Trump tax files: Fat losses, thin payments
Documents reveal massive liabilities
Donald Trump paid $750 in federal income taxes the year he won the presidency. Inhis first year in the White House, he paid another $750.
He had paid no income taxes at all in 10 of the previous 15 years — largely because he reported losing much more money than he made.
As the president wages a reelection campaign that polls say he is in danger of losing, his finances are under stress, beset by losses and hundreds of millions of dollars in debt coming due that he has personally guaranteed. Also hanging over him is a decadelong audit battle with the Internal Revenue Service over the legitimacy of a $72.9 million tax refund that he claimed, and received, after declaring huge losses. An adverse ruling could cost him more than $100 million.
The tax returns that Trump has long fought to keep private tell a story fundamentally different from the one he has sold to the American public. His reports to the IRS portray a businessman who takes in hundreds of millions of dollars a year yet racks up chronic losses that he aggressively employs to avoid paying taxes. Now, with
his financial challenges mounting, the records show that he depends more and more on making money from businesses that put him in potential and often direct conflict of interest with his job as president.
The New York Times has obtained tax-return data extending overmore than two decades for Trump and the hundreds of companies that make up his business organization, including detailed information from his first two years in office. It does not include his personal returns for 2018 or 2019.
The returns are some of the most sought-after, and speculated-about, records in recent memory. In Trump’s nearly four years in office — and across his endlessly hyped decades in the public eye — journalists, prosecutors, opposition politicians and conspiracists have, with limited success, sought to excavate the enigmas of hisfinances. By their very nature, the filings will leavemany questions unanswered, many questioners unfulfilled. They comprise information that Trump has disclosed to the IRS, not the findings of an independent financial examination. They report that Trump owns hundreds of millions of dollars in valuable assets, but they do not reveal his true wealth. Nor do they reveal any previously unreported connections to Russia.
In response to a letter summarizing The Times’ findings, Alan Garten, a lawyer for the Trump Organization, said that “most, if not all, of the facts appear to be inaccurate” and requested the documents on which they were based. After The Times declined to provide the records, in order to protect its sources, Garten took direct issue only with the amount of taxes Trump had paid.
“Over the past decade, President Trump has paid tens of millions of dollars in personal taxes to the federal government, including paying millions in personal taxes since announcing his candidacy in 2015,” Garten said in a statement.
With the term “personal taxes,” however, Garten appears to be conflating income taxes with other federal taxes Trump has paid — Social Security, Medicare and taxes for his household employees. Garten also asserted that some of what the president owed was “paid with tax credits,” a misleading characterization of credits, which reduce a business owner’s income-tax bill as a reward for various activities, like historic preservation.
Speaking at a news conference Sunday at theWhite House, Trump dismissed the report as “fake news” and maintained he has paid taxes, though he gave no specifics, according to the Associated Press. He also vowed that information about his taxes “will all be revealed,” but he offered no timeline for the disclosure and made similar promises during the 2016 campaign on which he never followed through.
Among the key findings of The Times’ investigation:
• Trump paid no federal income taxes in 11 of 18 years that The Times examined. In 2017, after he became president, his tax bill was only $750.
• He has reduced his tax bill with questionable measures, including a $72.9million tax refund that is the subject of anauditby the Internal Revenue Service.
• Many of his signature businesses, including his golf courses, report losing large amounts of money — losses that have helped him to lower his taxes.
• The financial pressure onhimis increasing as hundreds of millions of dollars in loans he personally guaranteed are soon coming due.
• Even while declaring losses, he has managed to enjoy a lavish lifestyle by taking tax deductions on what most people would consider personal expenses, including residences, aircraft and $70,000 in hairstyling for television.
• Ivanka Trump, while working as an employee of the Trump Organization, appears to have received “consulting fees” that also helped reduce the family’s tax bill.
• As president, he has received more money from foreign sources and U.S. interest groups than previously known. The records do not reveal any previously unreported connections to Russia.
It is important to remember that the returns are not an unvarnished look at Trump’s business activity. They are instead his own portrayal of his companies, compiled for the IRS. But they do offer the most detailed picture yet available.
Tax avoidance
Trump has paid no federal income taxes for much of the past two decades.
In addition to the 11 years in which he paid no taxes during the 18 years examined by The Times, he paid only $750 in each of the two most recent years — 2016 and 2017.
He hasmanaged to avoid taxes while enjoying the lifestyle of a billionaire — which he claims to be — in which his companies cover the costs of many personal expenses.
This tax avoidance sets him apart from most other affluent Americans.
Taxes on wealthy Americans have declined sharply over the past few decades, and many use loopholes to reduce their taxes below the statutory rates. But most affluent people still pay a lot of federal income tax.
In 2017, the average federal income rate for the highest- earning 0.001% of tax filers — that is, themost affluent 1/100,000th slice of the population— was 24.1%, according to the IRS.
Over the past two decades, Trump has paid about $400 million less in combined federal income taxes than a very wealthy person who paid the average for that group each year.
A large refund has been crucial to his tax avoidance.
Trump did face large tax bills after the initial success of “The Apprentice” television show, but he erased most of these tax payments through a refund. Combined, Trump initially paid almost $95 million in federal income taxes over the 18 years. He later managed to recoup most of that money, with interest, by applying for and receiving a $72.9 million tax refund,
starting in 2010.
The refund reduced his total federal income tax bill between 2000 and 2017 to an annual average of $1.4 million. By comparison, the averageAmericaninthe top 0.001% of earners paid about $25million in federal income taxes each year over the same span.
The $72.9 million refund has since become the subject of a long-running battle with the IRS.
When applying for the refund, he cited a giant financial loss thatmay be related to the failure of hisAtlantic City casinos. Publicly, he also claimed that he had fully surrendered his stake in the casinos.
But the real story may be different from the one he told. Federal law holds that investors can claim a total loss on an investment, as Trump did, only if they receive nothing in return. Trump did appear to receive something in return: Five percent of the new casino company that formed when he renounced his stake.
In 2011, the IRS began an audit reviewing the legitimacy of the refund. Almost a decade later, the case remains unresolved, for unknown reasons, and could ultimately end up in federal court, where it could become a matter of public record.
Business and pleasure
Trump classifies much of the spending on his personal lifestyle as the cost of business.
His residences are part of the family business, as are the golf courses where he spends so much time. He has classified the cost of his aircraft, used to shuttle him among his homes, as a business expense as well. Haircuts — including more than $70,000 to style his hair during “The Apprentice” — have fallen into the same category. So did almost $100,000 paid to a favorite hair andmakeup artist of Ivanka Trump.
All of this helps to reduce Trump’s tax bill further, because companies can write off business expenses.
‘Consulting fees’
Across nearly all of his projects, Trump’s companies set aside about 20% of income for unexplained ‘consulting fees.’
These fees reduce taxes, because companies are able to write them off as a business expense, lowering the amount of final profit subject to tax.
Trump collected $5 million on a hotel deal in Azerbaijan, for example, and reported $1.1 million in consulting fees. In Dubai, there was a $630,000 fee on $3 million in income. Since 2010, Trump has written off some $26million in such fees.
His daughter appears to have received some of these consulting fees, despite having been a topTrumpOrganization executive.
The Times investigation discovered a striking match: Trump’s private records show that his company once paid $747,622 in fees to an unnamed consultant forhotel projects inHawaii and Vancouver, British Columbia. Ivanka Trump’s public disclosure forms — which she filed when joining theWhiteHouse staff in 2017— showthat shehad received an identical amount through a consulting company she co-owned.
Money losers
Many of the highest-profile Trump businesses lose large amounts of money.
Since 2000, he has reported losingmore than$315 million at the golf courses that he often describes as the heart of his empire. Much of this has been at Trump National Doral, a resort near Miami that he bought in 2012. And his Washington hotel, opened in 2016, has lost more than $55 million.
An exception: Trump Tower in New York, which reliably earns himmore than $20million in profits a year.
The most successful part of the Trump business has been his personal brand.
The Times calculates that between 2004 and 2018, Trump made a combined $427.4 million from selling his image— an image ofunapologetic wealth through shrewd business management. The marketing of this image has been a huge success, even if the underlying management of many of the operating Trump companies has not been.
Other firms, especially in real estate, have paid for the right to use the Trump name. The brand made possible the “The Apprentice”— and the show then took the image to another level.
Of course, Trump’s brand also made possible his election as the first U.S. president with no prior government experience.
But his unprofitable companies still served a financial purpose: reducing his tax bill.
The Trump Organization
— a collection of more than 500 entities, virtually all of themwholly owned by Trump— hasusedthe losses to offset the rich profits from the licensing of the Trump brand and other profitable pieces of its business.
The reported losses from the operating businesses were so large that they often fully erased the licensing income, leaving the organization to claim that it earns no money and thus owes no taxes. This pattern is anold one for Trump. The collapse ofmajor parts of his business in the early 1990s generated huge losses that he used to reduce his taxes for years afterward.
Big bills looming
With the cash from “The Apprentice,” Trump went on his biggest buying spree since the 1980s.
“The Apprentice,” which debuted on NBC in 2004, was a huge hit. Trump received50% of itsprofits, and hewent on tobuymore than 10 golf courses and multiple other properties. The losses at these properties reduced his tax bill.
But the strategy ran into trouble as the money from “The Apprentice” began to decline. By 2015, his financial condition was worsening.
His 2016 presidential campaign may have been partly an attempt to resuscitate his brand.
The financial records do not answer this question definitively. But the timing is consistent: Trump announced a campaign that seemed a long shot to win but was almost certain to bring him newfound attention, at the same time that his businesses were in need of a new approach.
Thepresidencyhashelped his business.
Sincehebecame a leading presidential candidate, he has received large amounts ofmoney fromlobbyists, politicians and foreign officials who pay to stay at his properties or join his clubs.
But the presidency has not resolved his core financial problem: Many of his businesses continue to lose money.
Should he win reelection, his lenders could be placed in the unprecedented position of weighing whether to foreclose on a sitting president. Whether he wins or loses, he will probably need to find new ways to use his brand — and his popularity among tens of millions of Americans — to make money.