The quest for Donald Trump’s taxes is finally over and whatever secrets Trump fought for years to conceal will soon be revealed for all to see. But one fact is already clear: the IRS botched its job.
The IRS is required to conduct audits of the President and Vice-President while they are in office. This requirement arose in 1997, likely in response to concerns over President Nixon’s tax troubles. But the policy–enshrined in the IRS manual, section 126.96.36.199.4–was not followed during Trump’s term in office. During his four-year term, the agency opened only one audit–of this 2016 return–which only commenced in 2019 after Chairman Richard Neal of the House Ways and Means Committee sent a letter to the IRS seeking Trump’s returns and tax information. That audit is still not finished.
As the Committee characterized it, the IRS presidential audit program was “dormant” during Trump’s term.
Perhaps this should not have been surprising given that Trump’s Treasury Secretary Steve Mnuchin was the first Treasury Secretary to refuse to turn over tax information in response to a congressional request and when Congress sued to obtain compliance a Trump-appointed judge–Trevor McFadden–delayed ruling on the case until after Trump had left office.
But it surely must be stunning to most Americans that among the reasons cited by IRS officials for their failure to follow policy was that they were apparently intimidated by the complexities of Trump’s taxes. In an internal memo, the agency seemed to whine about the return having “about 400 flow-through returns…and since some of these are tiered…a total of 500 flow-through returns”—which meant that to “do a thorough review of these returns we would need a team much larger than the current team.”
A “flow-through” entity is one in which the income that comes into the business passes onto the owner and is commonly used to reduce taxation.
In sum, the I.R.S. rewarded Trump’s complex business structures by throwing their hands up at the prospect of having to dig into all those hundreds of records. Excuse me, but I thought that was what IRS agents liked to do?
Note that the agency had no concerns about following its policies when it came to auditing for President Obama and then-Vice President Biden.
The recent disclosure that, during the Trump Administration, the president regularly asked for audits of those he considered his political enemies—and invasive audits of former F.B.I. Director Comey and Deputy Director McCabe did occur—should raise deep concerns and trigger increased scrutiny. Such scrutiny could be undertaken by the agency’s Office of Inspector General or the the Justice Department’s Tax Division—not to mention Congress—although further work by the House of Representatives on the issue is highly unlikely given that the Republicans are about to take control of the House.
Chairman Neal and the present Ways and Means Committee have fought the good fight and put a lie to repeated claims that their investigation lacked legitimate purpose. All along, Neal stated that their purpose was to perform oversight on the effectiveness of the Presidential audit program and “on behalf of the American people … determine if that policy is being followed.”
We the people have our answer now, and it isn’t pretty.