Candidate Tax Return Transparency

With less than four weeks left as this is written until non-absentee votes are cast for President of the United States, I wonder what has become of the clamor for one candidate to publicly release his tax returns. It seems as if the public has either lost interest in, or given up expecting to review, those returns.

The issue was widely discussed a few months ago, and even sparked proposed legislation in Senate Bill No. 2979 that would have allowed public disclosure of the tax returns of certain Presidential candidates. Not every candidate, mind you, but certain ones.

It applied only to candidates who had been nominated by a major party for the office of President. A legal mind might be forgiven for wondering about some of those terms. For instance, what is a “major party?” Turns out the IRS has already come up with an answer for that in IRC §9002(6). It’s a political party whose candidate for the office of President in the preceding presidential election received, as the candidate of such party, 25% or more of the total number of popular votes received by all candidates for such office.  So a party can only be a major party if it ran a Presidential candidate in the previous election, and did reasonably well.

So what does it mean to be nominated for President?  That may seem obvious, looking at how Democrats and Republicans run their nominating conventions today.  But there’s no requirement that they continue doing so.  What if a Presidential candidate is nominated, selects a Vice Presidential candidate, and then drops out? If the Vice Presidential candidate assumes the candidacy, they clearly were never nominated as the Presidential candidate. If a Presidential nominee drops out, how the replacement occurs is a matter of party rules. Loopholes abound!

But enough idle speculation about improbable fact patterns. Back to the legislation!

The bill, if it became law, would have required these specified candidates to file copies of their returns within 15 days after being nominated, with the Federal Election Commission, which would then treat those returns like publicly available documents.

While there is no apparent penalty for a candidate who chooses not to file those returns with the FEC as instructed, despite the mandatory language of the legislation, the consequence for failure to do so would be that within 15 days after the deadline is missed, the Chairman of the Federal Election Commission must request the Secretary of the Treasury, who oversees the Internal Revenue Service, to provide those returns.  Again, note the mandatory language, so presumably the FEC Chairperson could be sued in their official capacity for failing to make that request. Once the FEC has those returns, it will make them available to the public.

This requires that the IRS code section that prohibits disclosure of individual tax return information to be amended so that the FEC could legally disclose the information to the public, and so the IRS could legally disclose those returns to the FEC. Note to any future Chairperson of the Federal Election Commission and Secretary of the Treasury; the disclosure exception is only good if the FEC makes a written request.  The part of the new bill requiring the FEC to make a request for the returns didn’t require the request to be written, but the part that gives the Treasury employees a legal shield against being charged with violating §6103 when providing the returns to the FEC does. The FEC employees appear to have carte blanche to publicly disclose the “applicable returns,” regardless of how they obtained them.

The bill was introduced on May 25, 2016.  It has hasn’t progressed any further. But a virtually identical bill, S. 3348, (with a few tweaks to make it apply to the current crop of candidates, since we’re well past convention season and the first bill’s deadlines were based solely on the nomination dates) was introduced September 15, 2016, and was reported out of committee.  Apparently not everyone has lost interest in that candidate’s tax returns.