Published 9:50 PM EDT Oct 3, 2018
WASHINGTON – Tax experts say President Donald Trump and his family are in no danger of facing federal criminal charges over allegations of potential tax fraud detailed by The New York Times, but they could be possibly forced to pay millions of dollars in federal back taxes, interest and civil penalties.
But even that is unlikely.
Federal law limits to six years the amount of time that prosecutors can file criminal charges in tax fraud cases.
There is no statute of limitations for assessing civil penalties in cases of tax fraud. But the Internal Revenue Service probably would be reluctant to open an audit into questionable tax activities that allegedly happened more than two decades ago, according to tax experts.
“Practically speaking, I would not expect the IRS to be pursuing this one,” said Steve Rosenthal, a tax lawyer who now serves as a senior fellow with the Urban-Brookings Tax Policy Center.
A spokeswoman for the IRS declined to comment Wednesday when asked if the tax agency is looking into the allegations described in the newspaper article. The agency is barred by federal law from discussing confidential tax records.
The New York Times article outlined numerous mechanisms and methods late New York City real-estate developer Fred Trump allegedly used to pass on hundreds of millions of dollars’ worth of gifts to his children — including Donald Trump — without paying much in taxes.
The conduct detailed by The Times, which the paper and tax experts suggested was fraudulent, occurred in prior decades, meaning the criminal statute of limitations has almost certainly expired. Fred Trump died in 1999.
At the White House, press secretary Sarah Huckabee Sanders told reporters on Wednesday the Times’ story was “a totally false attack based on an old recycled news story.”
Asked about inaccuracies, she replied: “I'm not going to sit and go through every single line of a very boring 14,000-word story.”
“I will say one thing the article did get right was that it showed that the president's father actually had a great deal of confidence in him,” she said. “In fact, the president brought his father into a lot of deals. They made a lot of money together; so much so that his father went on to say that everything he touched turned to gold.”
She then told reporters to read the president’s lawyer’s statement, “which completely undercuts the accusations made by the New York Times.”
In response to related tax questions, Sanders said Trump’s taxes are still under audit and that the White House had no plans to release any of the president’s tax returns — something Trump had refused to do during his presidential campaign.
Many of the techniques described in The Times article “are normal estate planning techniques for wealthy families," said Martin Press, a tax attorney with the Gunster law firm in Florida.
“Based on the Internal Revenue Code and court decisions, many of these techniques have been in existence for generations and have been approved by Congress,” he said.
But Sen. Ron Wyden, D-Oregon, called Wednesday for the IRS to investigate the claims detailed by The Times, which he said "represent serious and credible allegations of potentially illegal tax fraud."
Wyden, the top Democrat on the Senate Finance Committee, also said he would ask the panel to demand that Trump turn over his tax returns.
In New York, the state Tax Department said this week it is looking into allegations described by The Times.
New York could seek civil penalties if it can prove the Trumps actively avoided paying their full tax bill.
State law provides three exceptions where the statute of limitations does not apply to civil tax penalties: When someone failed to report a return at all, when someone failed to notify the state of changes made to their federal return by the IRS or when someone filed a false or fraudulent return with the intent to evade tax.
If state tax auditors were to determine the Trumps committed fraud, they could go after them for back taxes, interest and penalties.
On the federal level, the IRS would need “clear and convincing” evidence that fraud occurred before it could levy civil penalties against the Trumps. But that may be hard to establish given the time that has elapsed, said tax attorney Robert McKenzie of the firm Saul Ewing Arnstein & Lehr in Chicago.
“A lot of the records are gone, I’m sure,” McKenzie said.
What’s more, the IRS already has audited the combined estates of Fred Trump and his wife, Mary, after her death on Aug. 7, 2000, the Times reported.
The agency probably would not be inclined to open another audit, Rosenthal said, and even if it did, Donald Trump “would argue that the audit has already occurred.”
Political considerations also could come into play.
IRS Commissioner Charles P. Rettig was appointed by Trump and confirmed to the position just last month, so it's uncertain if he would be willing to get into a battle with the man who hired – and could fire – him, Rosenthal said.
Before he was tapped to run the IRS, Rettig practiced criminal tax law in Beverly Hills, California. At his confirmation hearing, Rettig told senators he would ensure the IRS follows the law and remains “impartial and non-biased from top to bottom.”
McKenzie said he believes Rettig would “act in good faith” and would not kill any audit of Trump’s taxes. But it would take more than a newspaper article to trigger such an investigation, he said.
“I don’t believe an audit is going to be opened against the president of the United States just based on that article,” McKenzie said.
Jon Campbell and Joseph Spector of the USA TODAY Network's bureau in Albany, N.Y., contributed to this story.
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