Revenue failed to audit Trump during first two years in office

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

Mr Trump filed returns in 2017 for the two previous tax years, but the Internal Revenue Service (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 Mr Trump’s taxes and any related audits. Its chair, Richard E Neal of Massachusetts, had said the panel needed the data to assess the IRS’ mandatory presidential audit program, but Mr Trump’s lawyers and Republicans called that a pretext for a politically motivated fishing expedition.

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

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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, Mr 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 Mr 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 Mr Trump’s returns. The move brought to an end a prolonged battle by the House to obtain Mr Trump’s returns.

After the vote, Mr Neal, who as the committee’s chair requested Mr 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.

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 Mr Trump filed as president.

After a scandal related to former president Richard Nixon’s taxes, the agency under the Carter administration adopted a programme 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 Mr 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 Mr Trump appointee, Charles P Rettig, who left the post last month. In 2016, Mr Rettig, then a tax lawyer in Beverly Hills, California, published a column in Forbes that defended Mr Trump’s decision not to release his taxes as a candidate.

The IRS did not immediately comment on the matter after the disclosure late on Tuesday. But Mr 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 Mr Trump’s filings.

Mr 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 such as partnerships, foreign income and financial products.

Mr Neal had first requested access to Mr Trump’s tax returns in 2019, after Democrats won control of the House in the midterm elections and began trying to perform oversight of Mr 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 US District Court judge and a federal appeals court ruled in favour of the committee, and last month, the Supreme Court declined to block the release of the returns to the panel.

– This article originally appeared in The New York Times.