Trump’s Tax Returns Aren’t the Only Crucial
Records Prosecutors Will Get
For all that they reveal, tax returns have
limitations. Other records from the former president’s accountants may help
give a fuller picture of his finances.
Mike
McIntire
By Mike
McIntire
When New
York prosecutors finally get to examine the federal tax returns of former
President Donald J. Trump, they will discover a veritable how-to guide for
getting rich while losing millions of dollars and paying little to no income
taxes.
Whether
they find evidence of crimes, however, will also depend on other information
not found in the actual returns.
The United
States Supreme Court on Monday cleared the way for the Manhattan district
attorney, Cyrus R. Vance Jr., to obtain eight years of Mr. Trump’s federal
income tax returns and other records from his accountants. The decision capped
a long-running legal battle over prosecutors’ access to the information.
The New
York Times last year provided more or less a preview of what awaits Mr. Vance,
when it obtained and analyzed decades of income tax data for Mr. Trump and his
companies. The tax records provide an unprecedented and highly detailed look at
the byzantine world of Mr. Trump’s finances, which for years he has
simultaneously bragged about and sought to keep secret.
The Times’s
examination showed that the former president reported hundreds of millions of
dollars in business losses, went years without paying federal income taxes and
faces an Internal Revenue Service audit of a $72.9 million tax refund he
claimed a decade ago.
Among other
things, the records revealed that Mr. Trump had paid just $750 in federal
income taxes in his first year as president and no income taxes at all in 10 of
the previous 15 years. They also showed he had written off $26 million in
“consulting fees” as a business expense between 2010 and 2018, some of which
appear to have been paid to his older daughter, Ivanka Trump, while she was a
salaried employee of the Trump Organization.
The
legitimacy of the fees, which reduced Mr. Trump’s taxable income, has since
become a subject of Mr. Vance’s investigation, as well as a separate civil
inquiry by Letitia James, the New York attorney general. Ms. James and Mr.
Vance are Democrats, and Mr. Trump has sought to portray the multiple inquiries
as politically motivated, while denying any wrongdoing.
Mr. Vance’s
office has issued subpoenas and conducted interviews in recent months as it
scrutinizes a variety of financial matters, including whether the Trump
Organization misrepresented the value of assets when obtaining loans or paying
property taxes, as well as the payment of $130,000 in hush money during the
2016 campaign to Stephanie Clifford, the pornographic film actress whose stage
name is Stormy Daniels. Among those interviewed have been employees of Deutsche
Bank, one of Mr. Trump’s largest lenders.
For all
their revelations, Mr. Trump’s tax records are also noteworthy for what they do
not show, including any new details about the payment to Ms. Clifford, which
was the initial focus of Mr. Vance’s investigation when it began two years ago.
The tax
returns represent a self-reported accounting of revenues and expenses, and
often lack the specificity required to know, for instance, if legal costs
related to hush-money payments were claimed as a tax write-off, or if money
from Russia ever moved through Mr. Trump’s bank accounts. The absence of that
level of detail underscores the potential value of other records that Mr. Vance
won access to with Monday’s Supreme Court decision.
In addition
to the tax returns, Mr. Trump’s accountants, Mazars USA, must also produce
business records on which those returns are based and communications with the
Trump Organization. Such material could provide important context and
background to decisions that Mr. Trump or his accountants made when preparing
to file taxes.
John D.
Fort, a former chief of the I.R.S. criminal investigation division, said tax
returns were a useful tool for uncovering leads, but could only be fully
understood with additional financial information obtained elsewhere.
“It’s a
very key personal financial document, but it’s just one piece of the puzzle,”
said Mr. Fort, a C.P.A. and the director of investigations with Kostelanetz
& Fink in Washington. “What you find in the return will need to be followed
up on with interviews and subpoenas.”
Still, The
Times’s investigation of Mr. Trump’s returns exposed a number of misleading
assertions and falsehoods he has propagated about his wealth and business
acumen.
Numerous
claims by Mr. Trump of generous philanthropy fell apart upon examination of his
tax returns, which raised questions about both the amount of certain donations
and the overall nature of his tax-deductible giving. For example, $119.3
million of the roughly $130 million in charitable deductions he claimed since
2005 turned out to be the estimated value of pledges not to develop real
estate, sometimes after a planned project fell through.
At least
two of those land-based charitable deductions, one related to a golf course in
Los Angeles and the other a Westchester estate called Seven Springs, are known
to be part of the civil inquiry by Ms. James, who is examining whether
appraisals supporting the tax write-offs were inflated.
More
broadly, the tax records showed how the public disclosures he filed as a
candidate and then as president offered a distorted view of his overall
finances by reporting glowing numbers for his golf courses, hotels and other
businesses based on the gross revenues they collected each year. The actual
bottom line, after losses and expenses, was much gloomier: In 2018, while Mr.
Trump’s public filings showed $434.9 million in revenue, his tax returns
declared a total of $47.4 million in losses.
And such
dire numbers were not an anomaly. Mr. Trump’s many golf courses, a core
component of his business empire, reported losses of $315.6 million from 2000
to 2018, while the income from licensing his name to hotels and resorts had all
but dried up by the time he entered the White House. In addition, Mr. Trump has
hundreds of millions of dollars in loans, much of which he personally
guaranteed, coming due in the next few years.
The Times’s
investigation also found that he faces a potentially devastating I.R.S. audit
focusing on the huge refund he claimed in 2010, which covered all the federal
income taxes he paid from 2005 to 2008, plus interest. Mr. Trump repeatedly
cited the ongoing audit as the reason he could not release his tax returns,
after initially saying he would, even though nothing about the audit process
prevented him from doing so.
If an
I.R.S. ruling were to ultimately go against him, Mr. Trump could be forced to pay
back more than $100 million, factoring in interest and possible penalties, in
addition to some $21.2 million in state and local tax refunds that were based
on the figures in his federal filings.
Mike
McIntire is a reporter with the investigations unit. He won a Pulitzer Prize
for his reporting on Russian interference in the 2016 presidential election,
and has written in depth on campaign finance, gun violence and corruption in
college sports. @mmcintire
THE
PRESIDENT’S TAXES
LONG-CONCEALED
RECORDS SHOW TRUMP’S CHRONIC LOSSES AND YEARS OF TAX AVOIDANCE
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