Miami Herald

Report: Trump paid no income taxes for years

- BY DAVID LEONHARDT New York Times

The New York Times obtained decades of tax informatio­n that President Donald Trump has hidden from public view. Here are 18 key findings from a trove of records.

Donald Trump paid $750 in federal income taxes the year he won the presidency. In his 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 over more 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. This article offers an overview of The Times’ findings; additional articles will be published in the coming weeks.

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 his finances. By their very nature, the filings will leave many 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.

The tax data examined by The Times provides a road map of revelation­s, from write-offs for the cost of a criminal defense lawyer and a mansion used as a family retreat to a full accounting of the millions of dollars the president received from the 2013 Miss Universe pageant in Moscow.

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 $72.9 million tax refund that is the subject of an audit by 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 on him is 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.

The following is a deeper look at the takeaways. The main article based on the investigat­ion contains much more informatio­n, as does a timeline of the president’s finances.

THE PRESIDENT’S 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 has managed to avoid taxes while enjoying the lifestyle of a billionair­e – which he claims to be – while his companies cover the costs of what many would consider 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, the most 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.

His tax avoidance also sets him apart from past presidents.

Trump may be the wealthiest U.S. president in history. Yet he has often paid less in taxes than other recent presidents. Barack Obama and George W. Bush each regularly paid more than $100,000 a year – and sometimes much more – in federal income taxes while in office.

Trump, by contrast, is running a federal government to which he has contribute­d almost no income tax revenue in many years.

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 average American in the top 0.001% of earners paid about $25 million 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 that may be related to the failure of his Atlantic 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 EXPENSES AND PERSONAL BENEFITS

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 and makeup artist of Ivanka Trump.

All of this helps to reduce Trump’s tax bill further, because companies can write off business expenses.

Seven Springs, his estate in Westcheste­r County, New York, typifies his aggressive definition of business expenses.

Trump bought the estate, which stretches over more than 200 acres in Bedford, New York, in 1996. His sons Eric and Donald Jr. spent summers living there when they were younger. “This is really our compound,” Eric told Forbes in 2014. “Today,” the Trump Organizati­on website continues to report, “Seven Springs is used as a retreat for the Trump family.”

Nonetheles­s, the elder Trump has classified the estate as an investment property, distinct from a personal residence. As a result, he has been able to write off $2.2 million in property taxes since 2014 – even as his 2017 tax law has limited individual­s to writing off only $10,000 in property taxes a year.

THE ‘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 $26 million in such fees.

His daughter appears to have received some of these consulting fees, despite having been a top Trump Organizati­on 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 for hotel projects in Hawaii and Vancouver, British Columbia. Ivanka Trump’s public disclosure forms – which she filed when joining the White House staff in 2017 – show that she had received an identical amount through a consulting company she co-owned.

MONEY-LOSING BUSINESSES

Many of the highestpro­file Trump businesses lose large amounts of money.

Since 2000, he has reported losing more 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 him more than $20 million 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 of unapologet­ic 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 them wholly owned by Trump – has used the 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 an old one for Trump. The collapse of major parts of his business in the early 1990s generated huge losses that he used to reduce his taxes for years afterward.

LARGE 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 received 50% of its profits, and he went on to buy more 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.

The presidency has helped his business.

Since he became a leading presidenti­al candidate, he has received large amounts of money from lobbyists, politician­s and foreign officials who pay to stay at his properties or join his clubs. The Times investigat­ion puts precise numbers on this spending for the first time.

A surge of new members at the Mar-a-Lago club in Florida gave him an additional $5 million a year from the business since 2015. The Billy Graham Evangelist­ic Associatio­n paid at least $397,602 in 2017 to the Washington hotel, where it held at least one event during its World Summit in Defense of Persecuted Christians.

In his first two years in the White House, Trump received millions of dollars from projects in foreign countries, including $3 million from the Philippine­s, $2.3 million from India and $1 million from Turkey.

But the presidency has not resolved his core financial problem: Many of his businesses continue to lose money.

With “The Apprentice” revenue declining, Trump has absorbed the losses partly through one-time financial moves that may not be available to him again.

In 2012, he took out a $100 million mortgage on the commercial space in Trump Tower. He has also sold hundreds of millions worth of stock and bonds. But his financial records indicate that he may have as little as $873,000 left to sell.

He will soon face several major bills that could put further pressure on his finances.

He appears to have paid off none of the principal of the Trump Tower mortgage, and the full $100 million comes due in 2022. And if he loses his dispute with the IRS over the 2010 refund, he could owe the government more than $100 million (including interest on the original amount).

He is personally on the hook for some of these bills.

In the 1990s, Trump nearly ruined himself by personally guaranteei­ng hundreds of millions of dollars in loans, and he has since said that he regretted doing so. But he has taken the same step again, his tax records show. He appears to be responsibl­e for loans totaling $421 million, most of which is coming due within four years.

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.

 ?? AL DRAGO NYT ?? President Donald Trump speaks during a news briefing in the White House in Washington on Sunday. Trump spoke just after The New York Times published a major investigat­ion into his tax returns.
AL DRAGO NYT President Donald Trump speaks during a news briefing in the White House in Washington on Sunday. Trump spoke just after The New York Times published a major investigat­ion into his tax returns.

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