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May 26, 2016
Former IRS Chief Says Trump Should Release Returns
by Paul C. Barton

Full Text Published by Tax Analysts®

By Donald Trump's own reasoning, the presumptive Republican presidential nominee should be releasing some of his tax returns, a former IRS commissioner says.

Trump has repeatedly said he can't release his tax returns -- on advice of attorneys -- because they are under audit, a defiance that threatens to interrupt a 40-year tradition of presidential candidates and presidents releasing returns.

During a February 25 Republican debate, Trump said he would "absolutely" release his returns, but that "I'm being audited now for two or three years, so I can't do it until the audit is finished, obviously. And I think people would understand that." He later said the audits were triggered "because of the size of my company."

That's more or less remained his basic response to questions about releasing tax returns, even though it's an excuse many tax law professors and practitioners rebut.

But the letter from attorneys that Trump uses to explain his claim of continuous audits says nothing about him being unable to make returns public.

"That's nowhere in the letter," Mark W. Everson, who served as IRS commissioner from 2003 to 2007, told Tax Analysts in an interview. Everson himself flirted with making a 2016 presidential bid as a Republican candidate.

Past Audits

The March 7 letter from Morgan, Lewis & Bockius LLP that Trump released March 30 said IRS audits of his 2002-2008 returns were completed "without assessment or payment, on a net basis, of any deficiency" and that audits for years 2009 forward are ongoing and involve "continuing transactions or activities that were also reported on returns for 2008 and earlier."

"That's good news," Everson said of the 2002-2008 audits.

So if Trump is saying audits are the standard for keeping his returns private, Everson said, "Why not release the years that are completed?"

Similarly, the liberal Campaign for America's Future said May 24, "Nothing prevents you from releasing your tax returns prior to 2009, which have been cleared by previous IRS audits."

"Trump must be very worried about what is in the returns, because he has clearly concluded that the damage to his campaign from making them public would be greater than if he toughs it out," Everson said.

Some former IRS agents also lean toward disclosure. Former revenue agent Russell Dunn of Hollywood, Florida, told Tax Analysts he knows it can be "a difficult situation" for some to make their returns public, but when it comes to presidential candidates, "I think they should."

But Corey Lewandowski, Trump's campaign manager, speaking with CBS News on May 24 about the real estate investor's returns, said, "I don't know what you think you are going to learn."

About the earlier returns in which audits have been completed, Lewandowski said, "There is nothing to see."

The campaign manager also said Trump had income of $557 million in 2015 and "fights for every single dollar" he can save through deductions and other tax breaks, "which I think the American people understand."

More Recent Returns

And what of Trump's returns for 2015 and 2014? Can those already be under audit?

Dunn said that when it comes to Trump's returns being filed, "an examiner could put a code in the IRS system that indicates that if and when a subsequent year return has been filed, the examiner will 'control' that return for examination purposes. The return may be placed under examination or inspected, which is a term for an evaluation for examination -- but not yet given an examination [audit] code on the system."

Dunn added, "People like that are almost under continuous audit." And while he favors disclosure in Trump's case, the public release of tax returns can disclose important information to business competitors, he said.

Everson said it's likely Trump files for extensions, meaning his 2014 return probably wasn't filed until October 2015, and his 2015 return probably won't be filed until October 2016.

"I highly doubt 2014 would be under audit," said former IRS field agent Anthony Hearn of Trenton, New Jersey. "Usually the ink is dry at least a year."

Trump's campaign did not respond to Tax Analysts' questions about releasing his 2002-2008 returns or those for 2014 and 2015.

"Unless I'm missing something, there's no way his 2015 return is being audited," said Jay Soled, tax law professor at Rutgers University. "The bigger question: Did he submit it yet? He could be on extension until as long as October 15."

If Trump files his 2015 return on October 15, that would put it about three weeks before the election. Soled asked if he "would release his return that day or the day after, right? There is no such thing as an immediate tax audit."

Trump's individual returns involve tax issues for about 500 business entities that he operates as sole proprietorships or closely held partnerships, according to the letter from Morgan, Lewis & Bockius. As a result, the letter adds, his returns are "inordinately large and complex for an individual."

Hearn said high-net-worth individuals like Trump can report shockingly low income for some years. He explained, "I kind of suspect his tax return will show very little income because of his losses."

"Maybe he's afraid people will be insulted. When we think of Donald Trump we think of billionaire Donald," Hearn added.

Hearn also said serial audits can signal chronic underreporting of income and taking excessive deductions.

Other Issues

Most of the speculation about what's in Trump's returns has included him paying zero taxes or at a very low rate for many years and not giving much to charities. New York magazine said his myriad business interests would likely present many conflicts of interest should he become president.

And some left-leaning groups, including Americans United for Change, want to know if his returns show that he profited from the housing collapse of the mid-2000s.

They point to Trump comments that CNN recently unearthed. In 2006 comments about the possibility of a crash in the U.S. real estate market, Trump said, "I sort of hope that happens because then people like me would go in and buy." The comment came from a Trump University audiobook, according to CNN.

In an interview, Robert Creamer, a consultant to Americans United for Change, said there are "lots and lots" of things about Trump the public will never know until he releases his returns. They include how rich he really is and whether he truly has no offshore accounts as he claims, and whether he is as generous as he claims.

"Let him show us," Creamer said. "This is not an Eagle Scout when it comes to telling the truth."

And while Trump aides have said the news media is more interested in his taxes than "middle America," a Morning Consult poll released May 24 found 67 percent of registered voters think presidential candidates should release their returns.

"With all of Trump's flailing statements regarding his tax returns -- and other issues, of course -- it's starting to seem that he has some kind of bet going, seeing if he can outdo himself with ridiculous and nonsensical statements," said Neil H. Buchanan, tax law professor at George Washington University.

Buchanan said Trump's 2015 return "is almost certainly not" under audit. "If it is, he can say so. If it's not, he would have to claim that he expects to be audited. But why? What has he done that could convince him that he'll be audited for 2015? And what would he lose by releasing the returns, in any event?" Buchanan said.

"Trump seems to think that he can simply bluff his way through this," he added.

And David Cay Johnston, a Pulitzer Prize-winning reporter on tax issues who has monitored Trump's business practices, said, "Trump makes things up, as he has said under oath."

Said Johnston: "Trump has testified that he has used a fake identity, John Barron, and that he makes up statements about his wealth and income. Indeed, he has testified that his statements about how much he is worth are influenced by his emotional state."

Taxpayers Influence Audits

Juan F. Vasquez, a tax attorney with Chamberlain, Hrdlicka, White, Williams & Aughtry, says taxpayers can help bring audits to a close or help extend them.

They can help bring them to a close, he said in an email, "by timely responding to Information Document Requests, no longer agreeing to and signing extensions [of the statute of limitations], and other potential steps that may extend the audit process. They could also agree to the proposed IRS adjustments and/or forego their rights to go to IRS Appeals."

Conversely, Vasquez said, they can extend the process by agreeing to extensions of the statute of limitations on their returns and by requesting more time to respond to information document requests.

But none of this, he said, affects their ability to make a tax return public. "Taxpayers can release their returns at any time," Vasquez said.

Speaking about the effect the returns could have on voters, Vasquez added, "There are many potential armchair quarterbacks out there, who may or may not pick up on the same potential tax issues raised by the IRS."

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