David J. Herzig is a professor and research fellow at Valparaiso University Law School. He is on Twitter: @ProfessorTax.
Republican presidential candidate Donald Trump announced in an interview with the Associated Press on Wednesday that his tax returns would not be released before November and, even then, only if his audits have been completed. Mr. Trump suggested that voters don’t care about what is on his tax returns. He may be right that some voters don’t–but Election Day is still months away, and many people are interested in what his returns would reveal.
There is more to the question of a candidate’s tax returns than potential hidden time bombs, as some have speculated. The traditional rationale for releasing a tax return is for transparency of the candidate’s views on various policies. The public can see, for example, whether Mr. Trump is aggressive in his return positions: what deductions he claimed, how much he donated to charities, etc. Mr. Trump doesn’t spend much time discussing policy because it would “make him less effective on the stump,” an aide told Politico. That makes other avenues into his policy preferences all the more helpful to understanding what a Trump presidency might look like.
If Mr. Trump is elected president, as the head of the executive branch he has control over its agencies, which include the IRS and the Tax Court. Technically, he would have the power to stop audits of his returns. (Audits, of course, were the reason he cited last fall for not having made his returns public when he was asked whether he would disclose his information.) Under the Internal Revenue Manual 18.104.22.168, the U.S. president’s returns are subject to mandatory audit. Imagine if, as part of his first 100 days, President Trump ordered the IRS to eliminate that provision or otherwise change it to exempt the president’s return from audit. That might sound like a step outside the law, but Mr. Trump has proposed policies that raise constitutional issues (most recently floating the idea of forcing a renegotiation of the U.S. debt but also, for example, suggesting that the U.S. military engage in torture).
IRS reforms implemented in 1997 prevent the president from becoming involved with individual cases under 6103 of the Tax Code. What would stop Mr. Trump from decreeing that his own affairs are not the same as other individuals’ cases?
Even if the IRS commissioner disagreed or otherwise refused to listen, a President Trump could replace the commissioner. He might not even have to do that, as the current commissioner’s term expires Nov. 17, not two weeks after Election Day. What if a President Trump appoints a new commissioner who supports his anti-audit position? Or, what if Mr. Trump decides that an idea put forward by Sen. Ted Cruz has merit and pushes to eliminate the IRS? Mr. Trump said during one Republican debate that changing positions can reflect his study and evolution on an issue; what’s to stop him from evolving in that direction?
Mr. Trump might not interfere with audits of his returns, but he could still disagree with the outcome. His recourse would most likely be to challenge in the adjustment in Tax Court, which raises another potential conflict: Last year, in Kuretski v. Commissioner, the IRS argued and the U.S. Court of Appeals for the D.C. Circuit agreed that the Tax Court fell under the executive branch. Congress has tried to alter that result in the Protecting Americans from Tax Hikes Act, but the president still has relevant powers. If a Tax Court judge ruled in a way Mr. Trump didn’t like, what if he decides to fire the judge?
There are basic questions about how Mr. Trump would handle an audit as president. Traditionally, some general information has been gleaned from candidates’ tax returns. With Mr. Trump’s decision not to make his tax information public, he opens a broader discussion of his past approach to taxation and how he might attempt to use his powers as president.