At the first presidential debate, Donald Trump repeated the line that an IRS audit is the reason that he has refused to release his tax returns to the public. Trump has repeated this line throughout his campaign. When he was under pressure during the Republican primary in February, Trump tweeted, “Tax experts throughout the media agree that no sane person would give their tax returns during an audit. After the audit, no problem!” It is a line that has served him well as it remains largely unquestioned.
However, the audit excuse is pure hogwash. Indeed, the absurdity of the claim is only surpassed by the ludicrousness of the claim that Trump will release his tax returns after the audit is completed.
The trifecta of ridiculousness is completed by the media, who refuse to press Trump or his surrogates on the issue in any significant way. Trump simply sites the audit or lawyerly advice and reporters move on. Nobody asks the follow up question, “What consequence do you fear will occur if you release during an IRS audit that would not happen if you release after the audit is completed?” (Hint: the answer is “none.”) Trump does not offer any reasons why it would be terrible to release tax returns during an audit, but after the audit it would be “no problem.”
Trump’s position implies that public release of the returns will have a detrimental effect on the audit. Although this may be true in that thousands of people may pore over his tax returns and point out errors or improprieties that the IRS may then investigate during the current audit, this scrutiny would happen to the released returns whether or not the audit was completed. And since—this is key—there is no prohibition against double jeopardy with respect to administrative processes such as audits, if the errors or improprieties are brought to light after the audit is completed, the IRS would simply reopen the audit and investigate.
Generally, the IRS tends not to reopen previously audited returns, but Title 26, section 7,605 of the U.S. Code clearly states, “only one inspection of a taxpayer’s books of account shall be made for each taxable year … unless the Secretary, after investigation, notifies the taxpayer in writing that an additional inspection is necessary.” Clearly, if there were some glaring error or impropriety found by the public post-audit and post-release, there would be tremendous pressure on both Trump and the IRS to correct the return. Either Trump would voluntarily file amended returns to correct the issues or the IRS would perform an additional inspection.
Moreover, if the IRS is currently auditing Trump’s returns, Trump’s post-audit release, if taken seriously by the IRS, would result in the IRS auditing as carefully as possible, since they would be aware that their audit will be reviewed by many experts with fine-toothed combs. Therefore, if Trump’s goal is to get through the audit with as little scrutiny as possible, declaring to the IRS that their work will eventually be micro-analyzed seems an odd way of proceeding.
Trump has repeatedly promised that his tax returns will be made public eventually. There is no colorable reason to delay release until after the audit. Whether his taxes are released today or after the alleged audit, no tax liability will be avoided, and no mistake or error will go unnoticed.
Trump’s declaration that his lawyers are advising him not to release his returns is a smokescreen. During the first presidential debate, Trump stated, “My lawyers, they say don’t do it. I will tell you this. No, in fact, watching the shows, reading the papers, almost every lawyer says, you don’t release your returns until the audit is complete. When the audit’s complete, I’ll do it.” This is simple misdirection. If you look at what reasons are being offered by the Trump campaign or “the shows”, they are reasons to never release tax returns, not reasons to delay release until after the audit. For example, Donald Trump, Jr. recently told the Pittsburgh Tribune-Review that releasing his returns “would create probably 300 million independent financial auditors … asking questions that are going to distract from his main message.” Obviously, such scrutiny will happen whether or not an audit was underway at the time of release. And just as important, post-release discovery of improprieties would not go uninvestigated by the IRS.
As to what “almost every lawyer says,” a recent article at The Street cited some typical lawyer comments such as, “If you release a tax return to the public, what you are essentially doing is crowdsourcing the audit,” and, “From a tactical perspective, he’s just trying to save himself some money, because he doesn’t want the IRS to be digging around on some issues that it hasn’t yet found.” But again, these are arguments for never releasing tax returns, not arguments against releasing during an audit where the audit can be restarted by the IRS whenever new information is acquired.
As to what Trump is hiding, only one thing can be said with certainty: It is more harmful to his presidential aspirations than the scrutiny he has faced so far, including what he faced in the first presidential debate. Trump believes his perceived fitness for office is greater with his tax returns hidden. Would this be the case if his refusal to release was based on a low net tax rate? Doubtful, since Trump has repeatedly declared that he avoids all possible taxes. What if his refusal to release was based on low levels of charitable donations? It seems like such a revelation could be weathered considering the cloud around Clinton’s charitable foundation.
Given all of the evidence, it is likely that by not releasing his tax returns, Trump is avoiding disclosure of facts that would significantly diminish his chances to be elected president. These facts could reveal him to be untruthful, or reveal business relationships or transactions that would severely tarnish his image.
Since Trump has promised that his tax returns will be made public eventually, there is no reason to delay release until after the audit. No tax liability will be avoided; no mistake or error will go uncorrected. Trump and his lawyers know this. Therefore, the audit canard is just an excuse that can be said now to avoid disclosure before the election. The bottom line is the decision whether or not to release his tax returns now is purely political, and Trump has made the calculation that doing so would damage his presidential aspirations more than continuing to hold out would. This will remain the case as long as the media and his opponent allow Trump to use the audit canard.
