Since the control of the House switched earlier this month, Democrats have reiterated their desire to obtain President Trump’s tax returns. According to a recent Wall Street Journal article, Rep. Richard Neal, the chairman of the Ways & Means Committee, intends to request those returns from the IRS. My prior posts have examined some of the legal and political complications associated with any such request. (See here and here.) However, Congress might already have access to some of the President’s tax return information.
Under Section 6405(a) of the tax code, the IRS cannot pay a refund greater than $2 million to any individual unless it first provides a report to the Joint Committee on Taxation (JCT). That report must identify the taxpayer involved, the amount of the proposed refund, and a summary of the facts relating to his or her refund. In practice, this review provision acts as a veto provision – the IRS generally will not issue a refund without the JCT’s approval.
Given Trump’s apparent wealth and business activities, it would be hardly surprising if, at some point, he received a refund from the IRS that triggered the JCT refund review procedures. As the New York Times reported during the last election cycle, Trump apparently incurred a massive “net operating loss” during the early 1990s. Under the tax code, those losses could be used to reduce his tax liability in future years and could lead to refunds of paid taxes. In those circumstances, the IRS would have sought JCT approval before it paid any refunds to Trump. And it would have provided a report about the refund to the JCT (though almost certainly not any complete tax returns). Congress thus likely has, or at least once had, some significant tax return information related to the President.
If the JCT has retained records on any tax refunds paid to Trump, should individual legislators review those records? Presumably, they have not done so already. Section 6405 calls for review by the JCT, but in practice the staff, not the legislator-members, review proposed refunds. See Joint Committee Statutory Refund Review (referring to review by committee staff).
Legislators might be tempted to personally review JCT records. But doing so here would raise serious concerns. If taxpayers believe that return information provided to the JCT will be used for political purposes, confidence in the JCT will decline. Also, it seems unlikely that Congress enacted Section 6405 to allow individual legislators to peek into their political opponents’ taxes. The JCT refund review function already raises potential constitutional problems, and politicizing that function would facilitate any challenge to Section 6405’s constitutionality. See Grewal, The Congressional Revenue Service, 2014 U. Ill. L. Rev. 689 (2014).
Rather than view JCT records as potential treasure trove, legislators should notice the care that has likely been exercised in audits of high-income taxpayers, such as Trump. Presumably, his tax returns have been audited by career IRS officials for decades. And, before any large refunds were paid to him, Congress’s own staff would have reviewed the proposed payments. Thus, rather than turn tax returns into political pawns – and stir public concerns about taxpayer privacy – legislators should consider measured alternatives to direct inspection.
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- “Can Congress Get President Trump’s Tax Returns?”
- “The Battle For Trump’s Taxes and the President’s Potential Revenge”