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Happy ‘PRESIDENTIAL HARASSMENT’ Day! [UPDATE-5]

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[NB: Updates at bottom of post. /~Rayne]

We’ve been waiting too long for this day.

Not this day:

But this day:

UPDATE-1 — 11:05 a.m. ET —

A reminder not to get too excited about tax documents being produced before November:

And Rep. Ted Lieu continues to press for expanded inherent contempt powers:

UPDATE-2 — 11:43 a.m. ET —

Could Trump be indicted by Vance’s office before November?

Fingers crossed.

UPDATE-3 — 11:58 a.m. ET —

Yup…and a specific reason why we can’t expect a speedy resolution.

This will have to work its way through the system.

UPDATE-4 — 2:08 p.m. ET —

Rep. Adam Schiff’s take on SCOTUS’ decision:

Another important SCOTUS decision today, which should not be lost to the hubbub over Trump v. Vance:

In a 5-4 decision, the Muscogee tribe of eastern Oklahoma has won in McGirt v. Oklahoma. Justice Gorsuch wrote the majority opinion.

JUSTICE GORSUCH delivered the opinion of the Court.
On the far end of the Trail of Tears was a promise. Forced to leave their ancestral lands in Georgia and Alabama, the Creek Nation received assurances that their new lands in the West would be secure forever. In exchange for ceding “all their land, East of the Mississippi river,” the U. S. government agreed by treaty that “[t]he Creek country west of the Mississippi shall be solemnly guarantied to the Creek Indians.” Treaty With the Creeks, Arts. I, XIV, Mar. 24, 1832, 7 Stat. 366, 368 (1832 Treaty). Both parties settled on boundary lines for a new and “permanent home to the whole Creek nation,” located in what is now Oklahoma. Treaty With the Creeks, preamble, Feb. 14, 1833, 7 Stat.418 (1833 Treaty). The government further promised that “[no] State or Territory [shall] ever have a right to pass laws for the government of such Indians, but they shall be allowed to govern themselves.” 1832 Treaty, Art. XIV, 7 Stat. 368.
Today we are asked whether the land these treaties promised remains an Indian reservation for purposes of federal criminal law. Because Congress has not said otherwise, we hold the government to its word.

The opinion is filled with remarkable little bites which have pointed teeth, like the first sentence in Sect. II:

Start with what should be obvious: Congress established a reservation for the Creeks. In a series of treaties, Congress not only “solemnly guarantied” the land but also “establish[ed] boundary lines which will secure a country and permanent home to the whole Creek Nation of Indians.” 1832 Treaty, Art. XIV, 7 Stat. 368; 1833 Treaty, preamble, 7 Stat. 418. …

Right there, in the text of the law, even.

And then this closing in the last graf of the majority opinion — whew, this seems like a message to another audience altogether:

…If Congress wishes to withdraw its promises, it must say so. Unlawful acts, performed long enough and with sufficient vigor, are never enough to amend the law. To hold otherwise would be to elevate the most brazen and longstanding injustices over the law, both rewarding wrong and failing those in the right.

This decision will likely result in a few death sentences being overturned, according to Sister Helen Prejean.

One might wonder at the impact on the ongoing threat to the Mashpee Reservation.

 
UPDATE-5 —  by Ed Walker, a very long comment

SCOTUS handed down two decisions in cases involving Trump’s tax returns: Trump v. Mazars USA, LLP, the House subpoena case, an Trump v. Vance, the New York State subpoena case. Here are some preliminary thoughts.

1. In both cases SCOTUS is forced to pretend that Trump is a normal President. This is from Vance, discussing Clinton v. Jones, the case about Clinton’s sex life.

The Court recognized that Presidents constantly face myriad demands on their attention, “some private, some political, and some as a result of official duty.” Id., at 705, n. 40. But, the Court concluded, “[w]hile such distractions may be vexing to those subjected to them, they do not ordinarily implicate constitutional . . . concerns.” Ibid.

No one thinks Trump is normal. His only time constraint is his TV schedule, and his need to spend quality time with his friends at Fox News. So, when reading these cases we have to remember that they apply to normal presidents of both parties, mostly, at least we hope so.

2. In Mazars, Roberts says that Congress can only issue subpoenas in pursuit of information needed for legislative purposes. Therefore, the only issue is whether this subpoena exceeds the authority of the House, considering that it makes demands on a different branch of government. SCOTUS makes up some considerations for balancing the need for information with the demands on the President. This makes sense in the normal run of things. As the Courts says, prior demands have been resolved without the courts. However a normal President doesn’t hide his tax returns, and doesn’t have significant business dealings with traditional enemies of the US.

This case exposes the Democrats as failures. They had information suggesting that Trump or his businesses or both had extensive business dealings with Russians, including some connected to Putin, and had reason to suspect that those relationships affected his official actions towards Russia. Two obvious points: Trump ignored and denied Russian meddling in US elections; and Mike Flynn explicit kowtowed to Putin over sanctions. Why wasn’t this the explicit rationale for the subpoena for his transactions with Deutsche Bank, which is thought to be the vehicle for those transactions. The grounds would be impeachment, which is a power solely reserved for Congress, and one in which the role of SCOTUS would be severely reduced.

This was a specific decision by Speaker Pelosi and the rest of the House Leadership Gerontocracy. Pelosi resisted demands for an investigation of the lies of the Bush/Cheney administration that led to the sickening attack on Iraq. She resisted any effort at serious investigation of Trump, and had to be forced into investigating the extortion of Ukraine.

3. The underlying problem in Mazars is the weakness of Congress. Trump and his contemptible lackeys refuse to cooperate with Congress. Bill Barr thinks the President has absolute authority, and can ignore Congress.

The Constitution provides that each house sets its own rules. Each house could easily set up its own rules about subpoenas and enforcement of subpoenas. One possibility would be that an administrative official who refused to comply with a subpoena could be held in contempt, and then that person and all underlings would lose all authority to act under any law or regulation.

4. The delay issue in Vance is similar. We’ve wasted a year on arguments that had no possibility of success except in the minds of Presidential absolutists. Now we can expect Trump to move to quash the Vance subpoena in New York state courts, starting the whole thing over. Neal Katyal disagrees; he thinks the matter can be settled quickly in New York courts. We’ll see.

5. Trump has damaged America and Americans while this case stumbled along. One obvious remedy is a law that Congressional subpoenas are deemed enforceable by Congress unless there is a final court decision within a short period, say two months. Current court rules ignore the speed with which legal matters can be handled with the internet. Legal research is easier and quicker, filing is trivial, and video-conferencing solves all travel and scheduling problems. The rest of us have had to speed up. So should Courts.

Day 33: Happy Some Saint’s Day

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I know, it’s St. Patrick’s Day, not just any saint but the patron saint of Ireland. It’s certainly not St. Trump’s Day, that’s for sure.

Trump’s budget proposal is the furthest thing from saintly — cutting federal funding to the Community Development Block Grant (CDBG) is just one disgusting example. CDBG provides grants to the Meals on Wheels (MoW) program, which feeds the home-ridden elderly and disabled as well as kids in after-school programs. Office of Management and Budget Director Mick Mulvaney says MoW is “not showing any results.” No more fishes and loaves for you, sickly/old/poor people, if Congress goes along with this nonsense. I guess your desiccated, malnourished corpses are the kind of results this administration wants to see.

According to St. Patrick’s ‘Confessio‘ — an autobiography-cum-confession — he overcame kidnapping from Scotland, enslavement by the Irish, and eventually converted Irish to Catholicism. In contrast, Trump was born with a silver spoon and treated his fellow man (and some family) like crap throughout his lifetime. Definitely not saintly. And definitely not up to converting those who aren’t already his hardcore faithful adherents.

Stuff of the Irish:

Irish PM Enda Kenny visits Trump and asks for leniency for illegal Irish aliens — Let’s be frank about this issue: Trump’s probably fine with them (meaning Bannon is fine with them, too) because these aliens are probably white and Christian. Got to give it to PM Kenny, though, for this nice bit of snark:

“They say the Irish have the capacity to change everything…I just saw the president of the United States read from his script, entirely.”

Wonder if Trump was ballsy enough to go for an other conflict of interest and complain about the sea wall he wants for his Doobeg golf course resort.

British Brexit secretary David Davis says border checks between North Ireland and Ireland possible post-Brexit — He did qualify them as “light” customs checks, saying,

“There are already customs checks between Northern Ireland and the Republic of Ireland because there are excise differences, but they are done in a very light way. … There would be customs checks, [but] that does not mean we demur from our position of wanting to have a very light border, no hard border.”

But wait…what do the Irish think of this?

Sinn Féin MEP tells Theresa May Brexit border checks in Ireland can go ‘where the sun don’t shine’ — And there it is. I didn’t even paraphrase that hed, that’s exactly what The Irish Post wrote. Here’s exactly what MEP Martina Anderson said:

“Theresa, your notion of a border, hard and soft, stick it where the sun doesn’t shine ‘cos you’re not putting it in Ireland.”

Ouch. No mincing words there.

Women won largest number of seats ever in North Ireland’s assembly election — Sinn Féin leads in gender parity as women represent 41% of its Member of the Legislative Assembly. Between the surge of women in NI’s National Assembly and the increased weighting of representation by Sinn Féin in both NI and Ireland’s National Parliament, the reaction toward the UK and Brexit will be quite different from expectations nine months ago.

Banks may be moving to Dublin from London because of Brexit — This report says Ireland is surprised; I don’t know why, given the amount of business conducted in English language in Dublin as compared to any other location like Paris, Brussels, or Frankfurt. Ireland has been a tax haven and a center for both insurance and technology for a couple decades, too. Perhaps Ireland ought to be more lenient toward educated illegal aliens from the U.S. if it’s looking to staff up its financial sector quickly.

Op-ed: ‘Another day, another Brexit lie exposed’ — Theresa May has only increased Irish sympathies for Scotland with her rejection of a second independence referendum, as if all the other Brexit fail wasn’t enough. Could this animus be enough to unite Ireland, but against Britain and its “Tory public schoolboys”?

That’s a wrap on this work week and Day 33 in our countdown to Tax Day. Don’t drink green beer. Just don’t.

Day 34: Frankly, We Have a Lot Right Now

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Still shaking my head over Trump’s interview with Tucker Carlson. While asked about evidence supporting Trump’s claim that President Obama wiretapped him, Trump said, “Frankly, we have a lot right now.”

Bring it, buddy. And with less bullshit because frankly, we have a lot right now.

While you’re at it, bring your tax returns as evidence you’re not violating the Emoluments Clause or in bed with Russia.

Reminder: you’ve got 34 days until we expect to see a 2016 income tax return.

Non-Tax Return Stuff:

UK’s PM Theresa May denies Indy Ref 2.0 before Brexit — When you need a break from American leadership stupidity, just take a look at May. Here’s an unforced error of hubris and hypocrisy; telling the Scots they can’t have a vote to leave the UK after the UK had a vote to leave the EU is just asking for the Scots to hold a referendum on their own. Nicola Sturgeon has already rebutted, calling May’s block “undemocratic.”

Fed Chair Yellen said, “The data have not notably strengthened” after rate hike — Between increases in energy and health costs not offset by decreases in food and apparel costs, the consumer price index rose 2.7% over the last 12 months. Private sector compensation only rose 2.2% over the same period. Consumer spending has been lackluster and businesses are not investing. The post-crash boom is petering out and nothing this administration or Congress is doing will help. A billionaire can only buy so many condos and yachts to keep the economy afloat, and workers can’t buy much on their chicken feed minimum wage at part-time jobs while they have to budget for increasing health care expenses. (I should point out here that the CPI detailed report won’t be produced after June 2017 thanks to Trump’s diktats. How convenient.)

Trump tells Michigan auto workers he’s fighting for their jobs — Sure he is. This guy is fricking clueless about manufacturing (ex: Carrier in Indiana) including the automotive industry. Detroit’s cheese is being eaten by entirely new entrants who don’t worry about emissions standards and whose mileage concerns are of an entirely different nature. After decades of Detroit’s inadequate R&D sunk into battery-powered vehicles combined with vacillating leadership on the future of fossil-fueled combustion engines, Michigan’s auto industry is now battling for market share with companies like Tesla, while Tesla is already seeing new competition emerge like Lucid Motors. Tesla and Lucid are both located in the U.S. Meanwhile, Trump’s budget plans revealed today are a shiv in Michigan’s back; why live and work here if the lakes aren’t clean, schools are underfunded, mass transit is suppressed?

Dispatcher punished in Tamir Rice case — What a bunch of crap. The officer who had the ultimate final and mortal power in Tamir Rice’s case — shooting Rice in seconds after arrival at the playground — should have been criminally prosecuted. Meanwhile, a dispatcher who never saw the victim or the scene of the shooting was suspended.

I feel awful now, after reading so much about Trump and writing about that last piece. Treat this like an open thread though I can’t look in again until I do something positive to get the Trumpish off me.

Is Trump’s $915 Million Tax Loss Connected to an Exotic Tax Shelter?

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293015Guest Post by Robert J. Lord

The news is out about Donald Trump’s $915 million of tax losses.

The real question is whether those losses were real economic losses, or just a tax artifice created by a clever planner.

Real estate developers like Trump benefit tax-wise from provisions that allow them to claim losses attributable to borrowed money. But those provisions are not a complete giveaway if the borrowing ultimately is repaid.

If the borrowing is not repaid, as we know to be the case of Trump’s casino debt, the tax law generally requires the person whose debt is forgiven to recognize income, which typically erases the tax benefit of those earlier losses. Even in those situations where debt forgiveness does not result in income, the borrower’s tax attributes are reduced by the amount of debt forgiven, and unused losses are at the top of the list of those tax attributes to be trimmed.

Could Trump have figured out how to have his cake and eat it too – that is, keep his losses for tax purposes, even while being excused from having to repay the borrowed money on which those losses were based? Yes, it is possible!

One possibility is that Trump’s lenders agreed not to expressly forgive Trump’s debt, but instead to sell their rights as lender for pennies on the dollar to an individual or entity close to Trump, such that it would never be enforced. This strategy is referred to as “parking” the debt. Some tax professionals like John Hempton at Bronte Capital and commentators like Josh Marshall at TPM have speculated this is the artifice Trump and his advisors engineered to preserve Trump’s huge losses and thus shelter close to a billion of future income from tax.

Does the tax law permit the parking of debt that effectively has been forgiven? Certainly not by design. If Trump parked the debt with a close relative, the tax code would have treated it as if the debt was forgiven.

Trump could have parked the debt with someone not so closely related or with a friend, but not if had an agreement that said person would not enforce the debt. Which means he’d be at severe risk, as the person could turn on him and enforce the debt. That would have been almost a billion dollar risk. It is hard to imagine Trump, his accountants and attorneys permitting that.

Could Trump have parked the debt with a corporation, trust or partnership he controlled? In a word, yes. Congress tried to prevent debtors from circumventing the law this way as well, but they inadvertently created a small crack in the law, which Trump just may have been able to squeeze through.

The tax code expressly identifies corporations, partnerships and trusts deemed too close to a debtor to purchase his debt without causing the debt to be deemed forgiven for tax purposes. Those rules were well written. After they were written, however, and not long before Trump faced his financial difficulties, Congress created a new type of entity for tax purposes only, the “real estate mortgage investment conduit,” or REMIC. Those rules state, in no uncertain terms, that certain partnerships, corporations and trusts become something else for tax purposes. They are expressly NOT to be treated as partnerships, corporations or trusts. Thus, unwittingly, Congress created a gaping yet little noticed hole in the rules that prevent parking debt with a controlled corporation, trust or partnership.

And Trump may have seized on Congress’ mistake.

The REMIC rules were enacted in 1986 to facilitate investment in mortgage-backed securities (yes, those securities that crashed the economy in 2008). A REMIC is a partnership, corporation or trust under the law of the state in which it is formed (usually, Delaware) that holds almost exclusively interests in mortgage debt, and satisfies a few additional statutory requirements related to the type of ownership interests (for example, corporate stock, partnership interests, or beneficial interests in a trust) it issues.

Congress anticipated that REMICs would hold entire pools of mortgage interests, but never specified a minimum number, which means a REMIC might hold only one mortgage – for example, the mortgage on a Trump casino – and still qualify. Or it could be multiple similar obligations.

A few clever tax lawyers realized that by qualifying a partnership, corporation or trust as a bastardized form of REMIC, they could circumvent the rules that prevent the parking of debt with a controlled entity to avoid debt forgiveness income.

Trump’s situation quite clearly lent itself to this exotic strategy. If he used a REMIC he controlled to purchase the mortgage debt on one or more of his casinos (and/or other properties) at a deep discount, the rules that prevent debt parking would not have applied to him.

The bottom line: Trump indeed could have used a debt parking strategy to preserve close to a billion dollars in losses for tax purposes even though he avoided the economic loss on which those tax losses were based.

Did Trump employ this strategy? Nobody knows yet, but it would explain why those losses still showed up on his tax return in 1995 and how he gamed the system for an enormous tax windfall.

The secretive and shady nature of whatever avoidance scheme Trump has used, which would clearly be on the edge of legality, even if putatively legal as Trump claims, would also very easily explain why Trump steadfastly refuses to make public any more of his tax return information.

It is also exactly why the public is entitled to see his convoluted machinations and judge for themselves his honesty. And, remember, all statutes of limitation, both criminal and civil, have long ago expired as to the 1995 and surrounding years tax returns. There is no legitimate reason whatsoever Trump cannot release them. Other than fear that what he is hiding is exposed.

Robert J. Lord, a tax lawyer and former Congressional candidate, is an associate fellow at the Institute for Policy Studies. Bob previously served as an adjunct faculty member at the Arizona State University School of Law. Bob’s work focuses on the relationship of tax law to inequality. He contributes to both the Inequality.org website and to OtherWords, the Institute’s national syndicated editorial service. Bob also is a staff member at Blog For Arizona, the leading political blog in Arizona.