Much attention is being paid to how Donald Trump could have amassed a $900 million NOL in the mid 90s. I remain laser-focused on the Donald J. Trump Foundation. For this blog post I ask the question: could Mr. Trump’s misuse of the private foundation that he leads result in criminal sanctions under tax law?

I think there is enough evidence to open a criminal investigation into his activities. Nevertheless, a criminal prosecution is highly unlikely for both political reasons and issues of proof (ignorance of the law is a defense). Still, I think the IRS has a duty to open an investigation under the egregious set of facts I lay out.

Here is the important thing to keep in mind as you consider the arguments I lay out in this post: Donald Trump does not own the Foundation and its property does not belong to him. It does not matter from whom the money came. He is the president of a nonprofit organization that is entrusted with money to be used for charitable purposes that benefit the public.

When I first wrote about the Foundation we knew that in 2013 it had improperly paid $25,000 to Pam Bondi’s political campaign for AG of Florida. I noted then the potential application of tax criminal law because there was a false statement on the Foundation’s Form 990PF, (the Foundation claimed the money went to a KS charity “Justice for All”) but said it was highly unlikely under the circumstances that the IRS would invoke criminal sanctions in a single situation.

Today, we know a lot more about Foundation’s highly questionable transactions largely due to the intrepid work of Washington Post reporter David Fahrenthold. For instance: the Foundation purchased expensive portraits of Trump and sent those to Trump’s private clubs; it has paid money to settle Trump Organization private lawsuits; it has acted as the receiver of what appears to be Trump income, but counted it as a donation from the payors.

In this post, I first discuss the criminal statutes most likely to apply and then consider the broad themes of violations upon which a case might be built. At the end of the piece, in an appendix, I list all the questionable acts by year with links to sources to show the quantity and quality of the violations.

The big New York Times scoop that Donald Trump used $916 million of tax losses to enjoy many income tax-free years raised a question the newspaper didn’t try to answer: How did Trump do it?
Trump, the only major-party presidential nominee in four decades to keep all his tax returns secret, insists “there’s nothing to learn from them.”

Yet in one day I figured out how Trump’s advisers almost certainly arranged the massive tax losses, skipped out on a massive income-tax bill, and then fashioned a loophole with more valuable tax benefits than the already liberal tax breaks Congress gives big real-estate owners while sticking others with the bill.

Trump dumped the real costs of all this on investors who saw gold in his brand name, but who lost everything even as he was paid tens of millions of tax-free dollars.

All this came from subtle clues on the front pages of Trump’s 1995 Connecticut, New Jersey, and New York state income-tax returns. Which sums were on which lines in each state pointed to how Trump must have organized his affairs. Two of the most respected tax professors in America agree with my analysis. Edward Kleinbard of the University of Southern California and Martin J. McMahon Jr. of the University of Florida refined my view.

Trump’s gambit is easy to explain in plain English, but for tax wonks the short version is this: Trump combined tax benefits under Section 1231 of the Internal Revenue Code with the exception provisions in Section 108.

Someone has tried to hack my Twitter account 7 times today. If I begin saying anything that doesn't sound like me it's not me.


https://twitter.com/kurteichenwald/status/782662333390737408