IRS Routinely Audited Obama and Biden, Raising Questions Over Delays for Trump
Charlie Savage and Alan Rappeport
Thu, December 22, 2022
The House Ways and Means Committee holds a meeting, where it voted to make six years of former President Donald Trump's tax returns public, on Capitol Hill in Washington, Dec. 20, 2022. (Haiyun Jiang/The New York Times)
WASHINGTON — The IRS subjected President Donald Trump’s predecessor and his successor to annual audits of their tax returns once they took office, spokespeople for Barack Obama and President Joe Biden said Wednesday, intensifying questions about how Trump escaped such scrutiny until Democrats in the House started inquiring.
Late Tuesday, a House committee revealed that the IRS failed to audit Trump during his first two years in office despite a rule that states that “the individual tax returns for the president and the vice president are subject to mandatory review.” But its report left unclear whether that lapse reflected general dysfunction or whether Trump received special treatment.
The disclosure of routine audits of Obama and Biden during their time in office suggested that the agency’s treatment of Trump was an aberration.
“I’m absolutely flabbergasted,” said Nina E. Olson, the national taxpayer advocate from 2001 to 2019. “It’s disturbing. You have a process where you’re auditing the president, you better be auditing the president.”
Reports issued by the House Ways and Means Committee, which obtained Trump’s tax data last month after a yearslong legal battle, said the IRS initiated its first audit of one of his filings as president in April 2019, the same day that Rep. Richard Neal, D-Mass., the committee’s chair, had inquired about the matter.
The IRS has yet to complete that audit, the report added, and the agency started auditing filings covering Trump’s income while president only after he left office. Even after the agency belatedly started looking, it assigned only a single agent to examine Trump’s returns, going up against a large team of lawyers and accountants who objected when the IRS added two more people to help.
The committee’s discovery that the IRS flouted its rules is bringing new scrutiny to concerns about potential politicization at the IRS during the Trump administration and spurring calls for the inspector general who oversees the agency to investigate what went wrong. It has also raised questions about why the IRS devoted so few resources to auditing Trump, who, as a business mogul, had far more complicated tax filings than any previous president.
Under Trump, the IRS was run for most of 2017 by a commissioner appointed by Obama, John Koskinen, and — after about 11 months being overseen by an acting head, David J. Kautter — a successor appointed by Trump, Charles P. Rettig. None ensured that the agency followed its rules requiring presidential audits.
Rettig, who left in October, said in an email Wednesday evening that he did not attempt to intervene in Trump’s audit.
“I am not aware of any taxpayer receiving special treatment at any time, before or during my term as commissioner,” he said. “Further, at no time did I make, nor am I aware that anyone else made, any decision to somehow limit resources available to conduct examinations under the mandatory examination process.”
He added: “I had no involvement in the process of selecting for examination or the conduct of an examination of any return regarding any taxpayer.”
Koskinen said that his only involvement in Trump’s tax returns was working to ensure that they were kept in a secure location.
“The good thing about being commissioner is that you never know who is being audited,” Koskinen said, adding that it would have been inappropriate to ask about the status of any examination.
Kautter did not respond to a request for comment.
The committee’s reports left many questions unanswered given that it had little time to act: While Neal had sought Trump’s tax records since 2019, Trump fought that request for nearly four years. The Ways and Means Committee only received access to the information last month, with Republicans set to take control of the House in January.
Spokespeople and associates of several other former presidents over the past three decades either did not respond Wednesday to queries about whether those presidents had been audited every year they were in office or said they did not recall.
Sen. Ron Wyden, D-Ore., the chair of the Senate Finance Committee, on Wednesday called the House panel’s findings a “blockbuster” that required further attention.
“The IRS was asleep at the wheel, and the presidential audit program is broken,” he said. “There is no justification for the failure to conduct the required presidential audits until a congressional inquiry was made.”
The IRS has already been the subject of repeated controversy.
The New York Times reported this year that the IRS had initiated particularly invasive audits of two of Trump’s perceived enemies, former FBI Director James Comey and his deputy, Andrew McCabe. Trump also repeatedly told his chief of staff that he wanted his perceived rivals, including those two, to face tax investigations.
Despite the low odds of both being singled out, an inspector general’s report concluded that both had been randomly selected for the initial pools from which the agency drew to carry out the examinations. But it is unclear how the IRS made final selections from those pools.
In 2019, Trump raised eyebrows by telling Sen. Mitch McConnell, the majority leader, to prioritize a confirmation vote for a longtime associate, Michael J. Desmond, as general counsel of the IRS over the nomination of William Barr as attorney general. Desmond had advised a subsidiary of the Trump Organization and worked with two of its tax lawyers.
And in 2018, Trump appointed as commissioner Rettig, who had written a Forbes column in 2016 defending Trump’s refusal to release his taxes as a candidate and portrayed the IRS as fully engaged in auditing very wealthy people.
“Teams of sophisticated tax advisers were likely engaged throughout Trump’s career to assure the absence of any ‘bombshell’ within the returns,” Rettig wrote. “His returns might actually be somewhat unremarkable but for the fact they are the returns of Donald Trump.”
In fact, the few glimpses of Trump’s taxes have shown much to talk about. The Trump Organization was convicted of a tax fraud scheme this month. The New York attorney general has sued Trump and three of his children, accusing them of fraudulently overvaluing his assets.
The Times gained access to years of his tax information and published a report in September 2020 that raised numerous questions about the legality of write-offs and deductions he had used to avoid paying any taxes most years. The article prompted the IRS to consider looking at Trump’s 2017 tax returns, the committee report said.
The IRS has had scant resources for years because Republicans have sought to cut its funding. The report highlighted the agency’s broader struggles in dealing with complicated tax returns filed by wealthy people and criticized its willingness to trust that returns filed by big accounting firms contained accurate information.
Congress has approved an $80 billion overhaul of the IRS intended in part to hire more specialists capable of auditing high-income filers.
The committee released the reports after a party-line vote, exercising a rarely used power to obtain and make public any U.S. taxpayer’s private information.
Congress invoked it in 1974, when a committee released a report about President Richard M. Nixon’s taxes after a scandal about whether he was underpaying what he owed. That scandal led the IRS in 1977 to create its rule mandating audits of presidents and vice presidents, ensuring that agency officials are not put in the awkward position of deciding whether to audit their boss.
The Ways and Means Committee again used that authority in 2014, when Republicans accused the IRS of political discrimination because it used conservative terms like “tea party” when selecting groups to scrutinize for political activities that would make them ineligible to receive tax-deductible donations. But an inspector general determined that the agency had also used liberal terms, like “progressive” and “occupy,” for the same purpose.
Commissioners of the agency are political appointees of presidents. Koskinen — who had also run the agency several of the years that it was routinely auditing Obama — was not the only one to say he avoided involvement in presidential audits.
Charles O. Rossotti, who served as IRS commissioner from 1997 to 2002, said that he was aware that presidents were audited as a matter of practice but that he played no role in the process.
“I kept away from that with a 10-foot pole,” Rossotti said.
The requirement that presidential returns be audited is included in the tax agency’s Internal Review Manual, which offers few details. A 2019 IRS document accompanying the committee report said the examinations were conducted by experienced revenue agents.
“The IRS is not aware of any reports of improper bias or partiality in the conduct of an officeholder’s examination in the more than 40-year history of the mandatory procedures,” it said.
The House committee report also documented an extraordinary lack of resources the IRS dedicated to auditing Trump’s returns when it belatedly started doing so, initially assigning just one staff member to the matter despite the unusual complexity of his business entities and partnerships.
The committee cited internal IRS memos stating that “it is not possible to obtain the resources available to examine all potential issues” raised by the more than 400 pass-through entities cited in Trump’s taxes.
“To do a thorough review of these returns, we would need a team much larger than the current team,” it said.
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