So About President McDeals's $70 Million Tax Refund ...
Who wants to talk about the Joint Committee on Taxation?
WAIT, WHERE ARE YOU ALL GOING?
Come back here right this minute so we can taxsplain you the most important part of the story about Trump's shadyass federal returns! Seriously, you guys, this is critical.
Okay, we all understand that Trump doesn't like to pay taxes. Which mostly works out fine, since his businesses don't generally make much of a profit. Well, not on paper at least.
But just to spell out how that works, let's say you own two businesses. Business A makes $1,000, and Business B loses $1,500. That means that you don't owe any taxes on the earnings from Business A, and furthermore, you lucky duck, you have $500 of losses you can apply to your taxes next year.
Which is more or less how Trump was able to wipe out his tax liability every year. (Also depreciation, but that's for another day.) But then in 2005, Trump actually started to have real cash income from "The Apprentice" and the publicity that allowed him to hock his name for hundreds of millions of dollars.
And instead of constant losses from lousy management skills (or "losses" from depreciation), TV gigs pay cash money. According to the Times, Trump reaped a massive $427 million payout from the show and endorsement deals. And Uncle Sam always takes a bite, AS HE SHOULD.
Now Trump had his regular business losses to use to abate some of that tax — he might have been playing a successful mogul on television, but his businesses were still hemorrhaging cash. But it didn't wipe out his liability entirely, so he still had to pay the IRS $70 million between 2005 and 2007. Then Trump got an unexpected lifeline in 2009 from President Obama, who was struggling mightily to undo the damage of the Bush Recession.
Previously, you could only use losses from the prior two years to offset taxable income. But under the new law, you could use 100 percent of your losses from the prior four years, and 50 percent of losses from the year before that. This effectively unlocked a shit ton of Trump's unused losses, allowing him to clam a refund on the entire $70 million he'd paid, plus more than $2 million in interest since the government had been holding his money. So he filed for the refund, and pocketed the $72 million, plus another $21 million dollars in state and local givebacks.
But! refunds of more than $2 million require approval by the .... Joint Committee on Taxation. TA-DAAAAA, told you we'd get there.
The JCT is a bipartisan committee composed of five members of the House and five of the Senate who are supposed to sign off on all of these big deals to prevent the executive branch from favoring cronies. In practice, Accounting Today reports, the real work is done by committee staff, toiling away at the IRS, reading reports instead of actual returns.
As grossly inequitable as this may appear, Trump was probably entitled to that refund, assuming all those losses were legit. And indeed Trump and the JCT reached a preliminary agreement in 2014. But the Times says that the refund triggered an audit which found indications that perhaps ...
... wait for it ...
NOT ALL THE LOSSES WERE ACTUALLY LEGIT.
Yeah, try not to pass out from shock.
According to the Times, the issue may well arise from Trump's announcement in 2009 that he was walking away from his stake in his Atlantic City casinos.
"If I'm not going to run it, I don't want to be involved in it," he told The Associated Press. "I'm one of the largest developers in the world. I have a lot of cash and plenty of places I can go."
The same day, he notified the Securities and Exchange Commission that he had "determined that his partnership interests are worthless and lack potential to regain value" and was "hereby abandoning" his stake.
"Abandonment" allows you to harvest all your losses on the property at once, but you have to literally reduce your stake in the property to zero, or the IRS limits your declared losses to $3,000 per year. So Trump cheerfully announced that his entire holdings had been wiped out and declared a $700 million loss.
Except he hadn't reduced his stake to zero. When the casino emerged from bankruptcy, Trump retained a 5 percent share. Which mightcoulda meant that he was only entitled to claim $13,500 of losses, rather than $70 million. Whoopsie!
So if the IRS winds up disallowing that $72 million refund, then it will be Donald Trump writing a check to the IRS for $100 million, including interest and penalties. Which brings us back to the JCT which, according the article, has been sitting on Trump's tax issue since 2016. (Well, since 2011, with some more ins and outs, if you want to get more technical than this already is.)
According to Arty McDeals, this is all a political hit.
"It's a disgrace what's happened," he whined to Sean Hannity recently. "We had a deal done. In fact, it was — I guess it was signed even. And once I ran, or once I won, or somewhere back a long time ago, everything was like, 'Well, let's start all over again.' It's a disgrace."
And that could be true. Or the president's allies could have stalled a final decision on this because the nonpartisan agents reached a conclusion adverse to his interests, and Treasury Sec Steven Mnuchin and IRS Commissioner Chuck Rettig don't want to force Arty McDeals to either cut a $100 million check, or enter into litigation that would make the disputed return public. We are talking about the same IRS that refused to hand over the president's tax returns in defiance of congressional subpoena and statute. So ... draw your own conclusions.
It's a hot mess, and likely to get hotter and messier.
Okay, Wonkers, CLASS DISMISSED.
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Liz Dye lives in Baltimore with her wonderful husband and a houseful of teenagers. When she isn't being mad about a thing on the internet, she's hiding in plain sight in the carpool line. She's the one wearing yoga pants glaring at her phone.