The six years of Donald Trump’s federal tax return
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The six years of Donald Trump’s federal tax returns, which were made public on Friday, reveal, among other things, that the former president claimed sizable losses that reduced his tax bill and paid very little in federal income taxes during his first and final years in office.
The House Ways and Means Committee released the returns to the public on Friday, capping a legal battle over their release that reached the Supreme Court. The returns had been long shrouded in secrecy. They support a Joint Committee on Taxation report that Trump carried forward sizable losses from before and during his presidency in order to substantially lower or eliminate his tax liability. For instance, according to his tax returns, he carried forward a $105 million loss from 2015 and $73 million in 2016.
Trump’s personal and business federal tax returns, which covered the years 2015 through 2020, totaled thousands of pages and provided a complex web of raw data about his finances. These returns raise numerous questions about Trump’s wealth and income that could be investigated by auditors and Trump’s political rivals.
The following are the main conclusions from the documents CNN reviewed:
image via outsidethebeltway.com
Returns provide insight into dubious tax claims.
The former president made a number of claims that auditors may contest, according to Trump’s returns. Trump claimed a number of dubious items on his tax returns, including eyebrow-raising amounts of interest he claims to have received from loans to his children, which the bipartisan committee said could indicate Trump was hiding gifts.
The JCT argued that an auditor ought to look into the terms of the loans Trump made to his kids, such as the interest rates. For example, if the interest Trump claims to have charged his children was not at market rate, it might be deemed a gift for tax purposes and subject Trump to a higher tax rate.
For instance, Trump stated that he received $8,715 in interest from his son Donald Trump, Jr., and exactly $18,000 in interest on a loan he claimed to have given his daughter Ivanka Trump. Trump claimed that between 2017 and 2019 he received $24,000 in total from his son Eric Trump, who also paid him $19,605 in interest in 2020.
This raises the question of whether “the transfers were disguised gifts that could trigger gift tax and a disallowance of interest deductions by the related borrowers, or whether the loans were bona fide arm’s length transactions,” the JCT said in its report.
Martin Sheil, a former supervisory special agent for the IRS’s Criminal Investigation unit, said, “It’s unusual to have interest in round numbers – very rare. “Payments, loan agreements, and interest rates would be requested by an auditor.”
Concerns exist regarding Trump’s returns, which show the same amount of business income and expenses.
For instance, in 2017 Trump reported earning $42,965 through DJT Aerospace LLC, the company that manages Trump’s personal chopper. It also listed expenses for the exact same sum, $42,965. In other words, the company’s costs, including payroll, fuel, and other items, negated every dollar it made, dollar for dollar. As a result, the business had no income and no tax liability.
According to Shiel, it is statistically impossible for total expenses to equal total income, and the numbers do not prove that anything illegal was carried out. It simply doesn’t occur.
Similar queries were posed by the JCT in its report. For instance, it mentioned that multiple so-called large unusual questionable items on Trump’s tax returns were being looked into by IRS auditors, and the regulator wanted Trump to provide proof to support his claims.
The release follows a long battle
After a protracted legal battle that lasted nearly four years, the Democratic-controlled Ways and Means Committee finally got its hands on the returns a few weeks ago. The committee decided last week to release the tax returns, but this was postponed so that Social Security numbers and other private data could be redacted.
The disclosure of the tax returns comes after an investigation for the records, which previous US presidents had usually made available voluntarily. Trump and his legal team fought tirelessly to keep his tax returns a secret, claiming that Congress had never used its legal authority to request a president’s tax returns, which Trump claimed could have significant ramifications.
Following the publication, Trump issued a statement in which he said, “The Democrats should have never done it, the Supreme Court should have never approved it, and it’s going to lead to horrible things for so many people.”
“The ‘Trump’ tax returns once again demonstrate how proudly successful I have been and how I was able to use depreciation and various other tax deductions as an incentive for producing thousands of jobs and magnificent buildings and enterprises.”
The committee’s top conservative Republican, Texas Rep. Kevin Brady, said the release would amount to “a dangerous new political weapon that reaches far beyond the former president and overturns decades of privacy protections for average Americans that have existed since the Watergate reform.” Other Republicans also criticized Democrats’ efforts to obtain the tax returns as political.
Republicans cautioned Democrats during the committee’s last week’s closed-door meeting that releasing Trump’s tax returns could lead to retaliation once they take control of the House the following year, such as pursuing the taxes of President Joe Biden’s son, Hunter Biden.
“I had a tonne of people talk to me about how they were worried about President Biden’s family dealings and how they thought that he and his family were wealthy as a result of his political influence. According to quotes from the meeting provided by the GOP, “And they are pleading for oversight and accountability on that,” said Rep. Jason Smith, a Missouri Republican. “Do we really need to go down there? Is that what everyone wants to do?
Returns demonstrate that he had overseas bank accounts while in the office
According to his tax returns, between 2015 and 2020, Trump reported having foreign bank accounts, including one in China between 2015 and 2017.
Trump was required to inform the Financial Crimes Enforcement Network of the accounts (FinCEN). According to the documents, the former president kept foreign bank accounts in places like China, the United Kingdom, and Ireland.
Trump International Hotels Management’s push for business in China, which was revealed by The New York Times in 2020, was connected to the bank account, according to Trump Organization attorney Alan Garten at the time.
When Biden revealed his 2020 business dealings in China, the Trump campaign was trying to paint him as a “puppet” of China. There were no Chinese business transactions or earnings disclosed in Biden’s tax returns or financial disclosures.
The tax returns also reveal that during 2017, Trump’s inaugural year as president, he paid more in foreign taxes than in US federal income taxes.
Trump’s large carryforward losses from prior years, which he claimed, effectively eliminated all of his American tax liability in 2017, resulting in him paying just $750 in federal income taxes in the US. Trump nevertheless forked over almost $1 million in taxes to other nations that year.
The fact that Trump paid taxes abroad is not surprising in and of itself, but it demonstrates how his businesses and business interests span the globe and are subject to regional tax laws and regulations.
In Azerbaijan, Panama, Canada, India, Qatar, South Korea, the United Kingdom, China, the Dominican Republic, United Arab Emirates, the Philippines, Grenada, US territory Puerto Rico, Georgia, Israel, Brazil, St. Maarten, Mexico, Indonesia, Ireland, Turkey, and St. Vincent, Trump listed business income, taxes, expenses, or other notable financial items on his tax return.
Trump didn’t deduct any donations for charity in 2020.
Trump promised to give every year’s entire $400,000 salary to charity while he was still president. He frequently bragged that he donated a portion of each quarter’s pay to different government agencies.
Trump tweeted in March 2019: “While the media doesn’t like writing about it, nor do I need them to, I donate my yearly Presidential salary of $400,000.00 to various agencies throughout the year.”
He didn’t deduct his 2020 salary from taxes if he donated it. In the six years of tax returns that the House Ways and Means Committee made public, Trump only failed to list any charitable contributions in 2020.
Trump’s finances suffered significantly in 2020, most likely as a result of the pandemic and the decline in travel and hotel bookings. Trump disclosed significant charitable contributions in 2018 and 2019, which helped him pay off millions of dollars in income he had previously reported in those years.
Trump, however, reported a staggering $4.8 million adjusted loss in 2020, which by itself eliminated his federal income tax liability. In 2020, Trump made no federal income tax payments.
The accuracy of some significant charitable deductions Trump claimed in prior tax returns, including significant and unsupported cash gifts, has been questioned by the Joint Committee on Taxation. In addition, Trump deducted $21.1 million in 2015 for donating 158 acres of his 212-acre Seven Springs property in North Castle, New York. The Manhattan district attorney’s investigation into the Trump Organization’s finances is centered on that donation, which was made to a land trust.
The amount Trump was able to deduct from his tax bill appears to have been reduced by Trump’s own 2017 tax law.
The 2017 Republican tax plan, which Trump supported and signed, was said to cost him and his family “a fortune.” Although it is unclear if it did, it does seem to have constrained the amount he could write off in one section of his complicated tax return.
The state and local tax deduction, also known as SALT, was limited by the 2017 tax law to $10,000 annually. Taxpayers were previously permitted to write off a larger portion of their SALT payments. Despite being passed in 2017, the law didn’t go into effect until the 2018 tax year.
Trump reported paying $10.5 million in state and local taxes in 2018, but he could only deduct $10,000 of those costs from his taxes. Trump paid $8.4 million in SALT in 2019, but the amount was capped at $10,000. Trump also claimed that in 2020 he paid $8.5 million in SALT but only claimed the maximum $10,000.
In contrast, Trump was able to deduct a lot more from state and local taxes in 2016 and 2017. For instance, he deducted $5.2 million in SALT payments each year between 2016 and 2017.
Democrats criticised the SALT cap in the 2017 tax law for targeting people in the Northeast and the West, where property taxes are among the highest in the nation.
According to the Tax Foundation, a third of all state and local tax deductions were previously attributable to property tax deductions, which were capped in 2017. But Trump defended the clause, claiming that even though it would harm his own finances, the cap was necessary.
However, it’s unclear how much Trump was harmed by the SALT cap. Trump claimed numerous other deductions that reduced the amount of federal income taxes he had to pay, even though that particular deduction had a cap.
Under the authority of section 6103 of the US tax code, the Ways and Means Committee, which is in charge of overseeing the IRS and formulating tax policy, requested the returns.
Their investigation primarily focused on whether Trump’s tax returns from his administration were properly audited in accordance with the IRS’s presidential audit program.
The committee discovered that the IRS only initiated one “mandatory” audit for Trump’s 2016 tax return during his administration. And that didn’t happen until the fall of 2019, following a request for Trump’s tax returns and information from the IRS made by Chairman Richard Neal, a Massachusetts Democrat. The presidential audit program is described in the report as “dormant.”
After the committee’s vote last week, Neal claimed that “no research was done as it relates to the mandatory audit program.”
Democrats acknowledged that it was “not necessary to publicly release the private tax information to change requirements on the presidential audit program,” according to Republicans on the committee.
The American public will demand the release of other people’s tax returns, according to a Republican dissent that was released on Friday.
In a largely symbolic vote last week, the House approved a bill to update the presidential audit procedure before the GOP gains control of the new Congress. Before the new Congress is sworn in, the Senate is not anticipated to take up the bill.