Coming Soon: Trump’s Tax Returns (or Maybe Not)

By Sam Brunson

As we’re all acutely aware, in his presidential campaign, Donald Trump flouted decades of history by refusing to release his tax returns. And given that (a) the history was based on norms, not law, and (b) the Republican-controlled Congress did nothing to enforce the norms (or transform them into law), he continued to flout that norm throughout the first two years of his presidency.

But on January 3, 2019, Democrats will gain control of the House. And Democratic Representatives have made pretty clear that one of their first agenda items will be to request Trump’s tax returns. So does that mean we’ll finally get access to his tax returns?

Maybe. (But probably not.) Continue reading “Coming Soon: Trump’s Tax Returns (or Maybe Not)”

Did Rachel Maddow Break the Law? #TrumpTaxReturns

By Sam Brunson

Last night, Rachel Maddow dropped a bombshell: reporter David Cay Johnston had a leaked copy of Donald Trump’s 2005 tax return, and he shared it on her show.

Okay, maybe it wasn’t entirely a bombshell; in our leakhappy environment, it was almost inevitable that we’d eventually see some of Trump’s returns. And this barely counts as a return: it’s just his Form 1040 from 2005 (that is, the first two pages of a return). When I grade voluntary presidential candidate tax disclosures, one year’s Form 1040 realistically gets you a D+; the 1040 says how much you ultimately paid in taxes, but very little more than that. (For example, you can see that Trump had itemized deductions of just over $17 million, but you can’t tell what itemized deductions he took. I mean, is it mortgage interest? state and local taxes? charitable contributions? some combination? Without the full return, we have no way of knowing.) Continue reading “Did Rachel Maddow Break the Law? #TrumpTaxReturns”

TaxSlayer: Technically Acceptable for VITA Returns?

Adam C. Mansfield
Staff Attorney, Legal Services for Students, University of Kansas

The first time I logged into the TaxSlayer training lab I knew that this tax season was going to be a problem. It became obvious when I typed “1040NR” into the form lookup box in the upper left corner of the TaxSlayer screen and the search came up empty. Next I tried “1042-S” and “8843.” Same result. Now I’m not some old fuddy-duddy that doesn’t like change.  I love working with new gadgets, software, or operating systems—as long as it does what it is supposed to do.

I work for Legal Services for Students at the University of Kansas. The main target population for our Volunteer Income Tax Assistance (VITA) grant is nonresident alien (NRA) students and scholars.  Every tax year we help hundreds of international students and researchers determine their residency status, calculate any applicable tax treaty benefits, and prepare their federal and state returns. In the past, TaxWise has worked just fine for this purpose.  I had no problem preparing a return for the student from Bangladesh who had income in both Kansas and Missouri or the Chinese student who has multiple 1042-S forms for scholarships and awards but still needs to apply treaty benefits to his or her wages. This year, TaxSlayer is just not up to the task.

I feel bad for Whitley, a member of TaxSlayer’s customer support squad, who is left with the task of informing me that they are aware of the “issue” that prevents their software from properly applying and reporting a tax treaty benefit on a nonresident alien return.  She proceeded to tell me that they could only handle “simple” state returns in conjunction with an NRA return.  This means that I can’t make any adjustments to the state return in order to properly apportion income. They are “working diligently to iron out the wrinkles.”  Not being able to prepare a pretty basic nonresident alien return is a little more than just a wrinkle. Continue reading “TaxSlayer: Technically Acceptable for VITA Returns?”

A New Approach to Presidential Tax Disclosure [Updated]

By: Sam Brunson

I’ve written a couple times about the various presidential candidates’ tax return disclosure and nondisclosure. Ultimately, I concluded that, unless Congress mandates disclosure, it’s not going to happen.

It turns out that I may have been wrong.

No, I don’t mean that the disclosure norm is going to reassert itself. I do mean, though, that requiring presidential candidates to disclose their tax returns may not require Congressional action after all.  Continue reading “A New Approach to Presidential Tax Disclosure [Updated]”

Revisiting Presidential Tax Return Disclosure

imjustabillBy Sam Brunson

At this point, it’s pretty clear that the norm of presidential candidates (and, presumably, presidents) releasing their tax returns to the public is dead and buried. Sure, it’s been on life support for some time now (I mean, a significant number of candidates in this race released weak disclosures at best), but Trump’s election without having ever released his returns clearly demonstrates that flouting this particular norm is not a bar to election.

On election day I wrote that Congress should require disclosure from presidential candidates (and, at this point, I would expand that to sitting presidents and vice-presidents), and provided a handful of ideas about how such legislation should look. But my previous post suffers from one significant weakness: I assumed that disclosure was a good thing, without explaining why. Continue reading “Revisiting Presidential Tax Return Disclosure”

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”

I’ve Got ITINs on My Mind

By: Francine J. Lipman

Individual Taxpayer Identification Number (ITIN) Holders Pay Over $45 Billion Annually in Federal, State, and Local Taxes

Among the many amazing opportunities I have had as a law professor at the University of Nevada, Las Vegas is continuing my work with immigrants on their tax issues. As I have written about at length unauthorized immigrants pay many tens of billions of dollars a year in taxes including federal (about 4.4 million ITIN tax returns were filed in 2015 paying over $23 billion including $18.1 in federal income taxes and $5.5 in self-employment taxes), state, and local income, property, sales, excise, etc. ($12 billion annually), and payroll taxes (about $12 billion a year in net Social Security and Medicare taxes for which they currently receive no current or future benefit).

ITINs GENERALLY

Nevertheless, Congress continues to challenge this population with respect to their tax compliance. If you do not know what an ITIN is then this issue likely does not directly affect you … however if you want a quick education the National Immigration Law Center (NILC) has a great primer available in English and Spanish here. Since 1996, IRS has issued about 21 million ITINs although only about 5 million are currently being used. Congress had previously enacted legislation causing any ITIN not used for five years to expire. However, that legislation was not given a chance to be enforced, because Congress has been busy enacting more recent ITIN expiration legislation that supersedes the five year law.

THE CURRENT ITIN on my mind ISSUE

ITIN EXPIRATIONS

In the recently enacted PATH Act of 2015 (Protecting Americans from Tax Hikes), among other matters, all ITINs issued before 2013 will be expiring and have to be renewed. An ITIN issued after December 31, 2012, will remain valid unless the person to whom it was issued does not file a tax return—or is not included as a dependent on the return of another taxpayer—for three consecutive years.

Congress has phased-in the expiration of ITINS as follows:

IF THE ITIN WAS ISSUED         THE ITIN EXPIRES ON

before January 1, 2008                    January 1, 2017
in 2008                                             January 1, 2018
in 2009 or 2010                                January 1, 2019
in 2011 or 2012                                January 1, 2020

In an effort to streamline the process, the IRS is identifying the first wave of ITINs expiring on January 1, 2017 as ITINs with the middle digits of 78 or 79. The IRS will identify the respective middle digits for the second, third, and fourth waves of expirations in time.

HOW TO RENEW BEGINNING October 1, 2016 

ITINs scheduled to expire as of January 1, 2017 (middle digits 78 or 79 or any ITIN not used on a tax return for the last three consecutive years (e.g., 2013, 2014, and 2015)), can be renewed using the newly revised for this purpose Form W7 (available here) also known as an Application for IRS Individual Taxpayer Identification Number. No tax return is required for a renewal application.

The application including all required original documents (e.g., passport) must be mailed to Internal Revenue Service, ITIN Operation, P.O. Box 149342, Austin, TX 78714-9342. The anticipated time that the IRS will take to renew or issue an ITIN outside of peak processing times (between January and April) has historically been about six weeks. However, in a recent press conference the IRS said that they would be sending 400,000 letters to ITIN holders with expiring ITNs so there could be a much longer waiting period. The National Taxpayer Advocate has written about the ITIN application backlog and bottleneck in her 2015 Report to Congress as Most Serious Problem Number 18.

Any original documents or certified copies submitted in support of an ITIN application are supposed to be returned within 65 days. Taxpayers who do not receive their original and certified documents within 65 days of mailing them to the IRS may call 1-800-908-9982 to check on their documents.

CERTIFIED ACCEPTANCE AGENTS   Not surprisingly, many immigrants will not want to send original documents to the IRS. In lieu of sending original documentation, taxpayers may be eligible to use an IRS authorized Certified Acceptance Agent (CAA) or make an appointment at a designated IRS Taxpayer Assistance Center location. CAAs often charge a fee for services rendered although some of the large chains of retail tax preparation companies are advertising free ITIN renewal services. I would advise taxpayers to proceed with caution as there may be ancillary costs, charges, or fees. The Consumer Federation of America, among others including myself, have written about the high cost of tax assistance services for low-income taxpayers and the potential for consumer abuse including price gouging.

FAMILY ITIN APPLICATIONS   The IRS will accept a Form W-7 renewal application from each member of a family if at least one of the family members listed on a tax return has an ITIN with the middle digits of 78 or 79. If one family member has middle digits 78 or 79, all family members who have an ITIN may submit a Form W-7 renewal application at the same time.

FINANCIAL CONSEQUENCES IF ITINs Are NOT Renewed

Until ITINs are renewed, returns with expired ITINs will be processed and treated as timely filed, but the returns will be processed without any exemptions and/or credits claimed and no refund will be paid. The taxpayer will receive a notice from the IRS explaining the delay in any refund and that ITINs must be renewed. Once ITINs are renewed, any exemptions and credits will be processed and any allowed refunds will be paid. If ITINs are not renewed, taxpayers may be subject to interest and penalties for any tax owed as a result of disallowed exemptions and credits.

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HELP IS AVAILABLE

The more than 130 Low-Income Taxpayer Clinics across the country should be able to answer questions and point you in the right direction to get assistance. To find the contact information for a LITC in your area look at this user-friendly map and list in English and Spanish here.

Moreover, the NILC and other immigrant advocate groups and pro bono lawyers like myself are always here to lend a hand. On November 16th, UNLV will be hosting a Continuing Legal Education program titled “Everything You Need to Know About the NEW Taxpayer Identification Number (ITIN) Renewal Process” from 12:30 – 2:30 p.m. at William S. Boyd School of Law, Moot Court Room. Join us.

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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?”

House Staffer is a Tax Protester?

By: David J. Herzig

Politico reported yesterday that “Isaac Lanier Avant, chief of staff to Rep. Bennie Thompson (D-Miss.) and Democratic staff director for the Homeland Security Committee, allegedly did not file returns for the 2009 to 2013 tax years.”

According to the Department of Justice Press Release, Mr. Avant has been a staff member of the U.S. House of Representatives since 2002.  In 2005, he filed a form with “his employer that falsely claimed he was exempt from federal income taxes.  Avant did not have any federal tax withheld from his paycheck until the Internal Revenue Service (IRS) mandated that his employer begin withholding in January 2013.”

This seemingly innocent story might get more torrid.  For starters, missing from the press release by Justice is that, as Richard Rubin pointed out to me, Mr. Avant’s employer was Congress.  Do you hear the can of worms opening?  I mean, who at payroll in Congress is green-lighting the stopping of withholding?  What did his form look like? Did he make up an official and name it – W-NONE?  How many other staffer’s did this?  How did he never get audited?  According the the press release and the story, Mr. Avant did not file tax returns for 5 years; I guess a matching program would not catch anything since he had no withholding.  But, one would think Congress would at least ensure that every employee has filed a tax return.

Not sure which awesome tax protester argument he is going with.  Personally, I hope it is that he is a sovereign citizen.  It would be great if the Democratic staff director of Homeland Security thought the U.S. laws did not apply to him.  I guess we will have to wait for the actual complaint.  For those interested, the IRS has outlined numerous frivolous tax arguments.

 [UPDATE 8/24/16 at 8:41 pm: It appears that a claim of Sovereign Citizen might really be in play.  According to the Panolian, a local Batesville, Mississippi newspaper, Mr. Avant is the son of Vernice Black Avant and the late Robert Allen Avant Sr.  In 2011, according to the Panolian, Mr. Avant’s mother, who is also a court clerk, filed an “11-page ‘Affidavit of Truth'”  “declaring that she is a “freeborn Sovereign” are meant to distinguish her as an individual, distinct from a corporation.”  “The affidavit cites participation in the use of bank accounts, Social Security numbers, driver’s licenses, vehicle license plates and tax returns as ‘under duress.'”]

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?”

Presidential Tax Transparency Act

By: David J. Herzig

I was given a heads up yesterday about new legislation requiring disclosure of a presidential candidate’s tax returns (thanks Janet Novack). In the wake of our coverage of the tax issues related to the presidential race, it is worth mentioning the legislation proposed by Senate Finance Committee Ranking Member Ron Wyden, D-Ore.

According to the press release: “‘Since the days of Watergate, the American people have had an expectation that nominees to be the leader of the free world not hide their finances and personal tax returns,’ said Wyden.

“The Presidential Tax Transparency Act says that within 15 days of becoming the nominee at the party convention, the candidate must release their most recent 3 years of tax returns to the Federal Election Commission (FEC). Should the candidate refuse to comply, the Treasury Secretary will provide the tax returns directly to the FEC for public release.”

A summary of the bill is here and the full text is here.

As an initial matter, I am in favor of codifying a rule requiring the disclosure of tax returns if you a candidate for president on any State’s ballot. As I read the legislation, there seem to be major problems with the language of the statute.  This makes me think that the legislation is more of a publicity stunt then a force for meaningful change.

Here are some of the problems I see with the legislation: Continue reading “Presidential Tax Transparency Act”

Trump Tax (Non) Disclosure

By David J. Herzig

Today, Paul Caron in his TaxProf Blog, highlighted an article by John McGinnis (a Constitutional Law Scholar at Northwestern).   In the article, McGinnis states that Trump should not have to disclose his income tax returns.  His premise is that the norm of tax return disclosure is “bad.”  He believes that privacy norms should trump any right of the electorate to see a candidates taxes.  I vehemently disagree with this normative position. I hesitate to write a “hot take” or half-baked reaction to the article.  But there is dangerous precedent failing to highlight the error(s) in McGinnis’ position. (I am under the assumption that McGinnis had limited space to write his opinion and nuance he would normally make is lost to space constraints).

I, as well as others such as, Joe Thorndike, have previously made the point that tax return disclosure is very important.  In my Forbes article, I made the point of a variety of reason tax return disclosure is very important.  I said, “First, tax returns can be a window to understanding how someone truly thinks and behaves; what you do when you think the public isn’t looking, shows the more authentic self.  (Hillary Clinton’s tax return is arguably less revealing, since she has long known her returns would be made public.)  Trump’s tax filings might provide some additional insight into how he would run the country.  Does he follow rules? Stake out very aggressive positions?  Take unnecessary risks?”  I think how people act in private is the best proxy for understanding what they think.  With a candidate like Trump, this may be the only window into how a Trump presidency would look like.

McGinnis starts his discussion by making the first point in support of his thesis that Continue reading “Trump Tax (Non) Disclosure”

Grading the Candidates’ Tax Disclosure (Updated)

By Sam Brunson

Image by Ludwig. License.
Image by Ludwig. License.

Nearly two months ago, guesting on Prawfsblawg, I wrote about the state of the presidential candidates’ disclosure of their tax returns. Since then, they’ve gone through several more primaries, and we have a better idea of where each candidate stands in the electorate. So, as the semester winds up and my focus shifts to grading, I thought I’d warm up by grading the candidates on their level of tax disclosure.

A caveat before we begin: as tax historian Joseph Thorndike has noted (here and 150 Tax Notes 591 (2016)), while there’s a strong norm for candidates’ releasing their tax returns (consistently since 1980, and sporadically for at least a decade before that), they are under no legal obligation to do so. If we really care about seeing candidates’ tax returns, we should encourage Congress to make disclosure mandatory.

That said, my grades aren’t based on legal obligation. They’re based on some combination of the quality and quantity of the disclosure.  Continue reading “Grading the Candidates’ Tax Disclosure (Updated)”