Here's something from last night's raucous GOP debate: Donald Trump is being audited. Not just this year -- but for the past decade or more. And that could mean real cause for concern.
This week, former Republican presidential candidate Mitt Romney suggested that Trump might be hiding something by not releasing his tax returns to the public. The party front runner addressed head on the issue, saying that he can’t release them due to an ongoing audit.
“I want to release my tax returns,” Trump told CNN moderator Wolf Blitzer, “but I can’t release it while I’m under an audit.... And obviously if I’m being audited, I’m not going to release a return.”
Florida Senator Marco Rubio faces no such issues with the feared IRS (and among Republican candidates, hated).
“I have no problem releasing them,” Rubio said of his own tax returns, finally seizing favorable ground on a financial issue. “And luckily I’m not being audited this year, or last year for that matter.”
But it's not the return itself that caused the biggest dust-up in the debate, but the audit. Or, the many audits.
“I would think that would underscore the need to release those returns,” Cruz pointed out later. “If he has said something that was false and that an audit is going to find was fraudulent, the voters need to know.”
An audit raises potentially serious questions about the legitimacy of Trump's purported wealth, especially considering that it's not his first audit.
"For many years I've been audited every year. Twelve years, or something like that," Trump said at the debate. "Every year they audit me, audit me, audit me."
This raises the serious question: Did Trump come by his fortune legitimately?
Trump has always made enormous play out of his personal success as a businessman, trumpeting it as one of his key qualifications for the office that he seeks. His own vast fortune proves his competence, he claims. A dozen years of audits puts that claim into question.
"It is unusual for someone to be audited 12 years in a row," said Alex Matjanec, CEO of MyBankTracker.
Most people read an audit as immediately implicating some form of wrongdoing, but the reality is that an audit simply means that the IRS found an irregularity in a line-itemed tax return. That could indeed mean the taxpayer attempted to cheat somehow, or it could represent nothing more than good faith error or even a mistake on the part of the government.
For individuals and companies with enough wealth, this actually is a relatively routine event. Someone with Trump's net worth and diverse assets will have a very complicated tax return and, as with any system, the more moving pieces the more chance there is for error. The IRS does, in fact, wind up routinely scrutinizing the filings of particularly large taxpayers for this very reason.
What is less routine, however, is one person facing an annual audit for over a decade.
While the candidate frequently drags out the boogeyman of persecution to explain away bumps in the road, the IRS doesn't repeatedly pursue a taxpayer lightly. In a case like this the old saw comes to mind that where there's smoke there's fire.
A single audit, or even several, is in and of itself not indicative of a problem, because too many innocent things can trigger the process. However if Trump is telling the truth and the IRS has had to spend the past decade poring over his records, it means that he has been setting off alarms for a while. With each passing year the odds good faith error decreases, and that's cause for concern.
Trump has said that he can't release his tax returns until after this year's audit is complete, which is probably on the advice of counsel. If Trump's tax returns are currently under scrutiny by the IRS the last thing he wants is a few hundred million more eyes on them, especially if there turns out to be something actually wrong with the filing. Far better to be able to file an amended return and release that than to find those mistakes plastered across the headlines.
"It makes sense," Matjanec said. "He would want to ensure that the IRS has no issues with his taxes before he shares such information."
A government investigation at any level is no laughing matter. Trump may or may not have anything to hide, but he certainly has nothing to gain by releasing those documents in the middle of an ongoing investigation (not from a legal position, at least). The IRS does not waste its increasingly thin resources on frivolous investigations, and voters who are concerned with a candidate's personal finances would be right to ask what Trump has been doing to raise the appearance of impropriety that many times in a row.
To be sure, it could just be the nature of Trump's businesses.
"He's an entrepreneur," said Dan Dunn, a partner specializing in tax law with Dechert, LLP. "He's probably doing a number of different investments of different types year to year. While it's not necessarily routine for somebody to be audited that many years right in a row, given the way he has accrued his wealth and some of the turbulence he's hit by being such an entrepreneur, I can't say I'm shocked."
As well, Trump claims the many audits are attacks by his enemies.
“Nobody gets audited. I have friends that are very wealthy people. They never get audited. I get audited every year,” he said.
Though, he later called it a “routine audit," like one so many wealthy people with complicated returns file, and said he’ll release his tax returns immediately after it’s over.
Which is it?