4 conclusions about Trump’s taxes after the congressional report

New York (CNN) — It will take time for lawmakers and the public to digest the vast trove of documents related 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 incumbent.

The commission, which is responsible for oversight of 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 review “how the IRS enforces federal tax laws against, and ensures compliance with, a president.”

These are some of the main initial conclusions of the commission reportwhich includes both his analysis of the IRS presidential audit program and an analysis of Trump’s statements by the nonpartisan Joint Committee on Taxation.

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Commission says IRS failed to properly audit Trump

The Ways and Means Commission affirms that the IRS presidential audit program it was “inactive” during Trump’s tenure.

The report found that during Trump’s time in office, the IRS only opened one “mandatory” audit: for his 2016 tax return. And that didn’t take place until the fall of 2019, after President Neal sent by for the first time a letter asking the IRS for Trump’s tax returns and information.

It also notes that the agency had opened an audit earlier that year for its 2015 return, but it was not designated as mandatory.

The 2017 tax return, meanwhile, was marked as “assessed and collected for examination, if necessary.”

It remains unclear why the IRS was not more active in auditing Trump’s returns while he was president.

“Despite knowledge of an ongoing Congressional investigation and the Manual, the previous administration did not prioritize the mandatory audit program,” the report states.

Sen. Ron Wyden, who chairs the Senate tax drafting committee, said Wednesday that “the IRS was asleep at the wheel, and the presidential audit program is broken. There is no justification for not having the required presidential audits done.” until a congressional investigation ensued. I have additional questions about the extent to which resource issues or fear of political retaliation from the White House contributed to the lapses here.”

Many Democrats, including those on the committee, as well as tax policy experts suggest that a lack of resources, including the staff to handle highly complex audits like Trump’s, may also be a factor.

“It’s easy to find fault with the IRS. They are severely under-resourced. The rich can take advantage of the tax law because the IRS doesn’t have the resources to go after them,” said Steven M. Rosenthal, senior fellow at the Urban Tax Policy Center. -Brookings at the Urban Institute.

CNN contacted the IRS, which did not immediately comment.

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Trump paid no federal income taxes in his last year as president

After years of dragging heavy losses to greatly reduce, if not eliminate, his federal income tax liability, Trump declared a sizeable tax bill in the middle two years of his presidency, according to the report’s tables.

Trump paid a combined $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 close to $23 million, which included a capital gain of $22 million.

The following year, he reported nearly $3 million in taxable income, with a capital gain of $9 million.

Yet in 2020 Trump declared losses of more than $16 million, large enough to reduce his federal income tax bill for that year to $0.

For many years before his run for president, a New York Times investigation showed that Trump had reported huge net operating losses that he was allowed to carry forward and apply to future fiscal years, greatly reducing or simply eliminating his obligation. annual income tax.

For example, the JCT noted that Trump dragged down $105 million in losses in his 2015 filing, $73 million in 2016, $45 million in 2017, and $23 million in 2018.

Doubts about Trump’s charitable deductions

The report raises questions about the accuracy of some huge charitable deductions that Trump claimed on several of his tax returns. Deductions can limit the amount of income tax due.

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 a focus of the Manhattan district attorney’s criminal investigation into the finances of the Trump Organization.

The IRS allows an income tax deduction for property owners who relinquish rights to their land for conservation purposes, but the IRS has raised questions about whether the value of Trump’s land gift was inflated.

The report notes that an IRS agent tasked with auditing Trump’s taxes suggested disallowing the entire $21.1 million deduction because Trump failed to obtain a qualified appraisal for the land. The agent also suggested cutting the value of the deduction by more than half and said the appraiser could be subject to a penalty for misstating the value of the land.

Since Trump did not have any 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 ongoing. An on-site visit occurred in January, and agents met with appraisers as recently as November, according to the report.

The report also raised questions about the 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 were in cash. Trump, again, had no taxable income in either year, but was able to carry the deduction over to future years, further limiting the amount of federal income tax he had to pay. The JCT said large cash contributions warranted a review.

Trump had taxable income in 2018 and 2019 and declared cash donations of just over $500,000 each year. That means he was able to claim a charitable contribution deduction for those years. The JCT suggested that Trump be asked to justify those large cash donations.

IRS points to ‘record of difficult negotiations’ with Trump team

Shortly after The New York Times published a high-profile story detailing Trump’s tax returns on September 27, 2020, the IRS met internally to discuss how to handle a review of the then-President’s taxes. .

During the meeting, the “history of difficult negotiations” between IRS staff and Trump’s lawyers was brought up, according to the report.

IRS regulators also laid out a strategy at that meeting to assess Trump’s finances, laying out criteria to make the process manageable given the large number of pass-through entities. The Trump trust has ownership of several pass-through entities, whose income and deductions flow to Trump’s federal tax return.

In March 2021, the IRS contacted Trump’s representatives to let them know that an audit of his 2017 and 2018 tax returns had begun.

Around this time, Trump’s team called the IRS to discuss the size of the team evaluating tax returns. Three agents were assigned, versus the typical single agent.

The IRS team head explained to Trump’s representatives that the agency had deemed the 2017 tax return “high risk,” requiring additional team members to examine the more than 400 flow entities.

Trump’s team also raised concerns about the scope of the review, which went back as far as 2014 because of deductions Trump claimed in that year that carried over and reduced his tax burden in later years.

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