D.C. Circuit Allows Disclosure of Former President Trump's Tax Returns to Ways and Means Committee

(Parker Tax Publishing August 2022)

The D.C. Circuit affirmed a district court and held that a 2021 request by the House Committee on Ways and Means for the tax returns of former President Donald Trump under Code Sec. 6103(f)(1) had a valid legislative purpose of investigating the need for legislation on Presidential audits and did not violate the separation of powers doctrine. The court also rejected Trump's arguments that Code Sec. 6103(f)(1) is facially unconstitutional and that the Treasury Department's intention to comply with the disclosure request violated his rights under the First Amendment. House Committee on Ways and Means v. Department of the Treasury, 2022 PTC 234 (D.C. Cir. 2022).

Background

In 2019, Representative Richard Neal (D, MA), the Chairman of the House Ways and Means Committee (Committee), requested the federal income tax returns of then-President Donald Trump, as well as the returns of various entities in which Trump had an interest. Chairman Neal's request stated that the Committee was "considering legislative proposals and conducting oversight related to our Federal tax laws, including, but not limited to, the extent to which the IRS audits and enforces the Federal tax laws against a President." The Chairman's request was made under Code Sec. 6103(f)(1), which provides that, upon written request from the chairman of the Committee, the Secretary "shall furnish" the Committee with any return or return information specified in the request.

The Department of the Treasury responded that it did not intend to comply with Chairman Neal's 2019 request because it was not supported by a legitimate legislative purpose. This position was supported by an Office of Legal Counsel (OLC) opinion which concluded that the Chairman's stated reasons for requesting the tax information were pretextual. The Committee filed a lawsuit against the Treasury Department and the IRS to force compliance with its 2019 request and Trump intervened. While the case was pending in a district court, Joe Biden was elected President.

In 2021, the Chairman again sent a written request to the IRS Commissioner, again invoking Code Sec. 6103(f)(1), and requested the same information regarding Trump's tax returns. However, in this request, the Chairman provided more detail as to why the Committee wanted this information. Generally, Chairman Neal stated that the Committee continued "to consider and prioritize legislation on equitable tax administration, including legislation on the President's tax compliance, and public accountability" and legislation related to the IRS's mandatory audit program of the sitting President's returns, which has been in effect since 1977 but is not required or governed by statute.

Upon receipt of the 2021 request, the Treasury Department again consulted the OLC. The OLC released a second opinion, this time concluding that the 2021 request was valid, and therefore that the Treasury Department had no choice but to comply with it per the mandatory language of Code Sec. 6103(f)(1). After the second OLC opinion was issued, the Treasury Department informed the district court and Trump that it intended to comply with the 2021 request and provide the Committee with the requested materials. The Committee then voluntarily dismissed its lawsuit. However, as an intervenor, Trump filed a crossclaim against the Treasury Department and the IRS, as well as counterclaims against the Committee. These claims alleged that the 2019 and 2021 requests were unlawful and therefore the Treasury Department should not comply with them. The Treasury Department and the Committee both filed motions to dismiss Trump's claims, which the district court granted in 2021 PTC 395 (D. D.C. 2021).

Trump appealed to the D.C. Circuit. He asserted that the Chairman's request was motivated by the improper purpose of exposing Trump's private financial information and did not identify a valid legislative purpose. Trump also argued that the request violated the principle of separation of powers under the Constitution. In addition, Trump contended that Code Sec. 6103(f)(1) is facially unconstitutional because it does not require a request to have a legitimate legislative purpose. Finally, Trump asserted that the Treasury Department's compliance with the request would violate his First Amendment rights because it would be done with a retaliatory motive.

Analysis

The D.C. Circuit affirmed the district court. First, the court found that Chairman Neal's request articulated a clear legislative purpose: the administration of the tax laws as they apply to a sitting President. The request stated that the Committee was concerned that the IRS mandatory audit program is not advancing the purpose for which it was created, and that Congress may need to act through legislation. It also stated that the Committee was seeking to explore legislation intended to protect IRS employees involved in Presidential audits. In the court's view, these were legitimate legislative purposes for which the Committee required the information requested. The fact that some members of Congress may have had political motives in addition to legislative ones, the court found, was not important.

Regarding separation of powers, the court noted that under Trump v. Mazars, 2020 PTC 197 (S. Ct. 2020), a Congressional request for a President's information raises "significant separation of powers issues." The Committee asked the court to apply the rule in Nixon v. General Services Administration, 433 U.S. 425 (1977), which focuses on the extent to which Congress is preventing the Executive Branch from accomplishing its constitutionally assigned functions. Trump, on the other hand, said that the court should apply the heightened rule laid out in Mazars, which examines: (1) whether the asserted legislative purpose warrants the significant step of involving the President and his papers, (2) whether the subpoena is no broader than necessary to accomplish the legislative objective, (3) whether Congress has offered detailed and substantial evidence to show the subpoena furthers a valid legislative purpose, and (4) whether the subpoena burdens the President as Chief Executive. The court concluded that, while it was likely that the Mazars test applied, the Committee's request passed muster under both tests. In the court's view, both tests required the court to consider the intrusion by Congress into the Executive Branch and Trump's personal life and the burdens such intrusions imposed. Neither burden, the court concluded, was sufficient to require the court to enjoin the Chairman's request for the returns and return information.

Next, the court rejected Trump's argument that Code Sec. 6103(f)(1) is facially unconstitutional after concluding that Trump failed to show that there was no set of circumstances under which the statute can be constitutionally applied. The court found that the statute can be properly applied in numerous circumstances, including the one before the court. The Chairman, the court found, could request returns and return information to inform legislation concerning the Tax Code; therefore, Code Sec. 6103(f)(1) is not facially unconstitutional.

Finally, the court found that Trump failed to state a claim under the First Amendment. In order to prevail on this issue, the court said that Trump had to allege that he engaged in protected conduct and that the government's action was in retaliation for that conduct. In the court's view, Trump failed to show that the Treasury Department's decision to comply with the 2021 request would have happened without a retaliatory motive. Further, the court noted that the language of Code Sec. 6103(f)(1) is mandatory and that once the Committee made a valid request, the Treasury Secretary had no choice but to comply. Thus, the court found that any motive, retaliatory or otherwise, was irrelevant.

Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.

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