye overview—without all the details one might wish for—in the remaining weeks. Alternatively, they could have taken their collective foot off the gas pedal and yielded to the Senate Finance Committee, which has the same statutory authority to obtain confidential returns and which will remain under Democratic control in the next Congress.
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The Ways and Means Committee followed neither of those paths. Rather, it voted on party lines Tuesday night to publish Trump’s returns for tax years 2015 through 2020. The actual returns—with information such as social security and bank account numbers redacted—will become public in the coming days. As a teaser, the committee posted a 39-page report from the staff of the Joint Committee on Taxation that summarized Trump’s tax filings for those years.
The Ways and Means Committee’s decision to release the full (albeit redacted) returns of an individual appears to be unprecedented. The staff of the Joint Committee on Taxation produced a report on President Nixon’s returns in 1974, but Nixon had voluntarily released his returns for the relevant years. Ways and Means Republicans also published confidential information regarding 51 taxpayers in 2014 as part of an investigation into allegations that the IRS had improperly targeted conservative groups for extra scrutiny, but those revelations were not nearly as detailed as the line-by-line information that Democrats have chosen to disclose regarding Trump.
While the Ways and Means Committee—like its upper-chamber counterpart, the Senate Finance Committee—unquestionably has the legal authority to disclose individual tax returns, the committee has been loath to use that extraordinary authority in the past. After all, confidentiality is a core value of the federal tax system. Confidentiality can promote compliance by assuring taxpayers that the information they share with the IRS won’t be used by third parties such as creditors and employers. Moreover, tax returns may reveal sensitive information about people’s private lives—about medical expenses, charitable contributions, family financial arrangements, and so on. If this information were public, many of us would feel like we were living in a fishbowl.
To be sure, these considerations are less compelling in the case of a president, who already lives in a fishbowl. And in the president’s case, countervailing considerations support a norm of tax return disclosure. In a 2017 Yale Law Journal Forum article, I highlighted four reasons why presidents should make their returns public: to bolster taxpayer morale; to aid voters in evaluating whether the president’s tax policies are motivated by self-interest; to shine a light on non-tax conflicts of interest that might affect the president; and to serve as a check on improper presidential influence over the IRS. In my view, these countervailing considerations are strong enough to justify a federal statute requiring presidents to release their returns. Every president since Jimmy Carter—with the exception of Trump—has done so voluntarily.
But a statute—adopted after robust debate—is different from a decision by members of one party on one committee in one chamber to release an individual’s returns on their own. At the very least, one would hope that the Ways and Means Committee would conscientiously consider taxpayer confidentiality interests before plowing ahead along an unusual procedural route. Yet one searches Tuesday’s report in vain for any evidence that members analyzed the implications of full disclosure.
A high-level summary would have sufficed to show that—notwithstanding Trump’s campaign trail claim that his returns were “very beautiful”—his filings contained items that should have merited further IRS scrutiny, such as a very large net operating loss carryforward that wiped away years of taxable income. We don’t need to know, for example, precisely how much interest income Trump received from his adult children on intra-family loans in order to conclude that the IRS’s failure to audit Trump for his first two years in office was potentially consequential.
Moreover, it’s not clear why the committee decided to include Trump’s tax year 2020 returns in the data dump—except for the scintillating fact that Trump paid $0 of federal income tax for that year (which was probably not unusual for owners of hotel properties at the height of the Covid-19 pandemic). Trump’s tax year 2020 returns weren’t due until after he left the White House, and none of Trump’s predecessors have released returns for their last full tax year in office. Obama didn’t release his tax year 2016 returns; George W. Bush didn’t release his tax year 2008 returns; Bill Clinton didn’t release his tax year 2000 returns; and so on. Ways and Means Democrats are applying a different standard to Trump than past presidents applied to themselves.
The report also says nothing about the potential downstream consequences of the disclosure, which may well set off an inter-party tit-for-tat. Granted, Republicans won’t gain much mileage from releasing President Biden’s tax returns when they take control of the Ways and Means Committee, because Biden releases his returns each year. But the Wall Street Journal editorial board is already making noises about Hunter Biden’s tax returns, which may soon displace Hunter Biden’s laptop as a perennial object of GOP obsession. Or House Republicans may target the tax filings of the Ways and Means Democrats who voted to disclose Trump’s returns–many of whom haven’t deigned to release their own. A scenario in which the two parties weaponize individual tax returns for political ends is not a happy scenario for the federal tax system. Tuesday’s decision doesn’t guarantee that we’ll tumble down that slippery slope, but it may well nudge the nation in that direction.
“The public must have confidence that our tax laws apply evenly and justly to all, regardless of power or position,” the Ways and Means Committee wrote in its Tuesday report. As part of that, the public ought to be able to trust that the IRS will follow through on its promise to audit the president each year—and the committee deserves credit for revealing that this promise wasn’t fulfilled. But by the same token, the public ought to be able to trust that Congress—the body that wields the awesome power to tax—will think long and hard before exposing a private citizen’s tax returns to public view, even if that private citizen happens to be a former president of the United States with aspirations to occupy the White House again. And even when—at the end of the day—lawmakers decide that public disclosure is warranted, the minimum we should demand of them is that they recognize the weight of what they’re doing.
In short, the IRS appears to have fallen down on the job. But Democrats on the Ways and Means Committee—who promised to carry out a thorough review of the IRS’s presidential audit program, yet instead made a hair-trigger decision to release Trump’s tax returns—fell down on the job as well. And as a consequence, a pox on both Trump and the IRS has become a pox on the House too.