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In Twilight of Majority, Neal and Ways & Means to File Trump 1040s with the Public…

UPDATED 12/23/22 6:04PM: To include movement on the bill Neal proposed after Ways & Means voted to release the Trump tax returns. The bill ultimately passed the House on Thursday, but is unlikely to see Senate action before the new Congress takes office in January.

Ways & Means Committee

Neal: We shall return, Trump tax return that is. Chairman Neal, center, with, from left, Reps Steven Horsford (D-NV), Judy Chu (D-CA), Mike Thompson (D-CA) and Stacy Plaskett (D-VI). (still via C-Span)

With the 117th Congress and its Democratic House majority expiring in days, the Ways & Means Committee, chaired by Springfield Congressman Richard Neal, voted to release Donald Trump’s tax returns. The move caps a nearly four-year legal battle that began when Neal’s party took control of the House in 2019. The fruit are a pair of reports. The committee also offered legislation that mandates audits of the returns of the president and vice-president.

Texas Republican Ranking Member Kevin Brady thundered after the vote that the move would invite abuse. Democrats shrugged, noting that Trump was the first president since Richard Nixon to disclose no tax returns. Rather, Neal and Committee members emphasized that the Internal Revenue Service was not auditing presidents at all per its own policy. This was consistent with the agency’s broader failure to audit the wealthy but rather go after taxpayers of modest means.

“We anticipated the IRS would expand the mandatory audit program to account for the complex nature of the former president’s financial situation yet found no evidence of that,” Neal said in his opening statement at the hearing.

“This is a major failure of the IRS under the prior administration, and certainly not what we had hoped to find. But the evidence is clear,” he continued. “Congress must step in. I’ve proposed legislation to put the program above reproach, ensuring IRS conducts yearly, timely examinations while publicly disclosing certain information.”

At a press conference with colleagues, Neal invoked the fraught start of this session: the insurrection on January 6th. This Congress and the Ways & Means Committee had been productive but, to put it mildly, “contentious,” he added, referring to the Committee vote shortly before.

Neal and the Committee’s report indicated that no “mandatory” presidential audits were happening in Trump’s first two years in office. The first tax year the IRS pulled for review was 2015. That examination began the day Neal sent his first request for Trump’s taxes to the agency and the Treasury Department.

Committee members declined to say whether Trump intervened to stop any audits. As to specific questions about Trump’s returns, Neal said he would leave that to others once the Committee publishes them.

IRS building

The IRS fell flat on presidential audits. (via Wikipedia)

A key underlying reason for the failure to initiate timely audits was the IRS’s abject lack of the staff to investigate sprawling passthrough and corporations woven into returns like Trump’s. This despite the lack of substantiation, or supporting documents, for many things claimed on Trumps’ returns. The result was, as Nevada Congressman and Committee member Steven Horsford observed, people who received the earned income tax credit were more likely to face an audit.

“This vote tonight was not taken lightly,” he said. However, the fact that the presidential audit program was essentially “dormant” exposed inequity in the enforcement of the tax code.

“What that speaks to is really we have a two-tiered tax system where working people are held to one standard the very rich and the well-connected are held to a different standard,” Horsford explained.

Only two reports, one from Ways & Means and another from the Joint Committee on Taxation, came out Tuesday. The full returns that Neal sought will become public. However, staff must redact personal information such as Social Security numbers before making them available to the press and individuals. However, the Joint Committee’s report highlights concerning elements of the Trump returns.

While Neal requested Trump’s returns in April of 2019, he used a Jazz Age law Western Massachusetts’s own Silent Cal signed after Teapot Dome. It allows Congress access to tax records. In addition to Ways & Means, The Senate Finance Committee and the Joint Committee on Taxation can also request returns. Neal sought a slice of returns for Trump himself and several of the entities his businesses use.

The Treasury Department Trump then controlled refused to comply. With Trump, his entities and his administration arguing the request did not serve a legislative purpose, the Committee sued. In court, lawyers for Trump argued the law was unconstitutional. Resolution of the issue bogged down amid other suits Dems in the House had initiated.

Even after President Joe Biden took office, progress was glacial. While the IRS and Treasury switched sides, Trump was still fighting. US District Court Judge Trevor McFadden finally got his rear in gear in December 2021 and ruled in Neal’s favor. The Court of Appeals for the DC Circuit affirmed McFadden and this November the Supreme Court declined to intervene. The Treasury Department then furnished the documents.

Kevin Brady

Texas Rep Kevin Brady, retiring but also criticizing. (via wikipedia)

Brady, the retiring top Republican on Ways & Means, accused Neal and Democrats of opening ordinary Americans up to political attacks on their privacy.

“Regrettably the deed is done,” he told reporters. “Over our objections in opposition, Democrats on the Ways & Means Committee have unleashed a dangerous new political weapon that overturns decades of privacy protections for average taxpayers.”

Brady listed potential targets, including Supreme Court justices. That drew guffaws from social media given the political activities of some justices’ spouses.

“I would note Republicans offered an amendment that would refer these documents and investigation to the Joint Committee on Taxation, a credible experienced organization that has conducted similar reviews in the past,” Brady continued.

Neal, who underscored the civility throughout the process—he and Brady have enjoyed a good working relationship—brushed off his counterpart’s criticism.

“First of all, in 2014, Republicans used the statute to pursue Lois Lerner,” Neal said, referring to the IRS official whose botched review of conservative nonprofits became a scandal. He added that Republicans even made a criminal referral against her. “The notion that we’re the only ones who’ve used this flies in the face of the evidence.”

The Committee’s top Democrat and Republican have found some agreement, though. Neal said he acceded to Brady’s request to let GOP Ways & Means staff participate in the review of Trump’s taxes.

Neal & Brady

One last dispute for the road. (WMP&I)

Neal had faced criticism for not acting more quickly and kept any blabbing about the case to an absolute minimum much to the consternation of reporters, he wryly remarked. The issue became a flashpoint in his renomination battle against now-former Holyoke Mayor Alex Morse in 2020.

On Tuesday night, Neal said he followed the advice of House counsel meticulously. He was vague with the press and never raised the issue in fundraising appeals.

“I accepted the advice of House counsel because I knew how perilous would be, but I stayed with it,” Neal said.

“The idea was to prepare the case,” he said in response to a question about whether moving faster would have alleviated the crunch now. “Not being an attorney, I scrupulous the advice of [House counsel] Doug Letter.”

As for the vote itself, some members admitted hesitancy on making the returns public. Stacey Plaskett, the Virgin Islands’ delegate, said the mandatory audit program was among the few checks on presidential corruption. As a former prosecutor, she had reservations about voting to make the returns public. Still, the IRS’s failure to conduct the program underscored the need for scrutiny.

“In seeing the report, seeing the dysfunction within the mandatory audit process as well as seeing the things that should have been looked at, the things that were pointed by the outstanding Joint Committee on Taxation, from the tax staff, that can only be understood with the release of the underlying evidence as well,” she said.

To the extent the IRS’s presidential audit program exists, the reports identify multiple problems. Staff from the Joint Committee on Taxation also received authorization to review the returns. They disagreed with the IRS’s decision to not bring in experts to review taxes as complex as Trump’s.

Staff also questioned the agency’s belief that high-earners employment of accountants and tax counsel hallows returns, obviating the need for reviews or audits. Finally, not auditing lets millions of potentially unallowed charitable contributions stand without proof.

Ways & Means

A Ways & Means Committee hearing in 2019. (WMP&I)

With respect to the Trump returns specifically, the report repeat general concerns about the unaudited returns of the wealthy. The joint committee also flagged the way Trump spread losses and deductions among his entities and how certain payments, may shirk federal gift tax.

The recommendations put forward focus on three main areas. One urges the IRS to revise its policy manual to provide direction and clarity to presidential audits. Another called for the allocation of sufficient resources to audit presidential returns. The report notes that the Inflation Reduction Act includes $79 billion to bulk up IRS’s enforcement vis-a-vis the wealthy.

The final piece of legislation requiring the annual audit and disclosure of presidents and vice-presidents’ tax returns. It is unlikely that such a bill could pass before the formal Congressional session concludes. Yet, Neal said there are discussions about it passing were ongoing.

On Wednesday, after this post was originally published, the Rules Committee too up the bill. It passed a rule and the House vote to pass the presidential audit legislation Thursday. Even if this does not pass the Senate, Neal thought it could easily pass a GOP-run House, too.

“I think this is going to sail. If there was any takeaway from the conversations we’ve had over the last couple of days with Republicans, they would like something like this to take place,” Neal said Tuesday.