Prosecutors getting more than just Trump tax returns
Business records, communications also on the table
When New York prosecutors finally get to examine the federal tax returns of former President Donald Trump, they will discover a veritable how-to guide for getting rich while losing millions of dollars and paying little to no income taxes.
Whether they find evidence of crimes, however, will also depend on other information not found in the actual returns.
The US Supreme Court yesterday cleared the way for the Manhattan district attorney, Cyrus Vance jnr, to obtain eight years of Trump’s federal income tax returns and other records from his accountants. The decision capped a long-running legal battle over prosecutors’ access to the information.
The New York Times last year provided more or less a preview of what awaits Vance, when it obtained and analysed decades of income tax data for Trump and his companies. The tax records provide an unprecedented and highly detailed look at the byzantine world of Trump’s finances, which for years he has simultaneously bragged about and sought to keep secret.
The Times’ examination showed that the former president reported hundreds of millions of dollars in business losses, went years without paying federal income taxes and faces an IRS audit of a US$72.9 million ($99.6m) tax refund he claimed a decade ago.
Among other things, the records revealed that Trump had paid just US$750 in federal income taxes in his first year as president and no income taxes at all in 10 of the previous 15 years. They also showed he had written off US$26m in “consulting fees” as a business expense between 2010 and 2018, some of which appear to have been paid to his older daughter, Ivanka Trump, while she was a salaried employee of the Trump Organisation.
The legitimacy of the fees, which reduced Trump’s taxable income, has since become a subject of Vance’s investigation, as well as a separate civil inquiry by Letitia James, the New York attorney-general. James and Vance are Democrats, and Trump has sought to portray the multiple inquiries as politically motivated, while denying any wrongdoing.
Vance’s office has issued subpoenas and conducted interviews in recent months as it scrutinises a variety of financial matters, including whether the Trump Organisation misrepresented the value of assets when obtaining loans or paying property taxes, as well as the payment of US$130,000 in hush money during the 2016 campaign to Stephanie Clifford, the pornographic film actress whose stage name is Stormy Daniels. Among those interviewed have been employees of Deutsche Bank, one of Trump’s largest lenders.
For all their revelations, Trump’s tax records are also noteworthy for what they do not show, including any new details about the payment to Clifford, which was the initial focus of Vance’s investigation when it began two years ago.
The tax returns represent a selfreported accounting of revenues and expenses, and often lack the specificity required to know, for instance, if legal costs related to hushmoney payments were claimed as a tax write-off, or if money from Russia ever moved through Trump’s bank accounts. The absence of that level of detail underscores the potential value of other records that Vance won access to with yesterday’s Supreme Court decision.
In addition to the tax returns, Trump’s accountants, Mazars USA, must also produce business records on which those returns are based and communications with the Trump Organisation. Such material could provide important context and background to decisions that Trump or his accountants made when preparing to file taxes. John D Fort, a former chief of the IRS criminal investigation division, said tax returns were a useful tool for uncovering leads, but could only be fully understood with additional financial information obtained elsewhere. “It’s a very key personal financial document, but it’s just one piece of the puzzle,” said Fort, a CPA and the director of investigations with Kostelanetz & Fink in Washington. “What you find in the return will need to be followed up on with interviews and subpoenas.”