House Ways and Means Committee Chairman Rep. Richard Neal, D-Mass., is seeking six years of President Trump’s business and personal returns under an obscure 1920s law that grants him authority to request it. Trump’s attorneys have challenged the subpoena.
President Trump’s break with the decadeslong precedent of presidential candidates releasing their tax returns has fueled speculation that he may face conflicts of interest in his business dealings. Tax returns alone are unlikely to show evidence of exposure to foreign influence — one of the issues congressional Democrats say they want to investigate — but could provide investigators with a baseline record to compare to any other financial information they discover.
“You can understand the business, you can understand how it’s working, how it’s operating,” said Dean Zerbe, a national managing director with the accounting firm Alliantgroup and a former investigator for the Republican staff of the Senate Finance Committee. “Underreporting of income, where the income’s being reported, where gains are being reported, where losses are being reported.”
[Related: Old-school legislator Richie Neal in spotlight for Trump tax returns investigation]
Neal’s committee plans to look into whether Trump’s golf course is failing to pay payroll taxes on illegal immigrant workers, an issue that tripped up President Bill Clinton’s first pick for attorney general, Zoë Baird, causing her to withdraw her name from consideration in the scandal known as “Nannygate.” The committee also wants to know if Trump’s businesses have been included under an automatic audit of every sitting president and vice president conducted by the IRS, which began the practice after President Richard Nixon underpaid his taxes by hundreds of thousands of dollars.
“Investigating how the IRS is implementing its audit policy for presidential tax returns and whether a law is needed to address the issues are important subjects that have never been tackled before by Congress, as far as I know,” said Elise Bean, a law professor at Wayne State University and a former Democratic congressional investigator. “The Ways and Means Committee is 100% solid in its jurisdictional basis for requesting the Trump tax returns.”
The release of tax returns by several of the Democrats running for president in 2020 provides a preview of the type of information that could be scrutinized in Trump’s personal returns: deductions, stated income, sources of income, and the amounts he’s given to charity, which could include his now-defunct Trump Foundation.
[Also read: Democratic lawmaker demanding Trump’s tax returns won’t immediately release his own]
The tax returns of Sen. Bernie Sanders, I-Vt., for instance, showed that he made over $1 million during his 2016 presidential run, most of it from book sales. Beto O’Rourke’s tax filings showed he and his wife underpaid by about $4,000 over 2013 and 2014 due to an overestimated medical expense deduction. The former Democratic Texas congressman’s campaign said he would file an amendment to those returns.
“When the public looks at a politician’s tax returns, either they didn’t pay their fair share or they didn’t give enough to charity,” said former Rep. Tom Davis, R-Va., now a partner at the law firm Holland and Knight.
Due to Trump’s wealth and expansive business holdings, his returns figure to be much more complicated than the individual returns of his Democratic rivals. Even if they gain access to the returns, House Democrats would have to spend substantial time and effort to fully understand how the different pieces of Trump’s business empire fit together.
“I’m always kind of skeptical that [the tax returns request] is going to be the kind of great game-changer Democrats think it will be,” said Zerbe. He suggested that, to glean insights from tax information, Congress could draw on lessons learned from the complex financial records of Enron.
“Enron was purposely set up to make things difficult to look at,” Zerbe said. “The most important thing for us was whistleblowers who came forward.” The whistleblowers helped investigators piece together information from Enron’s accounting, which included identifying profits that weren’t there and offshore assets.
One high-profile former Trump employee may have already provided some guidance about how the president organizes his finances: attorney Michael Cohen. In his congressional testimony, Cohen alleged Trump committed bank fraud and received an outsize tax refund in 2008 or 2009.
That led the committee that heard Cohen’s testimony, the House Oversight and Reform Committee, to subpoena Trump’s accounting firm, Mazars USA, for the firm’s audits of his financial records, which could include tax returns and other underlying documents. Trump’s financial records could help provide a fuller picture as to whether he misrepresented his tax liabilities in any way or if he misrepresented his assets when attempting to obtain financing.
[Related: Lawyers fear ‘constitutional crisis’ in Trump subpoena fight]
