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Supreme Court Ruling Adds Hurdle to Democrats’ Tax Return Quest (1)

July 9, 2020, 9:23 PMUpdated: July 9, 2020, 9:51 PM

The U.S. Supreme Court delivered a blow to House Democrats seeking President Donald Trump’s tax returns Thursday, kicking a separate case involving a congressional subpoena to Trump’s accounting firm and banks back to a lower court.

Democrats, including House Speaker Nancy Pelosi (D-Calif.), said they were undeterred in their quest to find out whether the IRS is properly auditing presidents—the reason they cite for seeking several years of Trump’s personal and business tax returns. But the court’s position in Trump v. Mazars USA is a setback all the same, legal scholars said.

“The court clearly didn’t like the idea of Congress investigating broadly into the president,” said Josh Chafetz, a professor at Georgetown Law. “It didn’t like the idea that congressional committees would go after the president’s financial records without some kind of extremely tight, clear justification and without a drawn out process trying to get them in a negotiated way.”

Congress has typically not sought the private financial information of presidents, but presidents have also divested themselves of business interests upon taking office, and in the era since Watergate, voluntarily disclosed their tax returns prior to taking office.

Thomas Hungar, a partner at Gibson, Dunn & Crutcher LLP who served as the House’s top lawyer under former Speaker Paul Ryan (R-Wis.), viewed the Supreme Court ruling as a major upset for Democrats.

“The Court’s decision is another illustration of the principle, ‘be careful what you ask for,’” Hungar said. “Legitimate congressional oversight will likely be hindered over the long term as a result of this unfortunate strategy call.”

Regardless of the outcome of Mazars, the ruling could mean Trump’s financial records remain private until after election day. The high court also ruled Thursday on a separate case involving a subpoena from Manhattan District Attorney Cyrus Vance, Trump v. Vance.

Tied Together

The case is stalled at the U.S. District Court for the District of Columbia, awaiting a decision in a separate pending case involving former White House Counsel Donald F. McGahn over whether Congress may sue the executive branch to enforce a subpoena.

Andy Grewal, a University of Iowa law professor, said that if Ways and Means clears that hurdle, “then a lot of what you see in Mazars is going to extend to analyzing whether the subpoena for the tax return information is valid,” citing the separation of powers concerns raised in the Mazars ruling.

George Yin, a University of Virginia professor who was a witness during a Ways and Means oversight panel hearing on presidential tax returns in February 2019, said the most important part of the Mazars case is a roadmap from the majority opinion that could foretell what might happen with Ways and Means Chairman Richard Neal’s (D-Mass.) tax return request.

The Ways and Means case might not matter so much any more because a decision isn’t likely before the November election, Yin said. But “it always matters in the sense that it’s going to be a legal judgment, it’ll be a precedent,” he said.

Chief Justice John Roberts wrote that courts should consider multiple factors when dealing with a subpoena for the president’s personal records, including the purpose of the subpoena, whether the subpoena’s scope is restricted to what Congress reasonably needs, and what kind of burdens the subpoena imposes on the president.

Tax Code Reliance

The House Ways and Means Committee sued last summer after the Treasury Department rejected a request and a subpoena for Trump’s tax returns. Their request hinges on tax code Section 6103, which gives the Ways and Means chairman the authority to request the tax returns of any individual.

Chairman Neal cited the code section in his statement following the Mazars decision.

“After reviewing the opinions, I remain confident that the Ways and Means case ultimately will prevail,” Neal said in a statement. “The law is on our side and the Administration has no basis whatsoever to continue to refuse to comply with my request.”

The committee’s reliance on 6103 could help their case, said Charles Tiefer, a former acting House counsel during a the Democratic majority of the early 1990s, now a professor at University of Baltimore School of Law.

That provision “gives the Ways and Means Committee a very special and strong access to tax records. The Ways and Means statute contrasts with the more aloof and distant general claims of committees,” he said.

Grewal, however, argued that today’s ruling could lead a court to consider whether the 6103 statute, as interpreted by the committee, exceeded Congress’s powers. “This opinion lays out the limits of Congress’s authority under the Constitution, so if they pass a statute, that can’t make it any bigger,” he said.

(Updates with comments from George Yin starting in 10th paragraph. )

To contact the reporters on this story: Colin Wilhelm in Washington at cwilhelm@bloombergtax.com; Aysha Bagchi in Washington at abagchi@bloombergtax.com; Kaustuv Basu in Washington at kbasu@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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