The revelation that the agency had not audited Donald J. Trump during his first two years in office despite a mandatory presidential audit program raised concerns about potential politicization.
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Charles P. Rettig during his confirmation hearing to become I.R.S. commissioner in 2018. In 2016, Mr. Rettig, then a tax lawyer, defended President Donald J. Trump’s decision not to release his taxes.
WASHINGTON — The I.R.S. subjected both President Donald J. Trump’s predecessor and his successor to annual audits of their tax returns once they took office, spokespeople for Barack Obama and President Biden said on Wednesday, intensifying questions about how Mr. Trump escaped such scrutiny until Democrats in the House started inquiring.
Late Tuesday, a House committee revealed that the I.R.S. failed to audit Mr. Trump during his first two years in office despite a rule that states that “the individual tax returns for the president and the vice president are subject to mandatory review.” But its report left unclear whether that lapse reflected general dysfunction or whether Mr. Trump received special treatment.
The disclosure of routine audits of Mr. Obama and Mr. Biden during their time in office suggested that the agency’s treatment of Mr. Trump was an aberration.
“I’m absolutely flabbergasted,” said Nina E. Olson, the national taxpayer advocate from 2001 to 2019. “It’s disturbing. You have a process where you’re auditing the president, you better be auditing the president.”
Reports issued by the Ways and Means Committee, which obtained Mr. Trump’s tax data last month after a yearslong legal battle, said the I.R.S. initiated its first audit of one of his filings as president in April 2019, the same day that Representative Richard E. Neal, Democrat of Massachusetts and the committee’s chairman, had inquired about the matter.
The I.R.S. has yet to complete that audit, the report added, and the agency started auditing filings covering Mr. Trump’s income while president only after he left office. Even after the agency belatedly started looking, it assigned only a single agent to examine Mr. Trump’s returns, going up against a large team of lawyers and accountants who objected when the I.R.S. added two more people to help.
The committee’s discovery that the I.R.S. flouted its rules is bringing new scrutiny to concerns about potential politicization at the I.R.S. during the Trump administration and spurring calls for the inspector general that oversees the agency to investigate what went wrong. It has also raised questions about why the I.R.S. devoted so few resources to auditing Mr. Trump, who, as a business mogul, had far more complicated tax filings than any previous president.
Under Mr. Trump, the I.R.S. was run for most of 2017 by a commissioner appointed by Mr. Obama, John Koskinen, and — after about 11 months being overseen by an acting head, David J. Kautter — a successor appointed by Mr. Trump, Charles P. Rettig. None ensured that the agency followed its rules requiring presidential audits.
Neither Mr. Kautter nor Mr. Rettig, who left in October, responded to a request for comment. Mr. Koskinen said that his only involvement in Mr. Trump’s tax returns was working to ensure that they were kept in a secure location.
“The good thing about being commissioner is that you never know who is being audited,” Mr. Koskinen said, adding that it would have been inappropriate to ask about the status of any examination.
The committee’s reports left many questions unanswered given that it had little time to act: While Mr. Neal had sought Mr. Trump’s tax records since 2019, Mr. Trump fought that request for nearly four years. The Ways and Means Committee only received access to the information last month, with Republicans set to take control of the House in January.
ImageRepresentative Richard E. Neal, Democrat of Massachusetts, and the chairman of the Ways and Means Committee, had been seeking Mr. Trump’s tax records since 2019.Credit…Haiyun Jiang/The New York Times
Spokespeople and associates of several other former presidents over the last three decades either did not respond on Wednesday to queries about whether those presidents had been audited every year they were in office or said they did not recall.
Senator Ron Wyden, Democrat of Oregon and the chairman of the Senate Finance Committee, on Wednesday called the House panel’s findings a “blockbuster” that required further attention.
“The I.R.S. was asleep at the wheel, and the presidential audit program is broken,” he said. “There is no justification for the failure to conduct the required presidential audits until a congressional inquiry was made.”
The Internal Revenue Service has already been the subject of repeated controversy.
The New York Times reported this year that the I.R.S. had initiated particularly invasive audits of two of Mr. Trump’s perceived enemies, the former F.B.I. director James B. Comey and his deputy, Andrew G. McCabe. Mr. Trump also repeatedly told his chief of staff that he wanted his perceived rivals, including those two, to face tax investigations.
Despite the low odds of both being singled out, an inspector general’s report concluded that both had been randomly selected for the initial pools from which the agency drew to carry out the examinations. But it is unclear how the I.R.S. made final selections from those pools.
In 2019, Mr. Trump raised eyebrows by telling Senator Mitch McConnell, the majority leader, to prioritize a confirmation vote for a longtime associate, Michael J. Desmond, as general counsel of the I.R.S. over the nomination of William P. Barr as attorney general. Mr. Desmond had advised a subsidiary of the Trump Organization and worked with two of its tax lawyers.
And in 2018, Mr. Trump appointed as commissioner Mr. Rettig, who had written a Forbes column in 2016 defending Mr. Trump’s refusal to release his taxes as a candidate and portrayed the I.R.S. as fully engaged in auditing very wealthy people.
“Teams of sophisticated tax advisers were likely engaged throughout Trump’s career to assure the absence of any ‘bombshell’ within the returns,” Mr. Rettig wrote. “His returns might actually be somewhat unremarkable but for the fact they are the returns of Donald Trump.”
In fact, the few glimpses of Mr. Trump’s taxes have shown much to talk about. The Trump Organization was convicted of a tax fraud scheme this month. The New York attorney general has sued Mr. Trump and three of his children, accusing them of fraudulently overvaluing his assets.
ImageThe Trump Organization was convicted of a tax fraud scheme this month.Credit…Dave Sanders for The New York Times
The Times gained access to years of his tax information and published a report in September 2020 that raised numerous questions about the legality of write-offs and deductions he had used to avoid paying any taxes most years. The article prompted the I.R.S. to consider looking at Mr. Trump’s 2017 tax returns, the committee report said.
The I.R.S. has had scant resources for years because Republicans have sought to cut its funding. The report highlighted the agency’s broader struggles in dealing with complicated tax returns filed by wealthy people and criticized its willingness to trust that returns filed by big accounting firms contained accurate information.
Congress has approved an $80 billion overhaul of the I.R.S. intended in part to hire more specialists capable of auditing high-income filers.
The committee released the reports after a party-line vote, exercising a rarely used power to obtain and make public any U.S. taxpayer’s private information.
Congress invoked it in 1974, when a committee released a report about President Richard M. Nixon’s taxes after a scandal about whether he was underpaying what he owed. That scandal led the I.R.S. in 1977 to create its rule mandating audits of presidents and vice presidents, ensuring that agency officials are not put in the awkward position of deciding whether to audit their boss.
The Ways and Means Committee again used that authority in 2014, when Republicans accused the I.R.S. of political discrimination because it used conservative terms like “tea party” when selecting groups to scrutinize for political activities that would make them ineligible to receive tax-deductible donations. But an inspector general determined that the agency had also used liberal terms, like “progressive” and “occupy,” for the same purpose.
Commissioners of the agency are political appointees of presidents. Mr. Koskinen — who had also run the agency several of the years that it was routinely auditing Mr. Obama — was not the only one to say he avoided involvement in presidential audits.
ImageCongressional aides taking documents into the Ways and Means Committee’s business meeting on Tuesday.Credit…Haiyun Jiang/The New York Times
Charles O. Rossotti, who served as I.R.S. commissioner from 1997 to 2002, said that he was aware that presidents were audited as a matter of practice but that he played no role in the process.
“I kept away from that with a 10-foot pole,” Mr. Rossotti said.
The requirement that presidential returns be audited is included in the tax agency’s Internal Review Manual, which offers few details. A 2019 I.R.S. document accompanying the committee report said the examinations were conducted by experienced revenue agents.
“The I.R.S. is not aware of any reports of improper bias or partiality in the conduct of an officeholder’s examination in the more than 40-year history of the mandatory procedures,” it said.
The House committee report also documented an extraordinary lack of resources the I.R.S. dedicated to auditing Mr. Trump’s returns when it belatedly started doing so, initially assigning just one staff member to the matter despite the unusual complexity of his business entities and partnerships.
The committee cited internal I.R.S. memos stating that “it is not possible to obtain the resources available to examine all potential issues” raised by the more than 400 pass-through entities cited in Mr. Trump’s taxes.
“To do a thorough review of these returns, we would need a team much larger than the current team,” it said.
Source: nytimes.com
