David Stewart 0:02

Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: supreme review. President Trump's refusal to release his tax returns has been a topic of discussion since 2016, but the most recent discussion could be the most consequential. The Supreme Court recently heard oral arguments in two cases seeking the president's tax returns and financial records.

1:30

Here to talk about those cases and the constitutional arguments behind them is Tax Notes Contributing Editor Joseph Thorndike. He joins me from his home in Charlottesville. Joe, welcome back to the podcast.

Joseph Thorndike 1:39

Hey, it's great to be here. You know how much I like talking about presidential tax returns.

David Stewart 1:44

It does seem to be your thing.

Joseph Thorndike 1:46

For a few years, at least.

David Stewart 1:47

Before we get into it, why don't you tell me about your work on presidential tax returns over the years?

Joseph Thorndike 1:51

Well, you know, mostly it's just archival work, right? We just collect tax returns here at Tax Analysts. We've been doing it on and off since the 1990s, but our collection extends way back. I think back to, certainly to Franklin Roosevelt. We might have it back to Woodrow Wilson pretty soon, so we tried to collect them. We have every president since Richard Nixon, with the exception of President Trump. So it's our theory that these things have been released to the public record, we should make them readily available because they're actually hard to get. They're like stashed away in presidential libraries, but not anymore. They're all on the Tax Analysts website.

David Stewart 2:21

Now, before we jump into the details of these lawsuits, the oral arguments held in this case were a bit different than what we've seen in the past. How so?

Joseph Thorndike 2:27

Well, I don't know how many of our listeners have been to oral arguments at the Supreme Court. Pretty exciting, right? It's the big august chambers and all the justices up there in their big chairs. It was nothing like that. I mean, this time, they literally phoned it in. Just like everybody else, in this time of coronavirus , the justices did this by telephone, and then it was live streamed to anyone who wanted to listen.

David Stewart 2:47

Yeah, it's definitely an experience that we're all familiar with these days. Could you give a bit of background on the two lawsuits and the two plaintiffs seeking information from President Trump?

Joseph Thorndike 2:57

Basically, the court heard two different cases. The first one was sort of a consolidation of a few different cases. It rolled in requests by three different congressional committees ⁠—committees from the House of Representatives ⁠— that are trying to get access to President Trump's tax returns and other financial records. They're trying to get these materials from the president's accountants and financial advisors over the years, so these are the third parties. And these came from, I think it was the House Oversight and Reform Committee, and the Financial Services Committee, and the Select Intelligence Committee. But these were all consolidated into one. So we have, on the one hand, it's sort of like Congress looking for this material case. Right? And then there was another case that was filed almost immediately, which is a Manhattan grand jury. It was convened by the district attorney there, Cyrus Vance Jr., in which he's conducting an investigation of the Trump Organization and specifically about the so-called hush money payments around the 2016 election that may or may not have been made. In any case, we don't need to get into the sorted details of all of that, but the grand jury is investigating whether or not there were hush money payments made, which were then claimed on the tax returns of the president as legal expenses in his business records. The grand jury wants to get a look again at tax returns, but also related financial records for something like eight years. So these are really two similar, but really quite different cases. And I think what's significant about them is that both of them are asking third parties for materials related to the president ⁠— not actually asking for those materials from the president himself.

David Stewart 4:24

Now, as you mentioned, President Trump is the first president since Richard Nixon, for whom we do not have tax return information. Do we get any clearer sense of the reasoning from President Trump and the administration about why these records shouldn't be turned over?

Joseph Thorndike 4:38

Yes, and maybe there's unspoken stuff going on as well. But let's take the second one first. In this grand jury case, the president's lawyer has essentially argued that presidents enjoy temporary immunity from criminal investigation, let alone criminal prosecution, during their term in office. And this is a pretty sweeping claim, right? And the various courts that have looked at this over the last year or so have brought up this famous thing about, "I could shoot someone on Fifth Avenue and no one would hold me responsible." You know that whole claim? They've asked that, you know, does that really mean that you can't investigate the president if he shoots someone in the middle of Fifth Avenue? And the answer to that from the president's lawyers is essentially, yes. You can't investigate that claim. You certainly can't prosecute. You can't even really look into it while the president is the president still. They also argue that the document requests tend to be too burdensome for the president, too much to ask of a sitting president, distracting him from his duty . So, that's one set of arguments for why he can't release his returns to the grand jury. As far as the congressional requests go, this tends to hinge on the question of legitimate legislative purpose. The president and his lawyers argue that these requests from Congress are essentially a form of harassment, that Congress doesn't have any legitimate reason to ask for this material, and that they're just trying to get in the president's head to bother him to disrupt his work, that this is harassment, and it is not part of what Congress has any legitimate right to do. And it really all then comes down to this question of, "What is a legitimate legislative purpose? And do we need to protect the president from sort of excessive zeal or just like partisan harassment on the part of Congress?" And so, that is what the president's lawyers are claiming, and that is really sort of what the argument's hinged on.

David Stewart 6:13

Now , is there any sort of historical precedent for this argument of presidential immunity from investigation?

Joseph Thorndike 6:19

Well, there is. There are two cases that sort of loom large in this. And the first is about President Nixon, although not about his tax returns. Although President Nixon did have quite a story around his tax returns, we can tell that story some other time. This was about the Watergate tapes. When President Nixon was required by the Supreme Court in an unanimous decision to hand over the Watergate tapes in response to a subpoena. That's one significant one. The other one was the Paula Jones sexual harassment civil litigation that Bill Clinton faced as president, when Bill Clinton was forced to sit for a deposition. And what the argument is that think it's disruptive for a president to have to hand over documents, think about how much more disruptive a deposition is. And in any case, they're not actually asking the president to do anything right now. They're asking his accountants and his financial advisors to do some work. The president has sort of jumped into this case even though he's not a party to the subpoena in this New York grand jury case. He sort of jumped in to try to block it, but it's not actually requiring any work of him. It's actually requiring an effort on the part of the accountants. So, these two previous cases do seem to bear directly on this. They were unanimous cases. A lot of people feel like this is a pretty high hurdle that Trump is trying to clear here. You know that the Supreme Court has a record of being deferential to these sorts of requests by Congress and by grand juries. And it's also true in the last year or so, these cases have been looked at by a number of federal courts, including district courts and courts of appeals, and all of them have ruled against the president. So, this is not an easy argument to make in either case for the president, although, the justices did seem to find some light between these two arguments. Going into it, and a bunch of people thought, "Well, this is going to be a slam dunk. There's no question that the president is going to lose these and he's going to lose them both." But actually the justices seemed to be signaling or you know, who knows, right? It's like reading tea leaves. But a lot of people think that what they could see was the court signaling that they might offer a split decision on these two cases, and grant the one from the grand jury. Agree with the grand jury and force Trump's advisers to hand over materials to the grand jury, but in some way, not give Congress what they're looking for, at least not right away. They could send it back to the lower courts. They could simply say no. There are a variety of options. But that they would offer some kind of a split decision here between the two cases.

David Stewart 8:35

So what arguments are the plaintiffs raising in order to try and get access to these? I would assume they're bringing up those two cases, as you mentioned. Beyond that, what arguments are they making? The congressional argument is simply that the lawyers for Congress say that Congress has the constitutional authority to issue subpoenas. If it's that subpoena is related to a valid legislative purpose. And that if it is, what that requires is that the information its seeking will inform Congress on the subject on which legislation could be enacted. And they say that that describes what they're seeking, that Congress has that authority and this is a legitimate authority really beyond challenge.

Joseph Thorndike 9:13

In truth, the courts have been deferential to Congress's investigatory powers for the long course of U.S. history. And that they simply believe that there's not much argument here. In the case of the grand jury decision, the district attorney for New York has argued that it's a settled issue. I think what he said was this court has long recognized that a sitting president may be subject to a subpoena in a criminal proceeding. In this case, they're actually saying the subpoena that is directed at the president's third party is clearly legitimate. It is really within bounds, so they just feel like there's just no question a grand jury is having the authority to issue this kind of subpoena, even for a president's records and that Congress knows as well. Really, it just comes down to this question of whether the president has special immunities or privileges while sitting as president . And that's the question the court's ultimately going to have to decide.

10:02

Now, if the court does decide against the congressional subpoenas, does that have implications on the powers of Congress going forward?

Joseph Thorndike 10:08

I wouldn't say ⁠— I think reasonable people can disagree about this. Right? It's interesting to see that people are also looking at the court and trying to figure out if the people who we think of as conservative justices are lining up where they're supposed to line up. And whether the liberals are lining up where they're supposed to line up, and by and large they often do fall into the groupings that you would expect. But in this case, on the subject of those congressional subpoenas, there was actually a little bit of weirdness going on. Justice Stephen Breyer ⁠— definitely not thought of as one of the conservatives on the court ⁠— expressed some concern about Congress harassing the president. And that in this case, he's not worried so much about the authority of Congress going forward, as in the freedom of the president to operate effectively going forward. You know , I think that it's reasonable to worry that a Congress might choose to harass a president by peppering them constantly with document requests, subpoenas of one sort or another. And on the other hand, if you simply say Congress doesn't have the authority to do that sort of thing because it infringes on the president's constitutional rights and constitutional authority and gets in the way of the execution of his office, well that leaves the president without very much oversight at all. And that's a concern that certainly restricts Congress's role in our government. But it's also just a little bit scary to have a branch of government without adequate oversight. I mean, personally as a historian, my feeling is sort of like if what we're worried about is Congress harassing a president, we should have been worried about that then for about 200 years. Because Congress has been harassing presidents for a long, long time, and presidents by and large seem able to hack. They seem to find ways to get their work done while asking their subordinates to also respond to congressional subpoenas. It's not like you're being hauled up in front of Congress and having to testify. That's not the issue here. So personally, I'm sympathetic to the idea that the branches need oversight of one another, and that Congress has limited arsenal sometimes here, and that they need this authority to make requests and demand documents from the president. But again, as I said, reasonable people can disagree. I think that it is a balancing act and that is a difficult question for the court at all times. And they're trying to find what the right balance is here between protecting the president's prerogatives as the president and protecting Congress's oversight authority. I don't think anyone knows exactly where that line gets drawn.

David Stewart 12:14

As you mentioned, Congresses have been making requests to the presidents since the beginning. Is there any precedent for something like this where it's seeking personal records?

Joseph Thorndike 12:23

That's a good question actually that I'm not sure I know the answer to.

12:25

Perfectly fair.

Joseph Thorndike 12:26

I'm not aware of subpoenas for presidential records. I'm not sure I can answer this question definitively. I mean, I know that presidents have been investigated for their personal behavior. And when Nixon was investigated for his tax returns, President Nixon voluntarily delivered his tax returns to Congress so that they could investigate them, but Congress also requested additional material from the IRS while doing that investigation. I can't speak authoritatively to all investigations present in their personal lives.

David Stewart 12:55

Well beyond the two cases in front of the Supreme Court right now, there's other challenges trying to seek President Trump's tax returns, correct?

Joseph Thorndike 13:02

Yeah. There's another case. This one filed by the House Ways and Means Committee, which is seeking access to the president's tax returns, I think for six years of the president's returns from the period before he was president. And they're seeking those returns from the Treasury department under the committee's authority under section 6103 of the Internal Revenue Code. One subsection of that grants the committee authority to request tax return information about specific taxpayers if it needs that information for its investigations while considering legislation, whatever else. It's a fairly broad grant of authority to the committee to request that kind of information, which is in general not information divulged to anyone. Right? A tax return information is very tightly controlled. But the revenue committees in each house of Congress ⁠— Ways and Means, and Finance ⁠— have a very broad grant of authority to ask for tax reform information when they need it to conduct their business. And the Treasury department has said no to that request, arguing that it serves no legitimate legislative purpose. That it is political and partisan in nature, and so that the department is not required by the section 6103 to hand it over. And that in fact the department is bound to not hand it over because it's also required to protect taxpayer information from unauthorized disclosure. So that case, that was initially a request to the Treasury department. That too has become a legal case. It's currently pending, but it is not really moving forward. It's sort of on hold for a while. It seems unlikely that it's going to be decided or even move forward very far before the election occurs and that may change what's going on. There may be a different president. There may be a different House of Representatives. There certainly will be a different Congress after this, so we don't know. But that case is not part of what was decided or was argued most recently .

David Stewart 14:44

Turning back to those cases, I assume we're expecting a decision sometime before November. Do you expect this decision to have any effect on the upcoming election?

Joseph Thorndike 14:52

Who really knows, right? What's going to affect the election ? Here's an interesting thing about these cases. President Trump has very clearly demonstrated that he is reluctant to have his tax returns become a matter of public record. Every president since Richard Nixon has had their tax returns released to the public, except for Gerald Ford. That's a weirdness we don't need to get into. But since then, Carter onward, every president has released the returns. President Trump said he would, has then changed his mind, hasn't done it, clearly doesn't want to do it. Well, one thing that's interesting about these sets of cases here, is that if the court decides that the tax return and financial material must be released to the grand jury, that material will probably never see the light of day again. Right? It will probably not become a part of the public record because grand jury proceedings are secret. So the court can require that and not in the process throw a grenade into the middle of the election, which is probably fairly appealing for the court, I would imagine. On the other hand, if they decide in favor of the congressional committees that they also have rights to this material, it's actually quite likely that that material would make its way into the public record, and that maybe would be more of an explosive event. So that being said, we can see why the court might choose to split its decision for pragmatic reasons in that sense. But that being said, it's not clear to me that the president's tax returns are this super explosive thing that's going to like completely upend the election. This has been debated for a long time. And personally as someone who believes in disclosure and who believes in this tradition of presidential tax disclosure, I wish very much that President Trump would choose to release his tax returns. We don't need to go down that road. But I do think that people who believe that releasing these tax returns is somehow going to change the world, that the politics of America are going to be changed by the release of these returns, I'm dubious about that. So, I'm not convinced that however the court decides on these cases, it's really going to be a huge shift in the political landscape. I mean, we have plenty of stuff going on in national politics right now. Anything besides the current economic situation and the pandemic is likely to be just a blip on the radar. It's just all been overwhelmed. So I just don't think that this carries the same political weight that it once did or that some people still think that it does. I just don't. I'm not convinced.

17:04

Well, that's fair enough. Joe, thank you for being here.

Joseph Thorndike 17:06

It's been my pleasure.

David Stewart 17:09

And now, coming attractions. Each week we highlight new and interesting commentary in our magazine. Joining me now from her home is Content and Acquisitions Manager Faye McCray. Faye, what will you have for

Coming Attractions with Faye McCray

David Stewart 17:19

us?

Faye McCray 17:19

Thank you, Dave. In Tax Notes Federal, Tara Ferris, Justin O’Brien, and Matthew Blum examine the information reporting requirements that the recipients of CARES Act relief and PPP loans should comply with. Jason Schwartz describes the pitfalls that investors may face when acquiring a collateralized loan obligation’s equity interests. In Tax Notes State, Burnet Maybank III, Rick Reames III, and Ray Stevens discuss the variety of results from cases on sales taxation of bundled transactions in South Carolina. Timothy Gustafson and Annie Rothschild discuss the California Franchise Tax Board’s legal authority to toll the statute of limitations and other statutory deadlines during the COVID-19 emergency. In Tax Notes International, Ibarra and Jorge Ramón Galland discuss Mexico’s new regime for taxing digital services that takes effect June 1. On the Opinions page, Marie Sapirie writes that a carbon tax is back on the table because of the economic damage caused by the COVID-19 pandemic, but argues that it’s still as regressive as ever

David Stewart 18:27

You can read all that and a lot more in the pages of Tax Notes Federal, State, and International. That's it for this week. You can follow me online at @TaxStew, that's S-T-E-W. And be sure to follow @TaxNotes for all things tax. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.