To Tell the Truth is Human Events News’ press analysis series. These stories will focus on “news” being reported by either The New York Times, The Washington Post, ABC News, NBC News, or CBS News. Despite 24-hour cable broadcasts, and an untold number of internet sources, these established, mainstream platforms continue to influence the majority of American citizens and their political opinions.
The “news” generated by these press is better regarded as “opinion” crafted in a way designed to discourage skepticism and critical thought on the part of the audience. To Tell the Truth will be Human Events News’ periodic effort to help address this bias, and restore the skepticism necessary on the part of all Americans to maintain a free society.
During Tuesday night’s debate, moderator Chris Wallace asked President Trump questions regarding recent reports that he only paid $750 in personal income taxes for both the tax years 2016 and 2017. The line of questions emerged from a New York Times exposé published on September 27th, reporting that the Times had obtained copies of the President’s personal and business tax returns for more than two decades.
The implication in Wallace’s questions was that the President had engaged in some form of deliberately deceptive activity. Former Watergate Assistant Special Prosecutor Nick Ackerman has gone so far as to suggest to CNN that the President could end up in jail for tax evasion. Ackerman’s arrived at this conclusion after reading the NYT exposé—not from reading the actual tax returns. Disclosing an individual’s business or personal tax return is a violation of Section 6103 of the Internal Revenue Code. There are five exceptions to the restriction, none of which would be applicable in this instance. Despite their insistence that they need to “protect their source,” this is what likely explains why the Times has refused to release copies of the actual documents to the public.
At issue is the distinction often lost on the general public between tax “avoidance” and tax “evasion.” The former is a legal, often widely practiced means by which to structure your financial activities in an attempt to minimize your required tax payments. The latter, tax “evasion, is a deliberate effort to illegally conceal income that should rightfully be subject to taxation from the Internal Revenue Service.
Despite conjecture from Ackerman, there is no indication in the NYT reporting that suggests the President is guilty of tax evasion.
Reading a tax return, especially one as complex as the President’s given his numerous business entities, is an incredibly complex task that requires extensive technical training. (Even within the profession of accountancy, the area of tax is considered a specialty). This greatly limits what the average citizen or untrained eye can understand and conclude from the leaked documents, making the inferences and conjectures circulated by the Times potentially very powerful. For many readers, what the Times writes about these documents will be the first and last word on the issue.
There is no official mandate requiring a Presidential candidate to release their personal or business tax returns to the public. Candidates are only required to file a financial disclosure form, which then-candidate Trump complied with. Still, the President’s tax returns have been the subject of intense interest on the part of his political opponents since well before the 2016 election. There has been an ongoing effort by Congress to compel the release of the documents, as well as pressure from the Manhattan District Attorney’s office.
According to some tax experts, the Times made several assertions that are difficult or nearly impossible to make in its reporting of the Trump tax returns. Some of these conclusions suggest the acquisition of documents that should be illegal to possess; others establish a pattern of conjecture that calls into question the entire report.
For instance, the Times indicated, in one of its features about the release, that, “The financial pressure on him is increasing as hundreds of millions of dollars in loans he personally guaranteed are soon coming due.” This so-called “Revelation” from the “Trove of Trump Tax Records” seems intentionally crafted to have the reader conclude that the President faces some sort of impending financial crisis—one which might, as Trump-rival Michael Bloomberg’s publication suggest, “make him a national security threat.”
According to two tax CPAs interviewed, however, personal tax returns do not include a list of personally guaranteed business loans. Conversely, business tax returns do not include a list of people who are personally guaranteeing those loans. This fact points to the possibility that the Times also got its hands on one or more of the President’s personal financial statements (PFS).
A PFS is a detailed listing of an individual’s assets, direct liabilities, and contingent liabilities (such as loan guarantees). They are typically completed for purposes of commercial banking transactions. (Which might provide some insight as to the potential source of the leaked documents.)
The financial disclosure form that the President filed in 2016 does show liabilities, but they are shown in “ranges,” not precise amounts.
There is also an abuse of financial terms by the Times. The statement that the loans are “soon coming due” does not mean that the loans need to be repaid or that the President is at risk of financial crisis. According to Paul Fisher, former head of the Commercial Real Estate Department in the Chicago Office of McGuireWoods, LLP, current lead-partner at the Chicago-area law firm Fisher Cohen Waldman Shapiro, and a nationally respected real estate attorney, almost all commercial term loans (loans with regular monthly, or some other periodic payments), especially those involving real estate, are structured with what are referred to as “balloon payments.”
“Loans are set to mature at various intervals so that the bank has a chance to examine both the pricing of the loan and the current market conditions to decide how to proceed,” Fisher said. “Just because a loan is maturing does not mean the borrower will have to repay the loan. In fact, it is typically not the case. The loan is simply ‘renewed,’ for some additional time period, and payments resume according to the new schedule.”
Fisher goes on to add that the guarantee on large commercial real estate loans is typically not unlimited or unconditional in nature. “Typically, in sophisticated commercial real estate loans, personal guarantees are limited to incidents of fraud or stealing,” Fisher Notes. The fact that no reported actions have taken place against the President to enforce loan guarantees suggests that Trump entity debts are likely being handled as agreed.
The Times would have no way of knowing (short of commercial bankers violating bank confidentiality regulations) whether loans to Trump related entities were going to be renewed at maturity, or have a demand made for payment. The suggested “concern” within the article is simply speculation.
A highly recommended analysis of further problems with the Trump tax return disclosure can be found in a piece by Bob Anderson, published by The Federalist on October 1st.
To tell the truth, it appears that the Times is using its advantage to withhold some unknown number of typically non-public documents from public scrutiny, all for the purpose of crafting a narrative intended to malign the President. Not, as is their function as a paper of record, to present complete facts to the public for analysis.