House Democrats are gearing up for a lengthy battle with the Trump administration as the deadline for turning over the president’s tax returns approaches.
Lawmakers are mapping out steps they may take if, as expected, the Internal Revenue Service refuses to release the returns.
The IRS has until end of April 10 to hand the returns over, but members of President Donald Trump’s legal team and acting White House Chief of Staff Mick Mulvaney have urged the agency and the Treasury Department to deny the request. Treasury Secretary Steven Mnuchin said April 9 at congressional hearings that the request is under review and the department “will follow the law.”
The IRS can expect a second chance from House Ways and Means Committee Chairman Richard Neal (D-Mass.) if it doesn’t meet the first deadline. An aide for Ways and Means Democrats told Bloomberg Tax that if that happens, Neal will likely send another letter with a new deadline by the end of this week.
If the tax-writing panel gets a second refusal, however, it may have no choice but to turn to the legal system. Tools the committee could use include issuing a subpoena or filing a lawsuit based on tax code Section 6103—the 1924 law that gives Neal authority to request the president’s returns.
Either move could be the beginning of a lengthy legal clash that could make it all the way to the U.S. Supreme Court and last beyond the 2020 presidential election.
“Unless they’re pursuing emergency procedures, things of this sort can take multiple years,” said Andy Grewal, a professor at the University of Iowa College of Law.
Subpoena Versus Lawsuit
Ways and Means could file a lawsuit against the executive branch to enforce Section 6103. The code section says that the chairman of Ways and Means, the chairman of the Senate Finance Committee, and the chief of staff of the Joint Committee on Taxation can seek tax returns.
The lawsuit would be based on the theory that Treasury is failing to comply with its statutory obligations and the committee is therefore entitled to relief from a federal court, said Thomas G. Hungar, who worked as general counsel to the House from July 2016 until January 2019.
This type of action may be preferable because it would require fewer procedural steps in the House than a subpoena and get this to a court—likely the U.S. District Court for the District of Columbia—faster, said Sam Dewey, counsel at McDermott Will & Emery in Washington. Dewey was senior counsel for oversight and investigations on the House Financial Services Committee from 2017 through 2018.
That would be new territory, Hungar, a partner in the Washington office of Gibson, Dunn & Crutcher LLP, said.
Because such action is unprecedented, “the committee may prefer to go the subpoena route in order to maximize its chances of success in court,” he said.
The House in the past has brought lawsuits against the executive branch to compel the production of information when it failed to comply with traditional committee subpoenas.
One example is the case against Eric Holder, a former U.S. attorney general under President Barack Obama, who was subpoenaed and later hit with a lawsuit for failing to provide requested information on the “Operation Fast and Furious” gunwalking scandal.
If the committee goes the subpoena route there is traditionally a process of negotiation and accommodation where Congress tries to reach a compromise with the executive branch. That usually takes at least several months before a lawsuit is filed, Hungar said.
“But the House has been trying to push things forward much more quickly in the new Congress, so the committee may try to short-circuit that process,” he said. For example, House Judiciary Committee Chairman Jerry Nadler (D-N.Y.) is working through this accommodation process now but has indicated he intends to subpoena the Department of Justice for a complete, unredacted version of Special Counsel Robert Mueller’s report on a short timeline.
House subpoenas last the length of a Congress—meaning if Ways and Means issued one for Trump’s tax returns it would expire in January 2021. Committees have on occasion sought to overcome that problem simply by reissuing the subpoena at the beginning of the next Congress, as they did in the Holder case, Hungar said.
The Ways and Means aide said that if it becomes clear legal action is required, Neal hasn’t yet decided whether he will issue a subpoena or file a lawsuit based on Section 6103. Both are options, the aide said. But the chairman and his counsel would first like to see how the IRS and Treasury respond to the initial requests before making those decisions.
Either way, it would likely take months before the issue makes its way to the court system, Dewey said.
“How many months is a function of how quickly Mr. Neal and the House want to move,” he said. “Part of that is steps they have to take. The other part of that is steps that they want to take to appear more reasonable because they think that will get them a better argument when they get into court.”
Dewey said that once in the court system, the issue could potentially move quickly because “it’s arguably a pure question of law.” But the length of legal battles like this can be hard to predict and depends partly on how aggressively the House pushes to expedite the proceedings, he said. It also depends on whether the court delves into factual questions around whether the Ways and Means’ request is legitimate or an abuse of process as the White House has been claiming, he said.
Ken Kies, a tax lobbyist and a former chief of staff of the JCT, said he thinks these proceedings will drag on to the end of 2020 at a minimum.
Congress must have a legislative purpose when using its investigative authority, even though Section 6103 has no specific limits.
Requests that serve a legislative purpose may be grounded in the need to gather information necessary to alter the tax code or to review the relationship between the president and the IRS, according to a report from the Congressional Research Service that was updated April 4.
Neal’s request focuses on these rationales. It says Ways and Means requires the president’s returns because it is considering legislative proposals and conducting oversight to determine the extent to which the IRS is fairly auditing and enforcing the federal tax laws against the president.
The panel is seeking six years of both Trump’s individual and business tax returns to check whether the agency’s audits include “a review of underlying business activities required to be reported on the individual income tax return.”
If the chair of a tax committee requested a president’s tax returns solely to release them publicly, a court could reject it, the CRS said in its report.
Trump’s legal team is trying to frame Neal’s request as a thinly veiled attack on the president and said it serves no legitimate purpose.
An April 5 letter from Trump’s attorney William Consovoy, addressed to Treasury General Counsel Brent McIntosh, says the request “is a transparent effort by one political party to harass an official from the other party because they dislike his politics and speech.”
Consovoy asked the IRS not to turn over the president’s returns until the Justice Department can formally weigh in on whether Neal’s request is legal.
Getting such an opinion “is not the normal course, but it happens if there’s a complicated legal question,” Dewey said. That could further stall this process for months, he said. In the past, the executive branch has been accused of using these types of opinions to deliberately drag its feet, he said.
—With assistance from Kaustuv Basu.
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