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Did Trump Get a Big Tax Refund After 2005?

This story was co-published with The Washington Post.

 

The pressure is growing to force President Donald Trump to turn over his tax returns. The other day, for example, 200 Congressmen filed a suit in federal court, arguing that voters and lawmakers have a right to know whether Trump's businesses are violating the Constitution's emolument clause, which bars the president from accepting payments from foreign countries.

 

The lead Senate plaintiff in the suit, Sen. Richard Blumenthal (D-Conn.), said that the legal effort could force release of the president's tax returns and other business documents during the discovery stage of the litigation.

 

"By failing to release his tax returns — reflecting payments and benefits from foreign powers — President Trump is thumbing his nose at the American people and the Constitution," Blumenthal told my Washington Post colleague Tom Hamburger. "He is violating the Constitution by accepting foreign government payments and benefits without consent from Congress — which can't consent to what it doesn't know."

 

But Trump hasn't filed a tax return for 2017, which is the year he became president and the emolument clause began to apply to him. So even if we got his earlier returns, we wouldn't know what he's done since taking office Jan. 20.

 

As for the argument that seeing his returns would expose Russian connections, should they exist: I've written before, his old tax returns, should they ever see the light of day, are unlikely to tell us much about any possible personal foreign entanglements.

 

Those might show up, if they exist, in the filings of the hundreds of companies that make up the Trump empire. But Trump's personal returns are unlikely to show them.

 

But seeing his old returns would tell us something especially relevant about a president who wants to radically reshape our tax code.

 

It would show us how much and in what ways Trump has personally benefited from the legal loopholes scattered throughout the current system. And what impact the changes he's proposing would have on him personally.

 

Trump's tax returns would also let us see, I suspect, that a good part of the tax payments that showed up on Trump's leaked partial 2005 federal return was refunded to him in later years.

 

When the first two pages of that return became public in March, he and his backers took victory laps because the return showed him paying $36.5 million of income tax and having made about $153 million during the year.

 

Among the boasters was Donald Trump Jr., who tweeted about his father's 2005 payments at least three times and at a May campaign rally in Montana told a heckler that his father's 2005 return shows that, "You can do it all. You can be successful [and] you can pay your taxes."

 

However, for reasons I'll get to in a bit, I think there's a very good chance that Trump got a major portion of his 2005 tax refunded to him in 2006 and later. If I'm right, it means that a good part of the 2005 payments that Trump and Trump Jr. and other Trump types boasted about amounted to temporary loans to the Treasury. Not tax payments as we normally think of them.

 

If so, that would be yet another example of how Trump has gotten a free ride — okay, in this case a reduced-fare ride — on his income taxes.

 

Getting refunds like the ones I think Trump got is perfectly legal. But for us to see the 2005 tax payments but not any subsequent refunds leaves us with a misleading picture.

 

Should these refunds exist — I think they do, but I can't prove it — they would show up on post-2005 tax returns that we haven't seen and that Trump refuses to disclose.

 

Seeing if he got refunds on his 2005 taxes is yet another good reason for us to want to see Trump's returns, which presidents and presidential candidates had been providing since the days of Richard Nixon.

 

We'd find out about possible refunds of Trump's 2005 taxes by looking at the "Other Credits" line on the second page of those returns and seeing if he took any credits on IRS Form 8801.

 

I emailed both Trump's tax attorney and the White House several weeks ago asking them to respond to my theory about Trump having gotten refunds in subsequent years. The law firm to which Trump tax attorney Shari Dillon belongs sent a quick and courteous "no comment" response. My email to Trump spokeswoman Hope Hicks went unanswered.

 

So I'm relying on my own analysis, which is based on information and guidance that I got from about half a dozen tax experts, some of whom I've worked with for decades in the course of writing about taxes. Some of the experts I consulted for this column are tax practitioners, some are theoreticians. Their political preferences range from pro-Trump to socialist.

 

Okay. Now, here we go.

 

If you look at Trump's partial 2005 return, which made its way to veteran tax journalist David Cay Johnson (with whom I worked at The Detroit Free Press in the 1970s), who gave it to "The Rachel Maddow Show" and put it into the public domain, you see three telling things.

 

First, you see the words "Client Copy" on the second page, which raises the possibility that the partial return was sent by someone in Trump's camp with access to Trump documents. Because it puts Trump in a good light, this wouldn't shock me.

 

Second, you see that most of the income tax Trump paid — $31.6 million out of $36.5 million — arose from what he owed as a result of the alternative minimum tax, a provision of the tax code intended to make sure high-income people pay at least some taxes.

 

Third, you see that Trump used $103.2 million of losses from previous years to reduce his taxable 2005 income. Those losses were lower than his total taxable income. This almost certainly means that he had no losses left to write off, because had more write-offs been available, Trump could have used them to lower his tax bill.

 

Now, let me try to make sense of all this for you.

 

The only other Trump tax filings that are public — partial 1995 New York, New Jersey and Connecticut state returns — show that back then, he had an astounding $915 million of losses that he could use in future years to offset income for federal, New York state and New York City income tax purposes.

 

The 2005 return indicates to me that Trump used up his losses in 2005 — he showed $48.6 million of taxable income after subtracting the aforementioned $103.2 million of losses. I'm assuming that from 1996 through 2004, he wiped out his taxable income for federal, New York state and New York City purposes by using the $915 million in losses, which were generated by the collapse of his real estate-casino empire in the 1980s and 1990s, and were probably supplemented with paper losses generated by a special tax code provision that benefits real-estate professionals such as Trump.

 

Now, I'll give you a simplified version of why I think — but hasten to say, yet again, can't prove — that Trump recovered a good part of the $31.6 million of alternative minimum tax that he paid for 2005.

 

The AMT, as it's known, has become a plague to middle-income and upper-income types who live in states with high income and real-estate taxes. That's despite the fact that when Congress created the AMT in 1969, its goal was to stop a handful of rich people from avoiding income taxes all together. Over the years, however, Congress failed to modify the AMT sufficiently to keep it from ensnaring millions of middle- and upper-middle taxpayers.

 

It turns out there are two separate types of alternative minimum tax. Most people — including me — who pay AMT on top of their regular income tax do so because state and local income taxes and the real-estate taxes on our personal residences aren't deductible under the AMT the way they are for regular tax purposes. That leads to the AMT being higher than our regular tax, and the difference between AMT and regular tax gets added to what we owe Uncle Sam.

 

That kind of AMT payment — arising from what tax techies call an "exclusion preference" — isn't refundable.

 

But judging from Trump's tax return, it looks like the vast majority of the additional tax he paid as a result of the AMT arose from so-called "deferral preferences." And that most of the $103.2 million of losses he carried over from previous years were deductible for regular income tax purposes in 2005, but not for AMT purposes.

 

Under the tax laws, Trump can get refunds, over multiple years, up to the refundable portion of the 2005 AMT that he paid. Which was probably the vast majority of his AMT.

 

For instance, let's say that Trump had the same income in 2006 that he had in 2005, but didn't have the $103.2 million of losses from previous years.

 

Because the AMT is assessed at a 28 percent rate and the top regular rate in 2006 was 35 percent, Trump's regular income tax would probably have been $6.5 million to $7 million higher than his AMT would have been. This would have yielded him a $6.5 million to $7 million refund, with future refunds coming in future years when his regular tax was higher than his AMT.

 

To be sure, part of Trump's 2005 AMT probably comes from not being able to deduct real-estate taxes on his personal residences. That "exclusion preferences" part of his AMT wouldn't be refundable.

 

But the vast majority of Trump's AMT appears to be from "deferral preferences" — especially since it's unlikely that he paid any significant New York state or New York City income taxes from 1996 through 2004 because the losses he carried over from previous years would have been deductible for New York state and New York City purposes and would probably have wiped out all or virtually all of his New York income.

 

Given the size of the numbers we're dealing with, his personal real-estate taxes and any personal income taxes he might have paid outside of New York are probably rounding errors, at most.

 

So unless Trump started running up big losses post-2005, when his losses dating back to the 1990s were all used up, it looks like his regular income tax (at a 35 percent top rate in 2006 and 39.6 percent in recent years) would have exceeded his 28 percent alternative minimum tax.

 

This means that a good part of the AMT that he paid in 2005 would likely have flowed back to him as credits in subsequent years. Hence my conclusion that although Trump paid $36.5 million of federal income tax in 2005, his ultimate income tax cost for the year was considerably lower. That's the bottom line. Or at least, I think it is.

 

Of course, there's only one way to find out for sure, and that's to view Trump's post-2005 tax returns. If they somehow show up at ProPublica, whose mailing address is 155 Avenue of the Americas, 13th floor, New York, NY 10013, I'll be more than happy to look at them. Even if they prove me wrong.

 

I collaborated with Cezary Podkul of ProPublica on this story, and received reporting help from Alice Crites and Tom Hamburger of The Washington Post.

 

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for their newsletter.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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India need regulatory guidelines for Retirement Homes, finds Study conducted by Moneylife Foundation for HDFC
The first ever study on retirement homes in India, done by Moneylife Foundation, reveals a huge potential for this growing sector. At the same time, there is a need for appropriate oversight, standards of infrastructure and service and grievance redress measures. 
 
The Retirement Homes report was released on Friday by BN Makhija, retired IAS officer and Chairman of GuideStar India, in the presence of senior citizens and activists. The study was conducted with the support of Housing Development Finance Corp Ltd (HDFC) as part of its corporate social responsibility initiative. The release was timed to mark World Elder Abuse Awareness Day, observed on 15th June. 
 
 
Says Mr Makhija, "The demand for retirement homes is there, it is growing and so this report is appropriate and timely. There are three reasons why people go to retirement homes: the company of people of similar age, care and safety offered by these places. People are willing and the resources are available, but now people want options. This is the right time to take up the issue of regulation in this segment and I will be happy to be associated with this project.”
 
India is a young country, but a growing population of older persons (8.94% of the Indian population today) has created a niche market for retirement homes that cater to the needs of fairly affluent Indians who no longer want to be burdened with running a home and want to live with people who have similar background and interests.
 
 
Sharing the findings from the report, Sucheta Dalal, Founder-Trustee, Moneylife Foundation, said, “The Study has thrown up a range of issues that seniors can expect to face over time -- starting with minor irritants such as service quality and maintenance to more serious issues such as forceful eviction, denial of services, substandard services and dealing with cost escalation. The need for regulation is underlined by a court case in the Tamil Nadu High Court that highlighted the travails of the senior citizens living in retirement home in Coimbatore.”
 
Moneylife Foundation also conducted an online survey of those living in retirement homes to get first-hand information from residents and gauge their level of awareness about the facilities and future. The survey threw up some startling findings.
 
 
According to the survey, out of the 340 respondents nearly 65% had not signed a contractual agreement which clearly outlines terms of service and their rights. Shockingly, over 62% were unaware about the cost and procedures involved in terminating their deal with the retirement home and its costs. 
 
Highlighting lack of regulation of retirement homes or retirement communities in India, Debashis Basu, Founder-Trustee of Moneylife Foundation, said, “There are two models that have developed -- an ownership model and a rental model. Both have good and bad examples. The question is what kind of regulation, supervision and structure will ensure a safe and viable retirement for senior citizens?”
 
 
Although realty is a state subject, the process of granting clearances to set up retirement homes and townships needs to have a national regulatory framework, preferably through an act, overseen by the Ministry of Social Justice and Empowerment. 
 
“The Ministry should ensure that every retirement home and its management agency is required to file details of its agreements, amenities, terms and conditions of service according to the model and structure under which they are set up and operate. The Ministry should also ensure that details of licenses, sanctions, permissions and terms and conditions of Retirement Homes are uploaded
on the Ministry website (as in the Real Estate Regulation Act),” the Report says in its recommendations.
 
 
Talking about the Report, Sailesh Misra from the Silver Innings Foundation, said the release of the report is just the beginning. “We need to change our mindsets. Seniors opting for retirement homes do not want pity but good services. This is because retirement homes are for the affluent class who can afford them. However, when we talk about elder care, there is a need for all of us to become service providers with holistic angles. Regulatory guidelines or frameworks are the right step in this direction,” he added. 
 
Retirement homes are popular in most developed countries such as the US, Canada, Japan, and New Zealand. While there may be a few differences in the structure and facilities offered by these homes, what they have in common is the fact that the governments of these countries extend support, incentives and facilities for retirement homes. Each of these countries has also put in place appropriate regulatory guidelines covering the structure, management and operations of such facilities.
 
 
According to the findings from the study, unless the government puts in place proper regulation, licensing, supervision and grievance redress mechanism with a clear administrative ministry,  examples like that of Coimbatore are bound to have an impact on the growth of the retirement homes segment, which otherwise have great potential in India.
 
You may also want to read…
 
 
 
 
 

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COMMENTS

Sandip Kishore

1 week ago

Rightly said it is SAD our Law enforcement authorities DO not play their role rigidly; even after Court injunction is obtained, when results are not forthcoming within a stipulated time, the accused MUST be punished / fined severely; NOT done now - police take back
seat saying party is pursuing court case etc, without verifying DATA completely; PITY;
Violation / Delay on part of authorities OR by accused should be dealt with strong and speedily ; only way to ensure redressal of grievances by elders whose term is "limited" !
Action being taken IS often told, BUT in practices NOT found moving a bit - Strange eh !

R. NARAYAN

1 week ago

Mr Suchindranath Iyer's practical comment appears valid. The Tamil Nadu Govt Order No. 83 issued by the Social Welfare & NMP Dept came into force on 23rd Nov 2016. It is over 200 days since the Govt Order came into force but the Promoters of senior citizen Homes are refusing to comply with the Order as they fear that their ability to further 'exploit' the senior citizens shall come to an end if they show Compliance to the G.O. The Secretary of the Regulatory Authority is the District Social Welfare Officer [DSWO] and she is also the Nodal Officer empowered to redress the grievances of Senior Citizens living in such homes. Despite our written complaints, the DSWO has NOT been able to redress a single grievance, so far. She expresses her lack of pwer and inability to bring the Promoters to comply with the Govt. Order. Same is inaction can be seen with the Police, Revenue and other authorities in the District upon whom a duty is cast to protect the security and property of Senior Citizens living in such Homes vide the G.O. Thus the issue of making the Promoters of such Senior Citizen Homes to become Compliant to the Govt Order. is the next level of our continuing struggle. The matter has been escalated to the Hon. District Collector who is the Chairman of the Regulatory Authority, the Director Social Welfare Tamil Nadu Govt., the Principal Secretary, Social Welfare & NMP Dept TN Govt, the PMO cell and we continue to knock at the doors of the every authority hoping that someone would wake up to ur plea and perform their duty towards senior citizens of the state. Hopefully the errant Promoters will be tamed by the senistization of the state level, quasi judicial law-enforcing authorities to the salient clauses in the G.O. resulting in the 'Rule of Law' being eventually implemented, in letter & spirit.

SuchindranathAiyerS

1 week ago

The assumption that regulation works in a corrupt India sans dependable Police and Judiciary is a facile one.

Nifty, Sensex to move sideways – Weekly closing report

We had mentioned in last week’s closing report that Nifty, Sensex were showing no signs of tiring. The major indices of the Indian stock markets suffered a minor correction during the week and closed with small losses over last Friday’s close. The trends of the major indices in the course of the week’s trading are given in the table below:

Weak global cues and caution ahead of major domestic macro-data release pulled the Indian equity markets lower during the mid-afternoon trade session on Monday. According to market observers, investors were cautious ahead of the meeting between Finance Minister Arun Jaitley and top executives of public sector banks on the sector's non-performing assets (NPAs) issue, as well as the release of Index of Industrial Production (IIP) and Consumer Price Index (CPI) data later in the evening. On the NSE, there were 482 advances, 987 declines and 51 unchanged.

 
India's steel exports jumped by 69% in May to 0.641 million tonnes (mt) over the same month last year while imports were up by 2.4%, according to a Steel Ministry report. "Export of total finished steel was up by 102% in April-May 2017 to 1.387 mt over same period last year. Overall export in May at 0.641 mt was down by 14.1% over April 2017 but was up by 69% over May 2016," said the Joint Plant Committee report. India's consumption of total finished steel at 13.785 mt saw a growth of 4.2% in the first two months of the current fiscal over year-ago period, under the influence of rising production for sale. In the last month, overall consumption stood at 7.491 mt, up by 1% over corresponding month last year. In May, production for sale of total finished steel at 9.066 mt, registered a growth of 4.4% over the corresponding month last year. The production was, however, up by 7% over April 2017. Shares of Steel Authority closed at Rs57.20, down 0.61% on the BSE. Shares of Tata Steel closed at Rs507.35, up 0.21% on the BSE.
 
Shrugging off the previous day's losses, the Indian equity markets on Tuesday traded in the green on the back of firm global cues, broadly positive domestic macro-economic data and healthy buying in capital goods, banking and consumer durables stocks. According to the data released by the Central Statistics Office (CSO) after-market hours on Monday, India's annual retail inflation (Consumer Price Index) eased to a record low of 2.18% in May 2017, and the factory output growth (Index of Industrial Production) marginally slowed to 3.1% in April 2017. This, according to market analysts, provided a boost to the key equity indices. On the NSE, there were 698 advances, 700 declines and 47 unchanged.
 
Drug major Sun Pharmaceutical Industries on Tuesday announced that one of its wholly owned subsidiaries has received final approval from the US Food and Drug Administration (USFDA) for its generic version of ezetimibe tablets. According to Sun Pharma, the generic ezetimibe tablets -- used to reduce higher levels of cholesterol -- are therapeutic equivalents of Merck's Zetia tablets. "As per IMS, ezetimibe tablets had annual sales of approximately $2.7 billion in the US for the 12 months (which) ended April 2017," the drug major said in a regulatory filing to the BSE. The company’s shares closed at Rs536.45, up 0.62% on the BSE.
 
Lending major State Bank of India (SBI) said that its paid-up capital has increased to Rs863.20 crore after its recent share placement through QIP. "Pursuant to the allotment of equity shares in the issue, the paid-up equity share capital of the bank increased from Rs810,98,57,182 to Rs863,20,50,393 comprising 863,20,50,363 equity shares of face value of Re1 each," the company informed the BSE in a regulatory filing. Last week, the lending major had allotted more than 52 crore shares of face value of Re1 each at a price of Rs287.25 per equity share aggregating to Rs14,999 crore to 61 "successful eligible investors". SBI shares closed at Rs283.80, down 0.44% on the BSE.
 
The Indian equity markets on Wednesday closed on a flat-to-positive note on the back of healthy wholesale price index (WPI) data and buying in capital goods, oil and gas as well as energy stocks. Official data released during market hours showed that India's annual rate of inflation based on wholesale prices decelerated in May to 2.17% from 3.85% in April as food prices eased. However, investors remained cautious ahead of the outcome of two-day US Federal Reserve's rate-setting meet later in the evening. On the NSE, there were 662 advances, 793 declines and 64 unchanged.
 
Telecom major Reliance Communications (RCom) Chairman Anil Ambani voluntarily decided to forego his salary and commission from the company during the current financial year as part of its "strategic transformation programme", RCom announced on Wednesday. Reliance Group Chairman Anil D. Ambani voluntarily decided to draw no salary or commission from RCom in the current financial year. The decision was part of the company promoters' commitment to the Strategic Transformation Program, the RCom release said. The company’s shares closed at Rs18.30, up 1.39% on the BSE.
 
Following their global peers, the Indian equity markets fell during the mid-afternoon session on Thursday, a day after the US Federal Reserve hiked its benchmark rates. The rate-hike assumes significance as it is expected to lead FPIs (Foreign Portfolio Investors) away from emerging markets such as India, and is also expected to dent business margins as access to capital from the US will become expensive. Consequent to the late-night US rate hike, the Asian markets traded broadly in the red and eroded Indian investors' confidence in the highly expensive conditions in the domestic stock markets. Selling pressure was witnessed in banking, oil and gas and capital goods stocks. On the NSE, there were 837 advances, 805 declines and 311 unchanged.
 
The US Federal Reserve raised its benchmark interest rates for the third time since December and unveiled plans to start trimming its balance sheet, even as news of the Fed's relatively hawkish stance provoked caution in early trading in the Indian equity markets, which were trading flat on Thursday morning. "In view of realised and expected labour market conditions and inflation, the FOMC (Federal Open Market Committee) decided to raise the target range for the federal funds rate to 1% to 1.25%," the American central bank said in a statement after concluding its two-day monetary policy meeting. This rate was a 25 basis points increase over the current one of 0.91%.
 
The Indian equity markets traded on a flat-to-positive note during the mid-afternoon session on Friday, with buying witnessed in consumer durables, FMCG (fast moving consumer goods) and banking stocks. According to market observers, weak global cues and selling in healthcare stocks eroded investors' risk-taking appetite. At the close of trading, the major indices ended flat over Thursday’s close. Bank Nifty closed with small gains over Thursday’s close.
 

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