Organ: A Data-Based Counternarrative To 'The Big Lie'

Prologue
Twelve months ago, on December 29, 2020, I posted a blog analyzing voting patterns in Congressional Districts in five of the six swing states that former President Trump lost.  The analysis demonstrated that Trump lost largely because significant numbers of voters who voted for Republican Congressional candidates in those five states did not vote for Trump.

I published that blog hoping to provide a data-based argument to put to rest some of the unfounded assertions about election fraud that have become known as “the big lie.”  Little did I think at the time, that “the big lie” would continue to be believed by a not insignificant percentage of our electorate a year later.  But several days after my blog posting, on January 6, 2021, then-President Trump, trumpeting “the big lie,” instigated some of his followers to storm the Capitol in an unsuccessful effort to stop Congressional validation of the Electoral College tally affirming President Biden as the lawfully elected President of the United States.

The former President has spent the better part of the last year refusing to recognize the validity of the November 2020 presidential election and continuing to assert “the big lie” — that the only way he could have lost the election was if there was ballot-rigging or some type of election fraud in all six of the swing states that he lost to President Biden — Arizona, Georgia, Michigan, Nevada, Pennsylvania and Wisconsin.  (But only ballot-rigging or election fraud with respect to the Presidential election.  No claims have ever been made that ballot-rigging or election fraud tarnished any of the other elections in the six swing states Trump lost on November 3, 2020.)

As indicated in my blog posting of December 29, 2020, an alternative explanation for Trump’s loss, an explanation that the former President does not or perhaps literally cannot acknowledge, is that large numbers of voters who voted for Republican Congressional candidates made a decision not to vote for him and instead to vote for President Biden or some other Presidential candidate.  Perhaps these Republican voters had finally found Trump's boorish behavior to be too much, or perhaps they were sufficiently concerned about his disregard for the rule of law, or perhaps they had concluded that he had grossly mismanaged the Covid-19 pandemic, or perhaps they had grown weary of his continuous efforts to polarize our society rather than work to bring people together, or perhaps some combination of these factors.

While I recognize that my effort to provide another data-based argument to put to rest “the big lie” is unlikely to be acknowledged by those who continue to believe “the big lie,” I feel compelled, as we recognize the first anniversary of the January 6 insurrection, to present once again a data-based counternarrative.

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Organ: Comparing Congressional Election Results With Presidential Election Results In Key Swing States

In trying to understand how statistics might inform one’s understanding of claims of electoral fraud and inform our understanding of how President Trump lost the election in key swing states, I have looked at the comparisons of voting within Congressional districts.  Congressional districts provide an interesting framework because each Congressional district conceptually represents a comparable population of people, although both voter registration and voter turnout will vary across Congressional districts.

The Congressional results are from the CNN webpage.

The Presidential results are from the Daily KOS webpage.

This analysis proceeds in two parts.  First, it looks at the overall distribution of votes across Congressional districts in key swing states to see if there are aberrational patterns worth noting.  None were found. Second, it looks at results on a state-by-state basis to see what the state results can tell us about why President Trump lost and President-Elect Biden won in these states.  There appears to be one key lesson from these state-by-state analyses.  To the extent that there is a common theme across states, the theme appears to be that President Trump lost because he did not perform as well as Republican Congressional candidates in districts in which Republican Congressional candidates won in these states.  Phrased differently, people who voted for Republican Congressional candidates failed to vote for President Trump in the same numbers as they voted for Republican Congressional candidates – resulting in President Trump’s loss to President-Elect Biden in at least three of these swing states. 

Please note that because this blog post includes detailed analysis of the comparison of Congressional and Presidential results in five of the swing states -- Arizona, Georgia, Michigan, Nevada and Wisconsin -- it is a fairly long post.

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Oei & Ring: The Senate Tax Bill And The Battles Over Worker Classification

Shu-Yi Oei (Boston College) & Diane M. Ring (Boston College), The Senate Tax Bill and the Battles over Worker Classification:

Senate Republicans released their version of tax reform legislation on Thursday, November 9. The legislative language is not available yet, but the Description of the Chairman’s Mark (prepared by the Joint Committee on Taxation) suggests that one of the key provisions in the bill will clarify the treatment of workers as independent contractors by providing a safe harbor that guarantees such treatment. The JCT-prepared description tracks the contents of the so-called “NEW GIG Act” proposed legislations introduced by Congressman Tom Rice (R-S.C.) in the House and Senator John Thune (R-S.D.) in the Senate in October and July 2017, respectively. “NEW GIG” is short for the “New Economy Works to Guarantee Independence and Growth (NEW GIG) Act.” But notably, and as we further discuss below, the legislation is not limited in its application to gig or sharing economy workers.

Assuming the Senate Bill adopts the basic parameters of the NEW GIG proposed legislation — which looks to be the case based on the JCT-prepared description — we have some concerns. In brief, this legislation purports to simply “clarify” the treatment of workers as independent contractors and to make life easier for workers by introducing a new 1099 reporting threshold and a new withholding obligation. But the legislation carries potentially important ramifications for broader fights over worker classification that are raging in the labor and employment law area. Despite possibly alleviating tax-related confusion and reducing the likelihood of under-withholding, we worry that there are quite a few underappreciated non-tax hazards for workers if these provisions go through.

Summary of the Legislation

The legislation (assuming the Senate Bill more or less tracks the NEW GIG Act language) purports to achieve such “clarification” of worker classification status by doing the following:

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New 'Paradise Papers' Data Leak

A new investigative report from the International Consortium of Investigative Journalists (ICIJ) and its media partners broke on Sunday. (ICIJ is the investigative journalist consortium that brought us last year's Panama Papers investigation, for which they won a Pulitzer for Explanatory Reporting.)

ICIJ: Offshore Trove Exposes Trump-Russia Links And Piggy Banks Of The Wealthiest 1 Percent:

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FactChecking Trump’s Tax Speech

FactCheck.org, FactChecking Trump’s Tax Speech:

In a speech on changing the tax code, President Donald Trump offered some political spin on the facts.

• Trump claimed “anywhere from $3 trillion to $5 trillion” of profits are left overseas by U.S. companies to avoid U.S. taxes. But his own press office cites an estimate of $2.6 trillion in a fact sheet posted online the day of his speech. The group that published that number told us $5 trillion “seems impossibly high.”

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Herzig: Scaramucci, Section 1043, And Certificates Of Divestiture

With the announcement of his resignation/termination, former White House Communications Director Anthony Scaramucci’s tenure in the Trump Administration lasted about 10 days. Those 10 days may prove tremendously interesting from a tax perspective. Like most administrative officials, Mr. Scaramucci requested a Certificate of Divestiture (“Certificate”) from the Office of Government Ethics (“OGE”).

Under the Ethics in Government Act (“Act”) (Ethics in Government Act of 1978, P.L. No. 95-52), certain individuals entering the administration must divest their holdings to avoid ethical dilemmas. Once a Certificate is issued, that individual could qualify under section 1043 for deferral of gains (assuming the procedural requirements are met). Congress enacted section 1043 to further the collective good by eliminating a tax-based barrier for entry into public service. If one qualifies under section 1043, the statute permits deferral of recognition of gain from sales required to comply with the Act if government securities or diversified mutual funds are acquired. (For a full description of the section 1043 rules see also Donald Williamson, A. Blair Staley, and James S. Gale, Tax Planning for Federal Appointee’s Conflict of Interest Requirements, Tax Notes (Mar. 16, 2009).

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Tax Reform Is Hard (#TRIH)

With the looming deadline on both the debt ceiling and the tax reconciliation bill (not to be confused with the ACHA reconciliation instructions), taxes and, hopefully, tax reform are moving to the top of the legislative agenda.   The rhetoric of tax reform is heating up.  Yesterday Paul Ryan tweeted:

Speaker Ryan is not the only member of GOP leadership discussing tax reform.  News last week broke that Steve Bannon wants to raise the top bracket rate to a number that has ”a 4 in front of it”. So, the GOP continues to a least float the idea of substantive tax reform measures.  

I don't want to get too carried away about tax reform. Despite my optimism for "reform season," others does not seem to have the same zeal. First there is no "plan" to discuss.  Second, the House Appropriations Bill (which I wrote about at Surly) does not seem to be too keen on the chances of real reform measures.  For example, the Appropriations Bill addresses estate tax regulations and ACA penalties.  If the estate tax and the ACA are on the chopping block, then why worry about the measures in the Appropriations Bill?

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Trump Won't Release Tax Returns, Despite Online Petition With Over 275,000 Signatures; WikiLeaks Hopes To Acquire And Publish Them

Following up on Friday's post, Should President Trump Release His Tax Returns?:  

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Should President Trump Release His Tax Returns?

New York Times op-ed:   Why Americans Care About Trump’s Tax Returns, by Ron Wyden (D-OR):

In his news conference on Wednesday, President-elect Donald J. Trump claimed that the American public did not care that he had not released his tax returns, as has been routine for every presidential nominee since Watergate. He could not be more wrong. ...

The reason is simple. Without these returns, Americans cannot know whether he is using the presidency to enrich himself and his family. Americans won’t know whether a policy he proposes primarily benefits steelworkers in Pennsylvania or lines his own pocket. ...

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Lawyer Presidential Campaign Contributions: 97% To Clinton, 3% To Trump

American Lawyer, For Many Big Law Trump Donors, 'Stigma' Kept Support Below the Radar:

It was no secret during the presidential race that Donald Trump trailed Hillary Clinton in financial donations from the legal industry. Lawyers and firms gave Clinton and affiliated groups more than $39.3 million, while they gave Trump and his groups $1.4 million, according to the Center for Responsive Politics.

But many partners at the nation's largest law firms did back the president-elect—even if they opted to keep their support unusually private.

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Tillerson Seeks To Defer Tax On Gains From Sale Of Exxon Stock To Comply With Ethics Rules, Using Aggressive Interpretation Of I.R.C. § 83

Bloomberg: Tillerson’s Exxon-Ethics Plan Has a $72 Million Tax Advantage, by Lynnley Browning:

The exit package Exxon Mobil Corp. has agreed to pay Rex Tillerson if he’s confirmed as secretary of state is structured to preserve roughly $180 million in deferred compensation for him — and might let him avoid an immediate federal income tax bill of as much as $72 million, according to tax specialists who have reviewed the plan.

The arrangement was designed to sever Tillerson’s ties to the global oil company he led since 2006 and allow him to comply with federal ethics law. Under the plan, Exxon would make a cash payment into an independent trust managed by Northern Trust Corp. for Tillerson. In exchange, Tillerson, 64, would give up his rights to more than 2 million restricted shares and restricted stock units that haven’t vested yet.

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Grewal: Should Congress Impeach President Obama For His Emoluments Clause Violations?

Following up on my previous post, Trump’s Emolument Tax Problem:  Andy Grewal (Iowa), Should Congress Impeach Obama for His Emoluments Clause Violations?, Yale J. on Reg.: Notice & Comment (Dec. 13, 2016):

My prior post explained how ordinary business transactions between foreign governments and Trump businesses do not create violations of the foreign Emoluments Clause. That post concluded that the term “emolument” refers only to payments made in connection with the holding of an office, and does not refer to any conceivable foreign government payment. The prior post relied on Supreme Court opinions, Office of Legal Counsel opinions, definitions in legal dictionaries, and so on.

However, some commentators, most notably Professor Richard Painter (Minnesota) and Norm Eisen (Brookings Institution), have argued for a much broader definition of emolument. The legal basis for their interpretation remains unclear  because they make no mention of Supreme Court opinions, OLC opinions, or other legal authorities, but their article in The Atlantic defines emoluments as reaching “anything of value.” (Their longer Brookings Institution report, co-authored with Larry Tribe, takes a similarly broad approach without citing relevant authorities. See page 11.) This post explains how their interpretation, if accepted, would support the impeachment of President Obama. ...

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Trump's Cabinet Will Reap Hundreds Of Millions In Tax Savings Under I.R.C. § 1043 On Sales To Avoid Conflicts Of Interest

Following up on my previous posts (links below): Wall Street Journal, Trump’s Nominees Stand to Reap Tens of Millions of Dollars in Potential Tax Deferrals:

President-elect Donald Trump’s top personnel picks stand to delay paying tens of millions of dollars in personal taxes on investment gains when they take up their posts, according to a Wall Street Journal analysis of corporate filings and other financial disclosures.

The potential tax benefits are the result of a longstanding federal policy designed to let incoming appointees sell their shares and other assets, to avoid conflicts of interest in their new jobs, without racking up huge tax bills.

The tens of millions of dollars in possible tax deferrals are a conservative estimate; the actual benefit is likely much greater. That is because the Journal’s analysis only includes paper gains on shares of publicly traded companies, where the appointee has recently been an officer, director or major shareholder. A number of the candidates—including Commerce Secretary appointee Wilbur Ross and Mr. Trump’s Treasury pick, Steven Mnuchin—derive large portions of their wealth from closely held investment vehicles about which there is scant financial information in the public domain, but which they’d likely need to divest.

“It’s a great thing for the nominees,” says Robert Willens, a tax professor at Columbia Business School. “They get to diversify their portfolios on a tax-free basis.” He estimated that the total tax savings for the appointees likely will add up to hundreds of millions of dollars. ...

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Donald Trump: 'A Socratic Method Guy' — The 'Professor Kingsfield Of Presidents'?

CBS Face the Nation (Dec. 4, 2016):  Reince Priebus on Donald Trump:

He is a details guy. ...  I would say it’s he’s a Socratic method guy. It kind of reminds me of being back in law school. He asks a lot of questions, asks questions about questions. And he will keep going until he’s satisfied with the information that he’s getting.

• Ann Althouse (Wisconsin), Reince Priebus Calls Trump "a Socratic method guy" — "It Kind of Reminds Me of Being Back in Law School."
• Glenn Reynolds (Tennessee), Donald Trump — The Prof. Kingsfield of Presidents?

Left, Right Slam Trump's Carrier Tax Deal

Following up on my previous post, Tax Reform May Determine Fate Of Trump's Push For Carrier To Keep U.S. Plant Open:

• Bloomberg View editorial, Trump's Carrier Victory Is the Economy's Loss
• Dallas Morning News editorial, Trump's Deal With Carrier Is One Step Shy of Presidential Shakedown
• New York Times editorial, Carrier Jobs, Saved by Government
• USA Today editorial, The Carrier Deal: Great News For Indianapolis Workers, But Some Potentially Chilling Effects
• Wall Street Journal editorial, Trump’s Carrier Shakedown
• Washington Post editorial, Don’t Reward Companies Like Carrier With Tax Cuts — Or Punish Them With Taxes

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WaPo: Alt-Right Group Has Not Filed Form 990s Due To IRS Error, Allowing Group's Finances To Escape Scrutiny

Washington Post, The Financial Secrecy Behind White-Nationalist Group Known For ‘Hail Trump,’ Nazi Salutes:

Richard Spencer, the face of a white-nationalist group that gained notoriety and momentum after Donald Trump’s election, has been allowed by the federal government to operate his nonprofit organization in financial secrecy for the past three years.

Spencer’s think tank, the National Policy Institute, has not filed financial returns with the federal government since 2013, according to a database of nonprofit records. That has allowed the institute to avoid public scrutiny at a time when the alt-right — the term Spencer coined to describe a movement seeking a whites-only state — has garnered international attention.

The institute is a public charity that relies heavily on contributions. The Internal Revenue Service almost always requires organizations such as his, which are exempt from paying taxes, to file returns that detail where the money comes from and how it is spent.

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Tax Policy In The Trump Administration

• Bloomberg, Goldman: How Corporations Will Spend Their Huge Piles of Overseas Cash
• CNBC, Trump's Tax Proposals Seen Leading to a Surge in Charitable Giving
• Forbes, How Trump Might Drain The Low Income Housing Tax Credit Swamp
• The Hill, Tax Reform Push Sparks Lobbying Frenzy
• The Hill op-ed:  Passing Tax Reform 101, by Judd Gregg
• Newsmax, Grover Norquist Likens Trump's 'Powerful' Tax Plan to Reagan's
• Victor Thuronyi, Trump Tax Policy and Expenditure Taxation
• Truth Out, The Six Worst Things About Trump's Tax Plan

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Trump’s Emolument Tax Problem

Andy Grewal (Iowa), The Trump Hotel Isn’t Unconstitutional, Yale J. on Reg.: Notice & Comment (Nov. 22, 2016):

Over the last few days, commentators have argued that President-Elect Trump’s business interests in the D.C.-based Trump Hotel may create constitutional problems under the Emoluments Clause. See, e.g., [Noah Feldman (Harvard)], Trump’s Hotel Lodges a Constitutional Problem, Bloomberg View (Nov. 21, 2016). As relevant here, the Emoluments Clause prevents a person holding a federal office from accepting any “present”  or “emolument” of any kind from any foreign country, unless Congress consents. Foreign diplomats have recently stayed at the Trump Hotel and this raises questions about whether, if this practice continues after inauguration, any lodging fees collected in connection with their stays would constitute the acceptance of a present (gift) or emolument by Trump.

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Will Trump Treat The Presidency As A Part-Time Job For Tax Purposes?

Washington Post: Will Trump Claim That Being President Is a Part-Time Job — For Tax Purposes?, by Allan Sloan:

Can you imagine anyone saying that being president of the United States is only a part-time job? Well, Donald Trump might have an incentive to say just that.

That sounds bizarre. But I think it’s within the realm of possibility for Trump to claim in future years that things such as living in Trump Tower rather than the White House and mentioning his properties at every opportunity are promotional activities. If he can show that he spends more than half his time developing, managing and promoting real estate, it could shelter millions of dollars of his non-real-estate income from federal income tax.

I’m not saying that Trump plans to play this particular tax game. But given that he won’t disclose his tax returns, as presidents and presidential candidates have done for decades — and given how aggressive he’s been about cutting his personal tax bill — it doesn’t seem so far-fetched. ...

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Trump Foundation Form 990-PF Admits To Violating Ban On ‘Self-Dealing’

• New York Times, Trump Foundation May Have Used Money to Benefit One of Its Own
• New York Times, Trump Foundation 2015 Tax Returns

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129 College Presidents Send Letter Asking President-Elect Trump To Condemn 'Harassment, Hate And Acts Of Violence'

Inside High Ed:

Dear President-elect Trump,

As do you, we “seek common ground, not hostility; partnership, not conflict.” In order to maintain the trust required for such productive engagement, it is essential that we immediately reaffirm the core values of our democratic nation: human decency, equal rights, freedom of expression and freedom from discrimination. As college and university presidents, we commit ourselves to promoting these values on our campuses and in our communities, and we stand alongside the business, nonprofit, religious and civic leaders who are doing the same in organizations large and small.

In light of your pledge to be “President for all Americans,” we urge you to condemn and work to prevent the harassment, hate and acts of violence that are being perpetrated across our nation, sometimes in your name, which is now synonymous with our nation’s highest office. In our schools, on job sites and college campuses, on public streets and in coffee shops, members of our communities, our children, our families, our neighbors, our students and our employees are facing very real threats, and are frightened.

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Law Prof Submits Letter With 12,000 Lawyer Signatures Opposing President-Elect Trump's Selection Of Stephen Bannon As White House Strategist

Daily Kos, Over 12,000 Lawyers Sign Letter Opposing Steve Bannon:

Later today, a letter with over 12,000 signatures of attorneys from all over the country will be delivered to key members of Congress. The letter, originally drafted by University of Denver law professor Nancy Leong, has garnered such a huge number of signatures in just 60 hours of being online.  Leong drafted the letter because “Bannon is on a different level.  His website has enabled white supremacists and his public comments show he does not respect the democratic institutions that we as lawyers have sworn to uphold.”

The letter has signers from all types of legal work and all different political persuasions. As Leong described it, “It’s not a partisan issue to support our democratic institutions and oppose a white supremacist, and I hope that what this communicates to vulnerable communities is lawyers have your back in opposing this.”

Bloomberg Law, Meet the Law Prof Who Found 10,000+ Lawyers Opposed to Bannon:

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Reynolds: Universities' Reactions To Presidential Election Constitute Microaggressions Against Students Who Voted For Trump

Following up on last Saturday's post, Law Schools React To Donald Trump's Election:  USA Today op-ed: 'Tolerant' Educators Exile Trump Voters From Campus, by Glenn Reynolds (Tennessee):

One of the more amusing bits of fallout from [the presidential] election has been the safe-space response of many colleges and universities to the election of the “wrong” candidate. But on closer examination, this response isn’t really amusing. In fact, it’s downright mean.

Donald Trump’s substantial victory, when most progressives expected a Hillary Clinton landslide, came as a shock to many. That shock seems to have been multiplied in academe, where few people seem to know any Trump supporters — or, at least, any Trump supporters who’ll admit to it.

The response to the shock has been to turn campuses into kindergarten. The University of Michigan Law School announced a “post-election self-care” event with “food” and “play,” including “coloring sheets, play dough (sic), positive card-making, Legos and bubbles with your fellow law students.” (Embarrassed by the attention, UM Law scrubbed the announcement from its website, perhaps concerned that people would wonder whether its graduates would require Legos and bubbles in the event of stressful litigation.) ...

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What American Law Professors Forgot And What Trump Knew

Chicago Tribune op-ed: What American Law Professors Forgot and What Trump Knew, by Stephen B. Presser (Northwestern; author, Law Professors and the Shaping of American Law (West 2016)):

It was lonely being a Donald Trump supporter in the legal academy. Of my thousands of colleagues teaching law in this country, I don't think more than a few dozen believed that he would have made a better president than Hillary Clinton, and not more than a handful of us were willing to go public with our support.

It has always been a risk to be a Republican teaching in a law school, where many teachers see a thin line between support for the GOP and bigotry or insanity. And yet, enough Americans liked what they saw in Trump to give him a smashing Electoral College victory.

How did it come about that law professors grew so out of touch with much of America?

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Pomona President Denies Wrongdoing As IRS Complaint Filed Against College For Funding Anti-Trump Student Protesters

Following up on Wednesday's post, Pomona College May Have Violated 501(c)(3) Tax Status To Fund Anti-Trump Student Protesters:  The Claremont Independent, President Oxtoby Denies Wrongdoing as IRS Complaint Filed Against Pomona College, by Matthew Reade & Ross Steinberg:

The Claremont Independent has learned that a concerned individual has lodged a complaint with the IRS in response to Pomona College’s promotion and funding of an anti-Trump rally.

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Pomona College May Have Violated 501(c)(3) Tax Status To Fund Anti-Trump Student Protesters

The Claremont Independent: Pomona College May Have Violated 501(c)(3) Tax Status to Fund Anti-Trump Protesters, by Matthew Reade & Ross Steinberg:

By funding the transportation of students to and from anti-Trump rallies in the Los Angeles area with tuition dollars, Pomona College’s Draper Center for Community Partnership may have violated IRS regulations prohibiting tax-exempt educational institutions from engaging in partisan political activity. ...

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Rosenthal: Protecting Trump's $916 Million Of NOLs

Steve Rosenthal (Tax Policy Center), Protecting Trump's $916 Million of NOLs, 153 Tax Notes 829 (Nov. 7, 2016):

This article describes how Republican presidential nominee Donald Trump generated $916 million of net operating losses, and how he preserved them for later use.

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Johnson: Trump Bought The Law In Wilkie Farr's Tax Opinion

Calvin H. Johnson (Texas), Bought Law:

In 1991, Donald Trump bought a tax opinion from Wilkie Farr, a New York law firm, that allowed him to avoid tax on roughly a billion dollars of income. The legal theory behind the opinion is that there was no reduction of deductions if the banks traded their Trump-depleted debt for a partnership interest. The theory has neither the literal wording of the statute nor any court case on its said. Nonetheless the theory called Trump to keep a billion dollars of fake tax losses to shelter a billion dollars' of luxury consumption from tax when nothing was lost as a matter of economics.

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WSJ: Law Professors Grapple With Trump—Some Use The S-Word And Even The C-Word

Wall Street Journal, Law Professors Grapple With Trump:

When it comes to Donald Trump, University of Texas law professor Sanford Levinson doesn’t shy away from using the s-word or even the c-word. Secession. Coup.

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Dilbert Creator Reiterates His Endorsement Of Trump Due To Clinton's Proposed 65% Estate Tax Rate

Following up on my previous post:  Dilbert.com, I Don’t Want a Government Job:

My current tax rate is about half of my income when you add up all of the various taxes. I don’t have many deductions. Clinton proposes an estate tax that would take about half of what is left. In effect, Clinton wants my tax rate to be around 75% for every dollar I earn today.

That level of taxation would make me feel like a government employee. The vast majority of my time and energy would go toward making money that politicians would decide how to spend. That doesn’t feel like a rewarding life. If Clinton wins, I would think hard about retiring early and becoming a user of resources instead of a creator of resources. Because I don’t want a government job.

A Trump presidency, on the the other hand, makes me want to do something useful for the country that is good for me too. That’s a big part of why I have been blogging about Trump’s persuasion skills. I want voters to have a clear view of their options. If voters choose Clinton, I can live with that for six months until Kaine takes over. But I wouldn’t feel good about myself if I didn’t at least try to help people see the Trump option for what it is – an opportunity to “drain the swamp” as he says. ...

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Pratt: Two Tax Issues Disqualify Trump For The Presidency

TaxProf Blog op-ed:  Trump Tax Concerns Persist, by Katherine Pratt (Loyola-L.A.):

Just 24 hours before the presidential election, concerns about Donald Trump’s payment of his tax obligations persist.  Recent press coverage has focused on an issue that (at least so far, based on very limited information) probably does not disqualify him to be our president, and has not focused enough on two more fundamental tax issues that disqualify him to be our president.

In the past few days, press coverage has emphasized a technical business tax question:  what specific tax strategies did Trump use to generate and preserve $916 million of net operating losses (NOLs), despite massive debt discharge, and were those strategies legally questionable? A front page November 1 New York Times article on this topic asserts that the “stock for debt swap” part of Trump’s overall  tax strategy was a new tax “dodge” dreamed up by tax lawyers to avoid debt discharge income (COD) on the cancellation of debt. This characterization of such swaps as a new tax scam is inaccurate. My academic articles on corporate COD explain the long history and theory of the exception and its gradual repeal [Shifting Biases: Troubled Company Debt Restructurings after the 1993 Tax Act, 68 Am. Bankr. L.J. 23 (1994); Corporate Cancellation of Indebtedness Income and the Debt-Equity Distinction, 24 Va. Tax Rev. 187 (2004)]. Suffice it to say that “stock for debt swaps” in bankruptcy cases were relatively common in the 1980s and early 1990s. Unless there is more to be revealed, Trump’s use of the stock for debt exception to COD does not disqualify him to be president.

But Trump’s conduct regarding two other tax issues does disqualify him to be president.

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Chodorow: Trump Should Pay The Political Price For Failing To Release His Tax Returns

Slate:  Keep Harping Over Trump’s Tax Returns, by Adam Chodorow (Arizona State):

His refusal to release them no longer feels like a first-order concern. But it’s one more broken norm that Americans will rue.

It’s fairly evident by now why Trump wouldn’t want his returns to be public—as I’ve written several times throughout the election cycle. There’s no reason to think he’ll reverse course and finally release them in the next week. But this goes far beyond Trump. Every major candidate for the past 26 years has released his or her tax returns, and we risk undermining this important tradition if we allow Trump’s refusal to get lost amid his other scandals and outrageous statements or concerns about Clinton’s emails. Just as candidates now release medical records to assure voters that they are fit for office, tax records are critical because they reveal a candidate’s potential conflicts of interest and commitment to honesty and integrity.

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More On Trump's $916 Million Of NOLs

Following up on this week's posts:

• NY Times: Trump’s Tax Dodge Stretched Law ‘Beyond Recognition’ (Nov. 1, 2016)
• David Cay Johnston: Why Donald Trump May Never Pay Federal Income Tax Again (Nov. 2, 2016)

Politico Morning Tax, Making Sense of Trump’s Maneuvers:

Ed Kleinbard, the former Joint Committee on Taxation chief of staff, said there was a reason few people were correctly guessing how Trump was able to list a $916 million loss on 1995 state returns. “None of us thought that the reason that Trump would have avoided discharge indebtedness income would have been a partnership equity-for-debt argument," said Kleinbard. "The reason none of us thought of that is because no such exception existed."

But Robert Willens, who said he worked on those kind of deals two decades ago, said they were more common than people might have thought — landing in that gray area where practitioners didn’t know whether it was allowed or not. “I'm a little surprised that the law firm gave such a weak opinion to him and his people back then,” Willens said about an opinion letter that Trump’s people received. “Because at the time I think we were a little more confident that the technique worked.”

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The IRS Scandal, Day 1275: The Impact Of The IRS Scandal On The Investigation Of The Clinton Foundation

Dallas Observer, The Dallas IRS Office That's Quietly Determining the Fate of the Clinton Foundation:

The Earle Cabell Federal Building in downtown Dallas is an all purpose office complex, a bastion of federal bureaucracy located at 1100 Commerce St. Most people come for a passport or to get business done in front of a federal judge. But inside, a quiet review is underway that has direct ties to the raging presidential election: The local branch of the IRS' Tax Exempt and Government Entities Division is reviewing the tax status of the Bill, Hillary and Chelsea Clinton Foundation.

This IRS review has not generated similar waves as Department of Justice probes into the foundation, and has largely been forgotten in the campaign's melee. It's just not as sexy as private email servers, FBI infighting and charges of political pressure applied to law enforcement.

But even though this examination is less scrutinized and is harder to conceptualize, it's impact may be important. The report won't likely be done in time to influence the presidential campaign — even though the review started more than four months ago — but it could certainly influence the first term of a Hillary Clinton presidency.

As with anything tax related, the status of the foundation may be determined using rules few understand. And that makes understanding the work at 1100 Commerce St. in Dallas that much more important. 

In Washington, D.C., many things start with words printed on congressional letterhead. Earlier this year, 64 GOP members of Congress asked the IRS to investigate why the foundation can keep its nonprofit status. The letter includes “media reports” claiming pay-to-play relationships between former President Bill Clinton, who received large speaking fees, and decisions made by Hillary Clinton to approve choices that benefited foundation donors. The sources of these reports range from The New York Times to hit-piece investigative books.

In July, the IRS sent letters back to the Congress informing members the review had begun. The letter also noted that the Tax Exempt and Government Entities Division (TE/GE) office in Dallas would be conducting the review.

IRS spokespeople in Dallas and Washington won’t say why the review is being conducted in Dallas. Spokespeople claim even this information would violate rules — Code 6103, staff make sure to cite — that stop them from discussing ongoing examinations. IRS officials declined to provide details about the Dallas office, including its size, or comment on the TE/GE work in general. ...

The TE/GE focuses on nonprofit groups, which is specialty work that requires experience. “They are pretty much career people,” says Ben Stoltz, an attorney with Perliski Law Group, a Dallas boutique firm with half of its business representing nonprofit groups. “It’s a different side of the IRS than people are used to seeing. ... They're generally very cooperative, but they're also the watchdogs."

The mix of awareness and enforcement dovetails with cases that get publicity. "They have a limited budget, which is a problem, so they have to pick their targets wisely," Stoltz says. "Because this is a high profile case, they can make an example and show that no one is above the law.” ...

Instead of money changing hands, the IRS is looking to see if the Clintons traded money for preferential treatment. The IRS rules lay out what qualifies as inurement:

Any transaction between an organization and a private individual in which the individual appears to receive a disproportionate share of the benefits of the exchange relative to the charity served presents an inurement issue. Such transactions may include assignments of income, compensation arrangements, sales or exchanges of property, commissions, rental arrangements, gifts with retained interests, and contracts to provide goods or services to the organization.

Given this language, citing “gifts” and “quid pro quo benefits” in emails is a pretty bad move for anyone involved in a nonprofit group. Another bad move: When senior Clinton advisers like Doug Bland call the intersection of the foundation fundraising and the former president’s personal activities “Bill Clinton Inc.” ...

This all leaves the IRS investigation in Dallas as a sideshow to the main Clinton Foundation events playing out in the offices of other federal agencies. However, if other investigations expose pay-to-play schemes, the IRS could take that into consideration, strip the foundation of its nonprofit status and seek payment of back taxes.

Looking forward, there’s one last wrinkle: If the IRS gives the foundation a clean bill of health, it will likely resurrect charges that the tax exemption office operates with a political bias. In 2011 Lois Lerner, the IRS’ head of TE/GE, pleaded the 5th and left her position after a scandal broke surrounding the denial of nonprofit exemptions to right-wing groups.

A Department of Justice probe found "substantial evidence of mismanagement, poor judgment and institutional inertia leading to the belief by many tax-exempt applicants that the IRS targeted them based on their political viewpoints.” A Government Accountability Office report in 2015 found "there are several areas where EO’s controls were not well designed or implemented. The control deficiencies GAO found increase the risk that EO could select organizations for examination in an unfair manner — for example, based on an organization’s religious, educational, political, or other views."

The GAO said the expertise of the TE/GE staff could be a problem, if there are too few "gatekeepers" to pass along referrals for closer looks:

The specialization of the classifiers allows for in-depth knowledge of complex issues and for the opportunity to apply experience; however, internal control risks accompany this approach. First, for political activity, church, and high profile referrals, the classifier appears to serve as an initial gatekeeper for determining whether a referral is reviewed by a committee. Although committee reviews are intended as a safeguard against unfairness in the examination selection process, referrals that do not make it past the classifier do not undergo committee review. 

The GAO recommended a host of changes, much of it focused on better documentation, more training and an increase in staff rotations. The IRS agreed to them — without admitting any guilt. In a response letter by deputy commissioner John Dalrymple, he says the IRS agrees that "internal controls are necessary to ensure we are applying the tax law with integrity and fairness. Although the report says that a hypothetical risk exists that returns could be selected unfairly, the draft report did not find any evidence that this has happened. Nevertheless, Exemptions Organization is committed to further strengthen our internal controls to ensure we continue to select organizations for examination in a fair and consistent manner. "

The DOJ determined that no crimes had been committed but the damage had been done — for many, the TE/GE will forever be partisan. The ruling on the Clinton Foundation's status, either way, will lead some to see continued partisanship inside the IRS or overreaching in a high profile case to prove they are not partisan.

But there is actually a bigger issue at stake as politics batters the nonprofit tax world. After all, the whole point of the IRS' involvement is to ensure that donations are actually used for charitable work.  

“It boils down to the public trust,” Stoltz says. “This division is responsible for the integrity of the system. Americans donate more money to charity than anywhere else in the world. But for the public to donate, people have to believe that it’s legit.”

(Hat Tip:  Glenn Reynolds.)

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Donald Trump Channels John Edwards And New Gingrich, Avoids Paying Social Security, Medicare Taxes

New York Times op-ed: Trump Probably Avoided His Medicare Taxes, Too, by Fred T. Goldberg, Jr. (Skadden) & Michael Graetz (Columbia):

In the final debate, Hillary Clinton said she would secure Social Security and Medicare by raising taxes on high-income earners, including herself and her opponent, Donald J. Trump, “assuming he can’t figure out how to get out of it.”

As we’ve learned in the past few weeks, Mr. Trump has used all kinds of extravagant maneuvers to get out of paying taxes. Without Mr. Trump’s returns, we can’t know for certain whether he figured out a way to get out of paying into Medicare and Social Security. But we have some clues.

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Why Donald Trump May Never Pay Federal Income Tax Again

Daily Beast: Why Donald Trump May Never Pay Federal Income Tax Again, by David Cay Johnston:

The alleged billionaire, last known to have paid up in 1977, may not have to until 2042—if then.

Donald Trump can enjoy income tax-free living for the rest of his life, my new analysis of his tax documents shows, adding to the reasons the Republican nominee for president should make his tax returns public before voting ends next Tuesday.

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NY Times: Trump’s Tax Dodge Stretched Law ‘Beyond Recognition’

New York Times, Donald Trump Used Legally Dubious Method to Avoid Paying Taxes:

[N]ewly obtained documents show that in the early 1990s, as he scrambled to stave off financial ruin, Mr. Trump avoided reporting hundreds of millions of dollars in taxable income by using a tax avoidance maneuver so legally dubious his own lawyers advised him that the Internal Revenue Service would most likely declare it improper if he were audited.

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The IRS Scandal, Day 1268: Sen. Whitehouse — Republicans Are Using Koskinen Impeachment To Bring IRS To Heel On Dark Money Campaign Financing

The Hill op-ed: The Republican Mission to Quell the IRS, by Sen. Sheldon Whitehouse (D-RI):

It looks like any other slick political ad on your TV. There’s ominous music, a dramatic voice-over, a grainy picture of President Obama. But this isn’t just another campaign commercial.

The news broke recently that a Republican mega-donor plans to spend about $1 million a week on ads calling on Congress to impeach John Koskinen, the commissioner of the IRS. It seems like an odd way to spend your millions. While it’s true that the IRS is the right’s favorite whipping boy, why the campaign-style ad blitz?

Well, in my years as a prosecutor, it’s become a habit to consider motive. So it got me thinking: What motive do the Republicans have to impeach the IRS commissioner? Maybe it’s just emotional acting-out against an agency they hate because it collects the taxes they hate. Maybe it’s an outbreak of political madness.

Or maybe there is method to their madness.

Let’s look at the Republican Party and how it is funded. While it raises a healthy amount for its campaign committees, Republicans and their allies depend increasingly on the super PACs and shadowy outside spending groups made possible by the Supreme Court’s 2010 Citizens United decision. ...

An under-funded and harried IRS has been unwilling to police the activities of powerful social welfare groups after an effort to separate out new applicants blew up in its face. In 2013, the IRS signaled it would begin the process of drafting a rule to better enforce our laws limiting dark money in elections. It later put the rulemaking process on hold after an especially loud outcry from conservative groups. The agency also came under heavy fire in the press from conservatives and Republicans in Congress who feared having the hose to their political oxygen crimped. And since Republicans took control of the House of Representatives in 2011, they’ve worked to slash the IRS budget. Funding in 2016 was $11.2 billion, or 17 percent below 2010 levels, adjusted for inflation.

So the dark-money floodgates remain wide open, deluging our politics in special-interest slime.

The GOP’s crusade against Commissioner Koskinen may seem overblown, but it makes a lot of sense when you consider motive: Republicans need dark money, and dark money needs a cowering IRS.

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Yale Student Newspapers Risk 501(c)(3) Tax-Exempt Status To Endorse Hillary Clinton; 94% Of Yale Profs' Political Donations Go To Democrats, 95% Of Conservative Students Feel Their Opinions Are Unwelcome At Yale

Daily Caller, Tax-Exempt Yale Daily News Appears To Violate Law By Endorsing Hillary Clinton:

The Yale Daily News appears to have violated tax laws by endorsing Hillary Clinton on Wednesday, despite being prohibited from doing so as a tax-exempt 501(c)3 organization.

Yale Daily News, News’ View: Hillary Clinton Law ’73 for President:

In 1969, the same year Yale College went coed, a young woman entered Yale Law School. Like many of us, she was an idealist: She took on child abuse cases and provided free legal advice to the poor. Like many of us, she was a go-getter who worked at the Child Study Center and conducted research on migrant labor. Long before she became Secretary of State Hillary Clinton LAW ’73, Hillary Diane Rodham was working to make our country a better place. Almost four decades later, the News is proud to endorse her for president.

We do not endorse Clinton solely because of the disqualifying flaws of her opponent, Donald Trump, whose campaign has disgusted and astonished our board. Indeed, our endorsement of Clinton should come as no surprise: A recent survey conducted by the News found that a vast majority of students support her candidacy. We endorse her because we, as young people, recognize this election is a turning point for our country. And the choice couldn’t be more clear.

Voting for Clinton is our obligation to ourselves and to future generations. ... Like the young woman who arrived in New Haven in 1969, we have the power to realize a different future. That power lies in our vote. Let’s use it to elect Hillary Clinton.

Independent Journal Review, Non-Profit Yale Record Magazine Taunts IRS With Editorial 'Not Endorsing' Hillary Clinton:

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Johnson: Were Trump's Fake Losses Legal As Tax Deductions?

Calvin H. Johnson (Texas), Were Trump's Fake Losses Legal as Tax Deductions?:

Trump claimed almost a billion of tax losses on his 1995 tax return. Trump did not lose anything like that in economic substance because he never put that much money into his transactions. If he never put it, he did not lose it. Trump must have treated part of the $3.4 bank debt as a cost and tax basis, while inconsistently, not correcting his cost when it turned out not be paid. Sheppard and Lipton have proposed an S corporation or Gitlitz theory, which if applicable would allow the fake loss as a tax deduction, but real estate developers did not use S corporations in the early and middle 1990’s because S corporations trapped all losses inside the corporation where they were wasted. Trump might have reduced basis in real property, rather than taking an immediate income or NOL reduction. In any event, the losses do not “impinge on the world” and courts take away fake tax losses when they see them.

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Presidential Campaign Tax News

• The Atlantic, ‘It’s Tax Policy That Matters’
• Bloomberg, Wilbur Ross Says Trump Plans Higher Carried-Interest Taxes
• Forbes, Clinton Versus Trump: How Their Tax Plans Will Affect You
• Forbes, Clinton's Child Tax Credit Plans Would Not Reduce Poverty By Even One Person
• Forbes, The Presidential Campaigns Contrast Their Candidate's Tax Plans At TPC
• The Hill, Trump Adviser Accuses Tax Policy Center of Bias
• Huffington Post, Donald Trump and Federal Income Taxes: Perspective
• MaddowBlog, Team Trump Offers a Case Study in How Not to Debate Tax Policy
• New York Times, How to Fix the Tax Code and Close Donald Trump’s Loopholes
• New York Times, Tax Me. Please.

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Trump's Estate Tax Plan Would Raise GDP, Incomes By 1%; Clinton's Would Shrink GDP, Incomes By 1%

Wall Street Journal op-ed: Killing the Death Tax Would Resurrect Growth, by Stephen J. Entin (Tax Foundation):

The death tax is an inevitable point of disagreement in a presidential campaign. Donald Trump would eliminate it to promote growth. Hillary Clinton would raise it—up to 65%, while lowering the exemption for estates to $3.5 million—to promote equality. The outcomes would be as different as their intentions. ...

Analysts at the Tax Foundation, where I work, have run the numbers using two models: one of the estate tax, based on historical filings, and another to estimate the economic effects on capital formation, GDP, profits, wages and federal revenue from those sources.

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Presidential Campaign Tax News

• American Lawyer, Trump's Returns: A Tax Lawyer's Rebuttal
• Bloomberg, Buffett Just Released His Own Tax Data to Hammer Trump
• Bloomberg, Clinton Proposes Bigger Tax Credit for Parents of Young Children
• Bloomberg, Trump’s Tax Plan Seen Turning Employees Into Contractors
• Buffett Press Release, Some Tax Facts for Donald Trump
• Cato at Liberty, Ending the Tax Breaks for Real Estate
• CNN, Warren Buffett to Trump: 'I Have Paid Federal Income Tax Every Year Since 1944'
• Forbes, Donald Trump's Deep Love Of Tax Depreciation - An Affair To Remember
• Forbes, Fact Checking Trump's Tax Claim: Clinton Would Not 'Raise Everyone's Taxes Massively'
• Forbes, Trump Tax Plan Would Add Trillions To Debt; Clinton Plan Would Trim Deficits, Hike Taxes On Wealthy
• Forbes, Warren Buffett Gave Away 75% Of Donald Trump's Net Worth In 2015, Offers Facts On Taxes
• New York Times, Buffett Calls Trump’s Bluff and Releases His Tax Data
• New York Times, What Donald Trump’s Big Tax Break Might Buy
• New York Times, The White House Rule: No Tax Returns, No Job

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Donald Trump And Hillary Clinton: I've Had The Time of My Life

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Trump's Accountant/Lawyer Committed 'Grievous' Violation Of Legal And Professional Ethics In Discussing His Tax Returns With Media

Following up on Saturday's post, Trump’s Ex-Accountant Jack Mitnick: He’s No Tax Genius:  National Review, Confidentially Yours:  Even a Scoundrel Like Trump Deserves Ethical Legal Representation:

Is there anyone concerned at the ugly turn the election has taken with the release of a few pages of Donald Trump's taxes from 1995? The ugliness is not that Trump's taxes have been revealed, per se, but that it was done, in part it appears, by getting an elderly lawyer to violate his duty of confidentiality to his client. One might say that Trump deserves what he gets. But in this age of ever-eroding privacy, it is alarming when the official rules meant to guard privacy come under assault. ...

Mr. Mitnick has committed a grievous violation of legal and professional ethics.

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Trump’s Ex-Accountant Jack Mitnick: He’s No Tax Genius

The Daily Beast, Trump’s Ex-Accountant Jack Mitnick: He’s No Tax Genius:

This past week, Donald Trump's campaign surrogates attempted to argue that the candidate is a "genius" for turning a nearly $1 billion loss into a tax avoidance strategy for up to 18 years. But now the accountant who compiled Trump's 1995 tax return — and helped verify it for The New York Times — has refuted that narrative in a series of interviews. Jack Mitnick, who handled Trump's taxes until 1996, told Inside Edition on Tuesday, “I did all the tax preparation. He never saw the product until it was presented to him for signature." Pushing back at Trump's own suggestion that he "brilliantly" used tax laws to his own advantage, Mitnick added, “I’m the one who did all the work."

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How Hillary Clinton And Donald Trump Would Tax The 1 Percent

Vox, How Hillary Clinton and Donald Trump Would Tax the 1 Percent, in One Chart:

On Monday, Marc Goldwein of the Committee for a Responsible Federal Budget shared an updated analysis of how each candidate’s tax plans would affect the top 1 percent of American income earners:

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Aprill & Mayer: The Relationship Between The Trump Foundation And Trump’s Tax Returns

TaxProf Blog op-ed:  Assigning a Tax Lesson: The Relationship between the Trump Foundation and Trump’s Tax Returns, by Ellen P. Aprill (Loyola) & Lloyd Hitoshi Mayer (Notre Dame):

As the debate between the Vice Presidential candidates Wednesday night made clear, Donald Trump’s refusal to release his tax returns remains an important campaign issue. The extraordinary tax losses that Donald J. Trump reportedly had in 1995 emphasize the need for him to fully disclose his tax returns for all years from then forward. Without disclosure of his federal income tax returns, we cannot begin to evaluate fully his claim on Tuesday that he has “legally” and “brilliantly” complied with all of our complicated tax laws.

The ongoing tax issues relating to his foundation came to light only because of the required disclosure of those returns. Those issues — and the foundation’s failure to register to solicit charitable contributions that has now resulted in a cease and desist order from the New York Attorney General — seem to demonstrate a woeful ignorance of the applicable law or a complete disregard of it, either of which would be of even greater concern if also reflected in his personal and business tax positions. And at least one issue raised by the foundation’s tax filings can be resolved only with full disclosure of Mr. Trump’s personal tax situation.

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More Trump Tax News

Following up on my previous posts (here, here, and here):

• Concurring Opinions, 11 First Amendment Experts Comment on Legality of NYT Release of Trump’s Tax Returns
• Daily Beast, Seth Meyers Taunts Trump Over Tax Returns: ‘I Think You’re Poor’
• Philip Hackney (LSU), Trump’s Abuse of Trump Foundation — Criminal Tax Implications?
• New York Times:  Trump, Taxes and Citizenship, by David Brooks
• New York Times editorial, Mr. Trump’s Government Bailout

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Clinton, Obama, Trump, And Congress Wage Estate Tax War

The Hill, War Over the Estate Tax Returns:

Battles are flaring over the estate tax, with the issue receiving increased attention from the presidential candidates, the Obama administration and Congress.

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