A Trump Tax Return Standoff Would Be ‘Uncharted Territory,’ Expert Says

(Bloomberg) -- The U.S. government would be in “uncharted territory” if Treasury Secretary Steven Mnuchin were to block a House request to release President Donald Trump’s tax returns, a law professor told a congressional panel on Thursday.

The Democrats who now control the House Ways and Means Committee are eager to get their hands on the returns and are easing their way into an almost-certain legal battle. An array of professors and lawyers testified before the panel’s oversight committee to advise its members how that struggle might play out.

Trump broke decades of tradition by refusing to release the documents during the 2016 campaign, and has continued to do so ever since.

Mnuchin has no “wiggle room” to deny a legitimate request from the House for Trump’s tax returns, but there’s also no precedent to follow if he did, University of Virginia law professor George Yin told the House Ways and Means oversight panel. Yin was previously chief of staff of Congress’s nonpartisan Joint Committee on Taxation.

Ways and Means Chairman Richard Neal of Massachusetts -- as well as the chairman of the Senate Finance Committee and the head of the Joint Committee on Taxation -- have the power under a 1924 law to ask the Treasury secretary to turn over the tax returns of any person, including the president.

Yet Neal, clearly aware of the political risk in demanding Trump’s personal financial information, has said he is working with committee lawyers to craft the request. The administration would likely mount a legal challenge, which could last until after the 2020 presidential election.

It’s unclear how quickly Neal will act. Even less clear is how cooperative Mnuchin would be in producing the documents. Mnuchin has said he would review the request and respond if required by law, but has declined to say what legal position he might take.

Thursday’s hearing is the first public glimpse into how House Democrats may use the little-used 1924 law to obtain Trump’s tax returns.

Democrats say they want to see Trump’s returns to be sure he’s complying with tax laws, to examine his financial connections abroad, and learn to whom he owes money. Trump did not divest from his real estate and licensing businesses after taking office.

To get a full picture of Trump’s financial network, the committee would also need to see the tax returns for his businesses, Steve Rosenthal, a senior fellow with the Urban-Brookings Tax Policy Center, told the lawmakers. Lines on those forms would indicate whether those concerns have people from foreign countries or foreign governments investing in them, he said.

Trump’s holdings include a large network of closely held businesses. He has said that he has been under audit by the Internal Revenue Service since 2009, and therefore cannot release the returns, although there is no law barring him from doing so.

IRS Commissioner Charles Rettig, a Trump nominee, said in his Senate confirmation hearing last year that he had never seen an audit that lasted for a decade.

Trump undergoes a special audit each year for presidents and vice presidents.

Representative Mike Kelly, a Pennsylvania Republican, said that audit was sufficient oversight of the president’s financial affairs and that concerns of privacy outweigh the committee’s desire to see the returns. “Keeping this information confidential is critical to the integrity of the U.S. tax system, which is only functional because taxpayers voluntarily pay their taxes,” Kelly said.

Republicans say that getting and releasing the president’s tax returns would set a bad precedent for the party in power to use the tax code to single out its political opponents. In the 1970s, Congress repealed the part of the 1924 law that allowed presidents to get individuals’ tax returns after President Richard Nixon misused that authority.

Representative John Lewis of Georgia, chairman of the Ways and Means oversight panel, pushed for a bipartisan effort on the request. “It is not a Democratic or a Republican query; it is an American responsibility,” he said. “The American public has a right to know.”

But cooperation between the two parties is unlikely. Representative Kevin Brady of Texas, who led the Ways and Means Committee during the first two years of Trump’s term, repeatedly declined requests from Democrats to pursue the returns.

Forcing Trump to relinquish his tax returns is just one of the many ways Democrats hope to wield their investigative power. Other House panels are looking into the president’s business activities, the 2016 campaign and the Trump administration. The president is also being squeezed by investigations by federal prosecutors in New York and by Special Counsel Robert Mueller.

Neal has faced pressure from members of his own party, as well as outside groups, to make the request immediately. Billionaire Tom Steyer ran an ad during the Super Bowl, and is spending $109,000 more on advertisements in Neal’s district, urging him to act.

“This hearing is not the end,” Lewis said. “It’s just the beginning.”

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