Trump tax audits required by law were 'dormant, at best,' congressional committee says

The IRS failed to pursue mandatory audits of Donald Trump on a timely basis during his presidency, a U.S. congressional panel found on Tuesday, raising questions about statements by the former president and leading members of his administration who claimed he could not release his tax filings because of the ongoing reviews.

A report released by the Democratic majority on the House's ways and means committee indicated the Trump administration may have disregarded an IRS requirement dating back to 1977 that mandates audits of a president's tax filings. The IRS only began to audit his 2015 tax filings on April 3, 2019, a date more than two years into Trump's presidency. That date also coincides with committee chair Richard Neal making an "initial request to the IRS for the former president's return information and related tax returns."

The 29-page report was published just hours after the committee voted along party lines to release Trump's tax returns in the coming days, raising the potential of additional revelations related to the finances of the onetime businessman who broke political norms by refusing to voluntarily release his returns as he sought the presidency.

The release is the culmination of a years-long fight between Trump and Democrats that played out all the way up to the U.S. Supreme Court.

Democrats on the committee argued that transparency and the rule of law were at stake by voting to issue a report that legally rests on questions about how the IRS monitors U.S. presidents.

"This is about the presidency, not the president," Neal told reporters.

Republicans countered that the release would set a dangerous precedent with regard to the loss of privacy protections.

"The era of political targeting, and of Congress's enemies list, is back, and every American, every American taxpayer, who may get on the wrong side of the majority in Congress is now at risk," said Texas congressman Kevin Brady, the panel's top Republican member.

Democrats want changes to laws

There was no suggestion that Trump, who has announced a third presidential run, sought to directly influence the IRS or discourage the agency from reviewing his tax information. But the report found that the audit process was "dormant, at best."

It wasn't until September 2019 that the IRS began to audit Trump's 2016 tax filings. Audits were on a lag for his 2017, 2018 and 2019 filings and never even began for his 2020 submission.

Trump spent much of Tuesday evening releasing statements on his Truth Social media platform that were unrelated to his tax returns. The IRS didn't immediately respond to a request for comment.

An accompanying report released by Congress's nonpartisan joint committee on taxation on Tuesday found repeated faults with the IRS's approach toward auditing Trump and his companies.

IRS agents in charge of the audits repeatedly did not bring in specialists with expertise assessing the complicated structure of Trump's holdings. They frequently determined that a limited examination was warranted because Trump hired a professional accounting firm that they assumed would make sure Trump "properly reports all income and deduction items correctly."

Democrats argue that the IRS is ill-equipped to audit high-income, complex tax returns, and instead targets filers in lower-income brackets — something they have tried to remedy with their work on the panel.

The committee led by Neal is proposing legislation to beef up the IRS's approach, requiring an initial report no later than 90 days from the filing of a president's tax returns. House Speaker Nancy Pelosi said the chamber would "move swiftly" to advance the legislation, with Republicans set to take over control of the chamber in early 2023.

Republicans vow to cut funding for more IRS agents as the first bill they will consider taking over the House majority in the new year.

Trump paid little in taxes for years

Americans were largely in the dark about Trump's relationship with the IRS until October 2018 and September 2020, when The New York Times published two separate series based on leaked tax records.

The 2020 articles showed that Trump paid just $750 US in federal income taxes in 2017 and 2018. Trump paid no income taxes at all in 10 of the past 15 years because he generally lost more money than he made.

At the time of the 2020 articles, Neal said he saw an ethical problem in Trump overseeing a federal agency that he has also battled with legal filings.

"Now, Donald Trump is the boss of the agency he considers an adversary," Neal said in 2020. "It is essential that the IRS's presidential audit program remain free of interference."

Trump, who refused to release his returns during his 2016 presidential campaign and his four years in the White House while claiming that he was under IRS audit, has argued there is little to be gleaned from the tax returns even as he has fought to keep them private.

There are no laws that would have barred Trump from voluntarily releasing his returns even if they were being audited. When Trump spoke of being audited, it's unclear whether he was referring to the mandatory process specifically aimed at presidents or prior reviews that are more typical for wealthy individuals.

Many questions remain

The New York Times found that before he entered the White House, Trump was facing an IRS audit potentially tied to a $72.9 million tax refund arising from $700 million in losses he claimed in 2009. The documents released Tuesday indicate that Trump continued to collect tax benefits from those losses through 2018.

"What happened?" said Steven Rosenthal, senior fellow at the Urban-Brookings Tax Policy Center. "If it was not resolved, the IRS stalled. If it was resolved in Trump's favour, then maybe the IRS rolled over and played dead. That's what we have to find out."

Read the report from the joint committee on taxation:

The report raised multiple red flags about aspects of Trump's tax filings, including his carryover losses, deductions tied to conservation and charitable donations, and loans to his children that could be taxable gifts.

Trump bragged during a 2016 presidential debate that year that he was "smart" because he paid no federal taxes and later claimed he wouldn't personally benefit from the 2017 tax cuts he signed into law that favoured people with extreme wealth, asking Americans to simply take him at his word.

Meanwhile, the Trump Organization was convicted earlier this month on tax fraud charges for helping some executives dodge taxes on company-paid perks such as apartments and luxury cars.