Has Trump Run Out The Clock On His Tax Returns Yet Again?

The maxim “justice delayed is justice denied” has been invoked throughout history and it serves as a reminder that success in litigation may turn not just on accomplishing a desired result, but on when the outcome is achieved. The recent efforts of House Democrats to obtain former President Donald J. Trump’s tax returns provides a case study of a litigant running out the clock on his opponent.

The saga of the Trump tax returns started when the former President broke with the longstanding tradition of presidential candidates and presidents releasing their income tax returns. While a good government group unsuccessfully sought then-President Trump’s returns immediately after he took office, Congressional Democrats used several avenues to try to obtain those returns after they took the majority of the House of Representatives in January 2019. After three-and-a-half years of litigation, late last month the United States Supreme Court put an end to legal battles over the returns with a two-sentence order rejecting the former president’s latest challenges and paving the way for the House Ways and Means Committee to obtain the returns. While the Court’s rejection of Mr. Trump’s arguments was a win for Congressional Democrats, with less than a month left before House Republicans take control, it is unclear what the Democrats will be able to do with the information they fought so hard to get.

By way of background, Section 6103 of the Internal Revenue Code governs the confidentiality and disclosure of returns and largely bars IRS employees from releasing tax returns and related information. Indeed, it is a felony for anyone, including federal employees or officers, to make an unauthorized disclosure of return information.

There are, however, important exceptions to the general non-disclosure rule, including Section 6103(f)(1), which stipulates that the Secretary of the Treasury shall provide the three Congressional committees charged with tax administration – the House Ways and Means Committee, the Senate Finance Committee, and the Joint Committee on Taxation – with any return or return information specified in a written request from the Committee chair.

Because both the House and Senate were in Republican control when Mr. Trump took office, none of the three Committee chairs asked then-Treasury Secretary Steven Mnuchin to provide copies of the President’s tax returns or return information pursuant to Section 6103(f)(1). While one public interest research group sued the IRS to obtain copies of Mr. Trump’s returns under the Freedom of Information Act, the district court’s dismissal of the suit was affirmed on appeal.

When Democrats took control of the House in 2019, the Financial Services, Intelligence, and Oversight Committees issued a total of four subpoenas seeking tax returns and other financial information from Mr. Trump, his children, his businesses, his former accounting firm, Mazars USA, LLP (“Mazars”), and Deutsche Bank. Over the course of almost a year, Mr. Trump and his lawyers challenged the Congressional subpoenas in the United States District Courts for the District of Columbia and the Southern District of New York, the United States Courts of Appeals for the D.C. Circuit and the Second Circuit Court, and finally before the United States Supreme Court in Trump v. Mazars USA, LLP. While the former President and his legal team suffered a series of defeats in these cases and in related litigation aimed at keeping his tax returns from the Manhattan District Attorney, in Mazars, the Supreme Court held that the lower courts had not properly considered separation of powers concerns in determining whether the Congressional subpoenas were proper, and remanded the case for further proceedings, resulting in further delay.

After the Supreme Court decided Mazars in July 2020, the Financial Services Committee withdrew its subpoena, the Intelligence Committee significantly limited its subpoena, and the Oversight Committee settled with Mr. Trump, who agreed to give the Committee access to some, but not all of the requested materials. Having apparently managed to keep his tax returns from the three Committees, Mr. Trump likely viewed the litigation as successful.

At the same time the three House Committees issued the Mazars subpoenas, Chairman Richard Neal of the Ways and Means Committee invoked Section 6103(f)(1) and requested Mr. Trump’s 2013 through 2018 returns from the Treasury Department. Notwithstanding the statute’s mandatory language, which provides that the Secretary of the Treasury “shall furnish” returns or return information in response to a written request, then-Secretary Mnuchin denied the request, concluding that the Committee’s request “lacks a legitimate legislative purpose.” The Committee’s challenge to this decision was pending when Mr. Trump lost the 2020 election.

In June 2021, Chairman Neal renewed his request, asking now-Secretary Janet Yellen to provide copies of Mr. Trump’s 2015 through 2020 returns. The Treasury’s Office of Counsel issued an opinion concluding that Chairman Neal’s second request was valid and that the Treasury had no choice but to comply. The Committee then moved to dismiss its lawsuit against the IRS and the Treasury Department, but Mr. Trump and his business organizations were not ready to give up the fight. They intervened to assert counterclaims and cross claims alleging, among other things, that the request lacked a valid legislative purpose and violated the separation of powers under the test created by the Supreme Court in Mazars.

Five months later, on December 14, 2021, the District Court threw out Mr. Trump’s claims, finding that the Ways and Means Committee had a valid legislative purpose for requesting the returns. Unsurprisingly, the Trump team appealed and, after another eight months, the D.C. Circuit agreed with the District Court that Chairman Neal had identified a legitimate legislative purpose and the fact that the request may have also been motivated by political considerations was “of no moment.” On October 31, 2022, days before the IRS was set to deliver the returns to the Committee pursuant to the D.C. Circuit’s order, Mr. Trump’s lawyers filed an emergency application with the Supreme Court to stay the order while he appealed the decision. On November 22, 2022, the Supreme Court put an end to the litigation, rejecting his application in an apparently unanimous two-sentence order, paving the way for the IRS to turn over Mr. Trump’s returns to the Committee last Wednesday.

Although it lost virtually every battle in the litigation and the returns are now in Congress’s hands, Mr. Trump’s legal team may well have won the war as Republicans – who have no interest in pursuing issues relating to the former president’s tax returns – are set to take over the House majority on January 3, 2023. With less than 30 days left in the majority, the Committee Democrats now must decide what to do with the returns in what may well be the public’s last chance to learn details of Mr. Trump’s finances and tax compliance.

While Section 6103(f)(1) provides that returns produced in response to a written request of a Committee Chair “shall be furnished to such committee only when sitting in closed executive session,” Section 6103(f)(4)(A) has been interpreted as permitting the Ways and Means Committee to submit the returns to the full House without any constraint. In other words, Committee members could arguably accomplish public disclosure by reading Mr. Trump’s tax returns aloud on the House or Senate floor or by including them in the Congressional Record through a report or letter.

One law professor who previously served as chief of staff of the Joint Committee on Taxation has argued that history and a common-sense interpretation of Section 6103(f)(4)(A) requires that the Committee have a legitimate legislative purpose for such disclosures. However, disclosure to Congress absent a valid legislative purpose is unlikely to yield legal consequences since committee members are protected under the Speech or Debate Clause of the Constitution. As New York University Law professor Daniel Hemel explained, the Committee “could begin its review of the presidential audit program now and then release everything it has when the clock strikes noon on Jan. 3, like a test-taking student who drops her pencil mid-sentence when the proctor says ‘time’s up’” without consequence.

Even absent a legal bar to the Committee disclosing Mr. Trump’s tax return information, releasing the returns in slapdash fashion runs the risk of undermining the Committee’s credibility with the public and the courts. Throughout the litigation the Committee asserted that their request was motivated by a legitimate legislative purpose – the need to review the IRS’s Presidential Audit Program to inform legislation related to the Program – and was not a pretext for releasing the returns to the public. Unless the Committee can finish its examination of the Program before January 3, releasing the returns this month could support partisan complaints that the Committee pulled a bait-and-switch with its request.

If the Committee does not release the return information before Republicans take the House on January 3, curious citizens have few other avenues to gain access to the returns. The Senate Finance Committee will remain in Democratic control in 2023 and can follow the Ways and Means Committee’s lead in requesting the documents from the IRS in furtherance of its own assessment of the Audit Program, or some other legislative purpose, such as potential legislation requiring presidential tax return disclosures. To date, however, the Committee’s Chairman, Senator Ron Wyden of Oregon, hasn’t indicated any interest in pursuing the returns.

Former President Trump’s litigation strategy with respect to Congressional attempts to obtain his tax returns among other matters may remind college basketball fans of the four corners offense made famous by Coach Dean Smith and the University of North Carolina Tar Heels. As the Tar Heels used the strategy to burn time off the clock waiting for the game to end, Mr. Trump’s legal team has kept his tax returns private for the last three-and-a-half years as it “dribbled” between different courts to run the clock against the Democratic-controlled House. While Coach Smith’s strategy ultimately led the NCAA to install a shot clock, it is doubtful that courts will adopt rules changes to preclude litigants like Mr. Trump from using litigation to delay an adverse ruling. Rather, regardless of how one feels about the former President’s efforts to hold his tax returns from the public’s eye, his lawyers’ apparent ability once again to run out the clock warrants (grudging) respect.

To read more from Jeremy H. Temkin, please visit www.maglaw.com.

Emily Smit, an associate at the firm, assisted in the preparation of this blog.