Trump Tax Write-Offs Are Ensnared in 2 New York
Fraud Investigations
Inquiries into the president and his businesses, one
criminal and one civil, are now looking at tax deductions taken on consulting
fees. Some of the payments appear to have gone to Ivanka Trump.
By Danny
Hakim, Mike McIntire, William K. Rashbaum and Ben Protess
Nov. 19,
2020
Updated
10:41 p.m. ET
https://www.nytimes.com/2020/11/19/nyregion/trump-fraud-investigations-taxes.html
Two
separate New York State fraud investigations into President Trump and his
businesses, one criminal and one civil, have expanded to include tax write-offs
on millions of dollars in consulting fees, some of which appear to have gone to
Ivanka Trump, according to people with knowledge of the matter.
The
inquiries — a criminal investigation by the Manhattan district attorney, Cyrus
R. Vance Jr., and a civil one by the state attorney general, Letitia James —
are being conducted independently. But both offices issued subpoenas to the
Trump Organization in recent weeks for records related to the fees, the people
said.
The
subpoenas were the latest steps in the two investigations of the Trump
Organization, and underscore the legal challenges awaiting the president when
he leaves office in January. There is no indication that his daughter is a
focus of either inquiry, which the Trump Organization has derided as
politically motivated.
The
development follows a recent New York Times examination of more than two
decades of Mr. Trump’s tax records, which found that he had paid little or no
federal income taxes in most years, largely because of his chronic business
losses.
Among the
revelations was that Mr. Trump reduced his taxable income by deducting about
$26 million in fees to unidentified consultants as a business expense on
numerous projects between 2010 and 2018.
Some of
those fees appear to have been paid to Ms. Trump, The Times found. On a 2017
disclosure she filed when joining the White House as a presidential adviser,
she reported receiving payments from a consulting company she co-owned,
totaling $747,622, that exactly matched consulting fees claimed as tax
deductions by the Trump Organization for hotel projects in Hawaii and
Vancouver, British Columbia.
The
subpoenas were focused on fees paid to the firm on her disclosures, TTT
Consulting L.L.C., and represented just a portion of the $26 million, according
to a person with knowledge of the matter. The name of the firm appears to be a
reference to Ms. Trump and other members of her family.
Ms. Trump
was an executive officer of the Trump companies that made the payments, meaning
she appears to have been treated as a consultant while also working for the
company. While companies can deduct professional fees, the Internal Revenue
Service requires that consulting arrangements be market-based and reasonable,
as well as “ordinary and necessary” to running a business.
Alan
Garten, general counsel for the Trump Organization, said in a statement that
“this is just the latest fishing expedition in an ongoing attempt to harass the
company.”
The I.R.S.
has sometimes rejected attempts to write off consulting fees if they were meant
to avoid taxes and did not reflect arms-length business relationships. It is
not known if the I.R.S. has ever questioned the Trump Organization about the
practice. The tax benefit to Mr. Trump from deducting the fees on his
companies’ federal returns would also be reflected on his New York returns,
making it of possible interest to the state.
A tax
adviser who has worked with the Trump Organization said that such consulting
fees were not uncommon.
The offices
of the district attorney and the attorney general declined to comment. Ms.
Trump did not respond to requests for comment but said on Twitter after
publication that “there was no tax benefit whatsoever.”
Few details
have been publicly disclosed about the district attorney’s investigation, the
only known active criminal case involving Mr. Trump. Mr. Vance’s office began
the inquiry more than two years ago, initially focusing on the Trump
Organization’s role in hush money paid during the 2016 presidential campaign to
Stormy Daniels, a pornographic film actress who claimed to have had an affair
with Mr. Trump.
The
investigation has been stalled since last fall, after the president filed a
lawsuit to block a subpoena for his tax returns and other financial records.
The legal
fight is before the United States Supreme Court for a second time, with a
ruling expected soon. Prosecutors have suggested in court filings that their
investigation has expanded far beyond the hush money and is focused on a number
of potential financial crimes, including insurance and bank-related fraud, tax
evasion and grand larceny.
Mr. Trump
has said the investigation is part of “the greatest witch hunt in history.”
Both Mr. Vance and Ms. James are Democrats.
Ms. James’s
civil investigation is focused on the Trump Organization’s business practices,
though she can make a criminal referral and can seek authority from Gov. Andrew
M. Cuomo’s administration or the state comptroller to bring charges on her own.
Her inquiry
began last year in March, after Michael D. Cohen, the president’s former
lawyer, told Congress that Mr. Trump had inflated his assets in financial
statements to secure bank loans and understated them elsewhere to reduce his
tax bill. In August, the attorney general’s office asked a judge to force the
president’s son Eric Trump to testify in the inquiry, and he did so last month.
Eric Trump is an executive vice president at the Trump Organization, running
its day-to-day operations.
Investigators
in Ms. James’s office have scrutinized a widening array of transactions. One of
them is a 2010 financial restructuring of the Trump Hotel & Tower in
Chicago, when the Fortress Credit Corporation forgave debt worth more than $100
million. The attorney general’s office said in court documents filed in August
that the Trump Organization had thwarted efforts to determine how that money
was reflected in its tax filings, and whether it was declared as income, as the
law requires in most instances. The Times’s analysis of Mr. Trump’s financial
records found that he had avoided federal income tax on almost all of the
forgiven debt.
The attorney
general’s office is also examining whether the Trump Organization used inflated
appraisals when it received large tax breaks for promising to conserve land
where its development efforts faltered, including at its Seven Springs estate
in Westchester County, N.Y.
“The
outcome of the election will have no impact on our investigations,” Ms. James
said in a television interview this month, adding: “No one is above the law. We
will just follow the facts and the evidence, wherever they lead us.”
Mr. Trump has
frequently assailed Ms. James, the latest in a string of New York attorneys
general with whom he has clashed. Ms. James presided over the final stages of
an investigation that led to the closing of his scandal-marred charitable
foundation. She is also seeking to dissolve the National Rifle Association, a
key ally of the president.
“They sue
on everything, always in search of a crime,” he tweeted last year, though his
own litigiousness is legendary. His campaign and its allies have filed more
than two dozen lawsuits in recent days aimed at overturning the results of the
election he lost this month.
The
examination of fees apparently paid to his older daughter is likely to arouse
even more vitriol from the outgoing president. And it raises questions about
whether the payments were a tax-deductible way for him to compensate his
children, or avoid gift taxes he might incur from transferring wealth to them,
something Mr. Trump’s father had done through legally questionable schemes
uncovered by The Times in 2018.
This is not
the first investigation from the attorney general’s office to involve Mr.
Trump’s children. As part of the settlement that led to the shuttering of the
president’s charitable foundation, Ms. Trump and her brothers, who were board
members, were to receive “training on the duties of officers and directors of
charities so that they cannot allow the illegal activity they oversaw at the
Trump Foundation to take place again,” according to the terms of the agreement.
In
September, after a state judge rejected arguments from Trump lawyers to further
delay a deposition of Eric Trump, the president’s son called the investigation
“a continued political vendetta.”
Danny Hakim
is an investigative reporter for the business section. He has been a European
economics correspondent and bureau chief in Albany and Detroit. He was also a
lead reporter on the team awarded the 2009 Pulitzer Prize for Breaking News.
@dannyhakim • Facebook
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
William K.
Rashbaum is a senior writer on the Metro desk, where he covers political and
municipal corruption, courts, terrorism and broader law enforcement topics. He
was a part of the team awarded the 2009 Pulitzer Prize for breaking news.
@WRashbaum • Facebook
Ben Protess
covers the Trump administration, including its overhaul of Obama-era
regulations and potential conflicts of interest arising out of the president's
personal business dealings. He previously covered white-collar crime, Wall
Street lobbying and the private equity industry. @benprotess
The president’s daughter was responding to a New York
Times report saying investigations now include tax write-offs that appear to
involve her.
By MATTHEW
CHOI
11/19/2020
10:40 PM EST
https://www.politico.com/news/2020/11/19/ivanka-trump-investigations-harassment-438561
Ivanka
Trump on Thursday called New York state investigations into her father’s business
dealings “harassment,” seeming to confirm that the probes now include tax
write-offs that appear to involve her.
“This is
harassment pure and simple,” she wrote on Twitter, linking to a New York Times
report of recent subpoenas on the Trump Organization. “This ‘inquiry’ by NYC
democrats is 100% motivated by politics, publicity and rage. They know very
well that there’s nothing here and that there was no tax benefit whatsoever.
These politicians are simply ruthless.”
As
President Donald Trump prepares to leave the White House, the tweet by his
daughter, a White House adviser, could signal the family’s coming defense
against mounting inquiries by state authorities.
The
president has been under investigation since 2019 by two independent inquiries
in New York into his finances. One, led by Manhattan District Attorney Cyrus
Vance Jr., was initially focused on the Trump Organization’s part in paying off
the pornographic actor Stormy Daniels to keep quiet about an alleged affair
with Trump. The other, a civil probe led by New York Attorney General Letitia
James, was sparked after the president’s former lawyer Michael Cohen testified
that Trump drastically exaggerated his wealth to secure loans.
The Times
reported on Thursday, citing people with knowledge of the matter, that those
investigations had since grown to include consulting fees that were deducted to
reduce the president’s taxable income. The two investigations have subpoenaed
the Trump Organization in recent weeks, the Times reported, and some of those
consulting fees appear to have gone to Ivanka Trump.
Ivanka
Trump dismissed the probes as political hit jobs. Both Vance and James are
Democrats.
Trump
deducted about $26 million in fees to unnamed consultants between 2010 and
2018, and some of those fees paired exactly with $747,622 Ivanka Trump reported
receiving from a consulting company of which she was a partial owner, according
to The Times. Ivanka Trump does not appear to be at the center of the
investigations, according to the Times report.
The Times
article comes after the newspaper revealed damning information based on the
president’s tax records going back decades. The president skirted federal
income taxes by reporting greater losses than profits each year, The Times
reported. Trump paid only $750 in federal income tax in 2016, The Times
revealed, and paid no federal income tax for several of the last 15 years.
The
president has dismissed the Times investigations, and maintains that he
“prepaid” tens of millions of dollars in taxes over several years. He has
declined to make his tax returns public, saying they’re under IRS audit.
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