Trump’s $73M tax refund stuck with little-known panel

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The details published about Donald Trump’s tax returns were a revelation to the public but not to a small group of attorneys who work for a little-known congressional panel.

Trump has been in the middle of a dispute with the Internal Revenue Service over a 2010 claim of a $72.9 million tax refund, according to the New York Times, which obtained more than 20 years of the president’s tax data. The size of the refund claim brought it before the Joint Committee on Taxation.

Whenever there is a proposed refund of more than $2 million for individuals and $5 million for corporations proposed, the committee staff reviews it before payment by the IRS. Part of the rationale for such reviews is to make sure tax laws are working the way Congress intended.

In Trump’s case, the IRS initially sent an audit of the refund to the joint committee in 2011 and an agreement was reached in 2014. But an expanding audit meant that the IRS resubmitted the refund documentation for review in 2016, where it has sat unresolved since then, the Times reported.

Trump received what tax professionals refer to as a “quickie refund,” a check processed in 90 days on a tentative basis, pending an audit by the IRS, the Times reported.

The committee staff reviewed between 470 and 370 proposed refunds per year from 2015 to 2018, according to a congressional aide.

Most of the proposed refunds involved net operating loss carry-back provisions, in which a business uses losses in one year to offset profits in another, sometimes resulting in refunds of “hundreds of millions of dollars,” said Kenneth Kies, who was chief of staff for the panel from 1994 to 1998.

Thomas A. Barthold, current chief of staff for the joint committee, said the staff “does not comment on the receipt of any review case, nor comment on when any review case’s review has been completed.”

Occasionally, the staff disagrees with the IRS and the tax agency usually wouldn’t proceed with a refund over the objections of the committee, Kies said, though the law doesn’t compel the IRS to accept the panel’s determination.

Much of the review work is done by lawyers from the committee who work onsite at the IRS, added Kies, now managing director of the Federal Policy Group, which provides advice to clients on tax policy matters.

The joint committee’s role reviewing tax refunds goes back to 1927, one year after the committee was formed, said George Yin, another former chief of staff and a retired University of Virginia law professor. The panel took up the task after there were accusations of favoritism over large refunds made during the 1920s under Treasury Secretary Andrew Mellon.

Differences over the proposed amount of a refund were usually worked out between committee staff and IRS personnel, Yin said. Yin said lower-level staff only “very infrequently” were unable to resolve differences with the IRS during his tenure from 2003-2005.

There are 10 members of Congress, five from the House and five from the Senate with bipartisan representation on the joint committee. Their role is largely symbolic, and they aren’t involved in reviewing confidential taxpayer returns.

No member of Congress ever became involved in a refund review or saw tax documents from such a review while he was chief of staff, Yin said.

David Noren, a partner at law firm McDermott Will & Emery who worked for the panel from 2001-2006, said it generally took the committee about three weeks to complete a refund review, but it wasn’t unusual for the process to last much longer if there were complex issues identified to review with the IRS.

“Any case involving a sitting president would not be run of the mill,” Noren said. “This situation with a sitting president is a completely extraordinary set of circumstances.”

If the IRS formally denies the refund, the disappointed taxpayer can sue in U.S. District Court where he or she lives or in the Federal Court of Claims.

— With assistance from Bob Van Voris and Laura Davison

Bloomberg News
Donald Trump Tax refunds IRS Tax returns Tax audits
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