Trump’s Abuse of Trump Foundation — Criminal Tax Implications?

 

By: Philip Hackney, Oct. 3, 2016

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Much attention is being paid to how Donald Trump could have amassed a $900 million NOL in the mid 90s. I remain laser-focused on the Donald J. Trump Foundation.  For this blog post I ask the question: could Mr. Trump’s misuse of the private foundation that he leads result in criminal sanctions under tax law?

I think there is enough evidence to open a criminal investigation into his activities. Nevertheless, a criminal prosecution is highly unlikely for both political reasons and issues of proof (ignorance of the law is a defense). Still, I think the IRS has a duty to open an investigation under the egregious set of facts I lay out.

Here is the important thing to keep in mind as you consider the arguments I lay out in this post: Donald Trump does not own the Foundation and its property does not belong to him. It does not matter from whom the money came. He is the president of a nonprofit organization that is entrusted with money to be used for charitable purposes that benefit the public. Continue reading “Trump’s Abuse of Trump Foundation — Criminal Tax Implications?”

A $916 Million Loss? #TrumpLeaks

By Sam Brunson

trump-returnThe New York Times reported tonight that in 1995, Republican presidential candidate Donald Trump may have claimed a $916 loss, a loss substantial enough that it could have allowed him to avoid paying taxes for nearly two decades.

The push notification for the story showed up on my phone at 8:30 pm Central time on a Saturday, so I haven’t had time to really dig into it. I’m sure that, over the next few days, we’ll have something more substantive to say. But in the meantime, a couple thoughts:  Continue reading “A $916 Million Loss? #TrumpLeaks”

Debate Prep: The Candidates’ Marginal Rate Proposals #debates

By Sam Brunson

In anticipation of tonight’s debate, I’m going to describe what both candidates propose to do with tax rates, provide a little commentary, and suggest a couple questions that the moderator might ask to clarify what the candidates plan on doing.

The candidates’ proposals for individual tax rates illustrate one of their biggest divergences. As best I can tell, in fact, their plans for tax rates are as different as it is possible to be. And what are those plans? Continue reading “Debate Prep: The Candidates’ Marginal Rate Proposals #debates”

Trump, Churches, and Politics – Counterpoint

By Benjamin Leff

A few days ago, my good friend and fellow Subgrouper, David Herzig, wrote a post about Donald Trump’s appearance at a church in Flint Michigan, the Bethel United Methodist Church. Herzig argued in his post (and on Twitter) that the interruption of Trump’s attacks on Hilary Clinton by the church’s pastor, Rev. Timmons, was necessary to protect the church from violating the prohibition on campaign-related speech by churches (and other charities). He also quoted Professor Lloyd Mayer’s tweet on the topic, arguing that the church could have violated the prohibition simply by permitting Trump to speak at all, regardless of the topic. I lamely tweeted back that the short video that had been released failed to provide sufficient facts to make a determination about whether the church violated the law or not. I want to say more about the law and the IRS’s current interpretation of the law to supplement Herzig and Mayer’s valiant efforts, since I think I have a slightly different view on the issue than either of them.

The most important point is that the Constitution protects all churches’ right to engage in speech (as well as religious practice). Statutory law — including the prohibition on campaign intervention (sometimes called the “Johnson Amendment”) — does not (could not) interfere with those very basic and fundamental rights. In my view, the IRS’s interpretation of the law gets some things a little bit wrong, but even its interpretation is extremely permissive of speech that takes place in churches and other charities in deference to their very real speech rights.

So, what’s the law with respect to hosting a political candidate at a church or other charity (including, by the way, a university)? Is it the case that any appearance by a known candidate at any event hosted by a 501(c)(3) organization is a violation of the law? Continue reading “Trump, Churches, and Politics – Counterpoint”

Trump, Churches and Politics

Photo: Evan Vucci/AP

By David J. Herzig

One of the leads in today’s news cycle was the Flint Pastor, Rev. Faith Green Timmons of the Bethel United Methodist Church, interrupting Republican Presidential Candidate Donald Trump during a speech at her church.

According to the story, Rev. Timmons, intervened during Mr. Trump’s speech  when he started attacking Democratic Presidential Candidate Hillary Clinton stating, “Mr. Trump, I invited you here to thank us for what we’ve done in Flint, not give a political speech, …”. To which Mr. Trump responded, “OK. That’s good. Then I’m going back onto Flint, OK? Flint’s pain is a result of so many different failures, …”.

I headed to Twitter to state that Rev. Timmons was doing the right thing protecting her churches charitable exemption by halting the political speech.  Quick blackletter law: churches, like other public charities, are exempt from tax under section 501(c)(3). But like all exemptions there are certain limitations, including an absolute prohibition on supporting or opposing candidates for office.  In IRS Publication 1828, the IRS position is clear,  “churches and religious organizations, are absolutely prohibited from directly or indirectly participating in, or intervening in, any political campaign on behalf of (or in opposition to) any candidate for elective public office.”  (For a primer on the topic, my co-blogger Sam Brunson wrote for Surly here and for a full blown analysis see his work for University of Colorado’s law review here).  Churches can’t (although they often do) engage in political speech.  Maybe Rev. Timmons was attempting to protect the church’s exemption.

However, as Lloyd Mayer pointed out on Twitter, having a candidate appear at your church two months before the election might in itself be political speech regardless of the topic actually discussed.  This would be true unless the church gave the same amount of “air time” to the opponent.  Publication 1828 supports Professor Mayer’s view.  Statements made by the religious leader of the church at an official church function or through use of the church’s assets would be improper political campaign intervention.  Hosting only one candidate regardless of the topic would seem to be an endorsement of that candidate and thus improper political campaign intervention.

Continue reading “Trump, Churches and Politics”

Trump Pays $2,500 Excise Tax: Is that Enough?

By: Philip Hackney

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A couple of months ago, I wrote about the tax consequences of the Donald J. Trump Foundation paying $25,000 to the Pam Bondi campaign for attorney general in Florida in 2013. While most folks are focused on whether the payment was a bribe, I still see signs of a mismanaged charitable organization. I suggested that the political contribution could lead to the Foundation losing its exempt status and should require it to pay some excise taxes. I also said that there was enough questionable information for the IRS to open an audit of the Foundation. Well, last week, David Fahrenthold reported that Donald Trump recently paid $2,500 to the IRS as a tax for that impermissible political contribution made by the Foundation. This action leaves a lot of odd unanswered questions that I write about here.

Jeffrey McConney, the senior vice president and controller of the Foundation, told the Washington Post that Trump himself filed paperwork with the IRS alerting them to the improper political contribution from the Foundation, paid a 10% excise tax, and returned the $25,000. McConney states that the Foundation believes this should end the problem because the Foundation has done everything it has “been instructed to do”. While some have assumed that the IRS had communicated with the Foundation, it is not clear who did the instructing. Continue reading “Trump Pays $2,500 Excise Tax: Is that Enough?”

Child Care in the Presidential Campaign

CCA-IG-CostsCompared_v1bToday, Donald Trump laid out a series of economic proposals. Included, naturally, were a series of tax proposals, which I assume we’ll address on this blog as time goes on. For now, I want to focus on just one of his proposals: easing the cost of child care.

While the cost of child care varies, it has risen dramatically, nearly doubling over the last 25 years. And although the cost of child care varies from state to state—and even from city to city—the numbers can be eye-opening. In Illinois, the average annual cost of child care for an infant and a 4-year-old is more than $22,000. At the same time, the median income for a single parent is about $24,000, and the median household income for married parents is about $88,000.[fn1] That means that the cost of child care for two children represents 25 percent of the median Illinois married couple’s household income, and fully 94 percent of the median income of a single parent.

Clearly, using averages and medians doesn’t paint an accurate picture of any given family’s situation. But in no state would child care costs make up less than 30 percent of a minimum wage-earner’s income. That’s a pretty dire picture. Dire enough, in fact, that the cost of child care is keeping women out of the workforce. (And note that it’s not just women who can afford to stay out of the workforce because of a spouse’s or partner’s income: 34 percent of stay-at-home mothers live in poverty, as opposed to 12 percent of mothers in the workforce.) Continue reading “Child Care in the Presidential Campaign”

Examination of Allegations Against Clinton Foundation Part II

By: Philip Hackney

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A week ago I considered one of three allegations Rep. Marsha Blackburn made against the Bill, Hillary & Chelsea Clinton Foundation in a letter Blackburn sent to the IRS, FBI, and FTC. I found the first allegation stated nothing of significance to the IRS. I now look at the other two and find them significantly wanting as well. Recently, IRS Commissioner Koskinen sent a letter indicating the IRS would investigate these complaints. I conclude they fail to state any complaint actionable by the IRS.

The second and third Blackburn allegations seem to come from a book by Peter Schweizer called Clinton Cash. Both allegations suggest that Sec. Clinton provided large governmental benefits in exchange for donations to the Clinton Foundation and payments to Bill Clinton. Both of the claims, already made by Presidential candidate Donald Trump, regarding Laureate University and Uranium One have been rated False and Mostly False by Politifact. Thus, it is difficult to take these allegations seriously.

Nevertheless, there are two things I do in this post. First. I discuss the factual conclusions of others regarding whether there was a quid pro quo arrangement associated with the second and third allegations. Then, I look at how the tax law might treat such arrangements were they true. Continue reading “Examination of Allegations Against Clinton Foundation Part II”

Examination of Allegations Against the Clinton Foundation

By: Philip Hackney

book-863418_1280Back in June I wrote disapprovingly of some actions of the Donald J. Trump Foundation. In that piece I promised to write about the Bill, Hillary & Chelsea Clinton Foundation too. Recently, Rep. Marsha Blackburn sent a letter that was scheduled to be sent to the FBI, the FTC, and the IRS. That letter makes a number of allegations about the misuse of the Clinton Foundation, and I figured these allegations would be a good place to analyze the performance of the Foundation that I had promised.

Blackburn alleges a number of things, but I am going to focus on her first allegation in this post because it is the only one that is a pure tax exemption question. She alleges that the Foundation is illegally operating outside the scope of its initial application for tax exemption to the IRS.  For reasons explained in the post below, I conclude there is very little involved in this claim and it is a misunderstanding of the law. There could be problems with the Foundation but this is not one of them.

UPDATE: I look at the remaining two Rep. Blackburn allegations here.

Continue reading “Examination of Allegations Against the Clinton Foundation”

Should the IRS Penalize Trump Foundation Political Contribution?

By: Philip Hackney

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The news yesterday was focused in part on the fact that in 2013 the Florida AG Pam Bondi personally solicited a political contribution from Donald Trump. And, shortly thereafter the Donald J. Trump Foundation (“Foundation”) made a $25,000 contribution to a political organization called And Justice for All that supported the reelection effort of Pam Bondi for AG of Florida. Bondi’s office ultimately dropped any investigation into Trump University. Bondi denies the allegation that she ended an investigation in exchange for a political contribution. She says her office was never investigating Trump U in the first place. She does acknowledge, however, that her political organization should not have accepted the donation from a charitable foundation. She claims she tried to refund the contribution in March.

The claims against the AG are obviously a serious issue and should be looked at, but I of course see things through a bit of blinders. I see a nonprofit behaving badly. The level of negligence here and misuse of a private foundation frankly drives me crazy. As discussed below, the Foundation’s excuse is that it made a mistake and did not know what it had done. In this post I examine all of the tax code violations involved, and I look at the Foundation’s excuse and try to assess whether it is believable and whether it matters. Continue reading “Should the IRS Penalize Trump Foundation Political Contribution?”