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Nov. 1 — The latest news report on Donald Trump’s tax maneuvers in the 1990s is a reminder of the presidential candidate’s “outrageous” refusal to release his tax returns, Sen. Ron Wyden (D-Ore.) said.
“Every story that comes out about Donald Trump’s reported tax dodging and ties to Russia is a fresh reminder of the outrageous fact that he is refusing to release his tax returns to the public,” the ranking member of the Senate Finance Committee said in a Nov. 1 statement. “There is a week to go before election day and millions of votes have already been cast, but Mr. Trump is still falling back on baseless excuses to hide his taxes.”
The New York Times published an Oct. 31 story that attempted to explain why Trump reported a $916 million loss on his 1995 state tax returns. The Times reported that Trump may have used a “dubious” method known as a partnership equity-for-debt swap to potentially avoid tens of millions of dollars in federal personal income taxes.
The article referred to documents obtained during a search of Trump’s casino bankruptcy filings, which included two federal tax opinion letters written by Willkie Farr & Gallagher LLP in the early 1990s in which Trump’s lawyers warned him against the strategy.
Wyden said that for months, he has pushed for Congress to adopt his proposal, the Presidential Tax Transparency Act, which would make disclosing tax returns a legal requirement. “That’s because a candidate’s tax return says a lot about who they are, whether they pay what they owe and where their money comes from,” he said. “I’ll keep fighting after the election ends to make disclosure a legal requirement because we cannot in good conscience allow Mr. Trump to be responsible for the death of this post-Watergate, bipartisan tradition.”
Candidates on both sides of the aisle have been releasing their returns for more than four decades.
Steve M. Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center who was quoted in the Times story, said it is possible that Trump reaped this tax benefit for losing vast amount of other people’s money in the process of trying—and failing—to build a casino empire in Atlantic City.
“Trump stretched the partnership-interest-for-debt exception, which was tenuous to begin with, to a partnership-interest for-someone-else’s-debt,” Rosenthal wrote in a Nov. 1 blog post.
“We have no evidence that Trump broke any laws but, at a minimum, he seems to have aggressively stretched the law to avoid reporting taxable income of hundreds of millions of dollars from restructured loans,” he said. “Had he reported that income, he would have lost about half of his $916 million” in net operating losses.
Congress banned equity-for-debt swaps by partnerships in 2004.
“Congress closed the egregious loophole Donald Trump used to avoid paying what he owed when his businesses failed, but the tax code today remains a tale of two systems, one set of rules for typical Americans and another special set for the wealthy,” Wyden said in the statement. “I believe the Congress has a responsibility to address the unfairness in our tax code that allows wealthy individuals like Mr. Trump to decide how much tax to pay and when to pay it. It’s time for the games to end.”
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