Donald Trump broke with a tradition dating back to the presidency of Richard Nixon by refusing to release his tax returns during the election. He has done so using the excuse that his returns are being audited by the IRS and he is unable to release them. This is not quite true. But it is likely that he refused to release them upon the advice of his lawyers while the returns were under audit. He should have made that clear.
Most of the following information regarding the Internal Revenue Service was provided by a former IRS Revenue Agent who, coincidentally, shares the same last name as I do.
While Trump broke with tradition, he did not break the law. In order to ensure that taxpayers fully report their income, the IRS has made the confidentiality of information contained in our tax returns sacrosanct. This protection extends to all Americans, including Donald Trump. Failure to report all income, regardless of its source, known as “underreporting” is a civil offense, although it may be criminal if due to fraud.
The constitutionality of legislation requiring presidential candidates to release their tax returns as a condition for election is problematic, at best. The requirements for a President are clearly defined in the Constitution, and there are only two. First, that the candidate must be 35 years old, and second, that they must be natural born citizens of the United States. However, and this is a big, however, there is nothing preventing any political party to require that any candidate has to release his or her tax returns to qualify for nomination.
The calls for someone inside the IRS to “leak” Trump’s tax returns are ludicrous. This is considered a “deadly sin” within the IRS. Any such person would be easily identified, automatically terminated, and possibly go to jail. If anyone within the IRS accesses a person’s tax returns without the need to do so, even if accidentally, the IRS notifies the taxpayer, who can then pursue civil penalties up to 1, 000 dollars against that individual [IRS publication 4761] This protects all of us, not just Trump, from having our tax information illegally obtained.
But this does not mean that Donald Trump is off the hook. The civil servants within the IRS are generally diligent and dedicated individuals. For the everyday taxpayer, any civil violations are handled by the case agent and the taxpayer can either pay the IRS or take the matter to Tax Court. As with his civil suit regarding Trump University, Trump would most likely pay rather than go to court. Potential criminal violations are referred Criminal Investigations (the guys with guns) who can decide whether or not to pursue it. One of the criteria for acceptance by Criminal Investigations is if the person is a “high profile” individual. When they complete their investigation, it is then turned over the Justice Department for possible prosecution.
There is one further government entity that could become involved in the Trump tax issue and that is the Congressional Joint Committee on Taxation. Under IRS Code 8021, the Joint Committee, as well as the House Committee on Ways and Means and the Senate Committee on Finance are empowered to do the following:
“Upon written request from the chairman of the Committee on Ways and Means of the House of Representatives, the chairman of the Senate Committee on Finance, or the chairman of Joint Committee on Taxation, the Secretary (of the Treasury) shall furnish such committee with any return or return information specified in such request, except that any return or return information which can be associated with, or otherwise identified, directly or indirectly, a particular taxpayer shall be furnished to such committee only when sitting in closed executive session unless such taxpayer otherwise consents in writing to such disclosure.”
While this may seem all dry as dust to many people, remember that it was the IRS that brought down Al Capone for failure to disclose all his income. Interestingly, the year after Capone’s conviction, reported income increased three times more than the year before. And it was Richard Nixon’s attempt to fraudulently claim a $500,000 deduction on his 1969 taxes that led to his famous “I am not a crook” speech It also proved to be the final nail in his coffin and his presidency.
Whether the American people will ever know what is concealed in Donald Trump’s tax returns remains to be seen. Will the IRS discover criminal activity? If they do, will the Justice Department prosecute? Will the three Republican chairmen demand to see Trump’s tax returns?
All of this could be easily avoided if Trump keeps his promise, and releases his taxes. In future, it is incumbent on all political parties to require that all candidates release their tax returns. But if our tax system, which relies on self-reporting by individuals, is to be fair, then it must apply equally to each taxpayer, including Donald Trump.
Oh, and for your further information, if you claim a deduction or gift exceeding 2 million dollars, the Joint Committee on Taxation will review your return. Not that many of us face that particular dilemma.