Disclosure of Donald Trump’s Tax Returns

Steve, Les and I vote in the battleground state of Pennsylvania which means we get more than our fair share of advertising on the upcoming election.  Over the past week much attention has been focused on the disclosure of three state tax returns allegedly filed by Mr. Trump.  Most of that discussion has centered on pundits seeking to interpret what the small snippet of information available in the state tax returns means about Mr. Trump’s tax liabilities 20 years ago and today.  As a procedural blog, our interest is not focused on the substance of his returns but on the procedural issues implicated by the disclosure.

Today’s guest blogger, Stu Bassin, provides insight into the federal disclosure laws that govern the disclosure by the New York Times of the returns and, to a certain extent, the disclosure of the returns by the person who mailed the returns to the New York Times.  I say to a certain extent because there may be other laws governing the individual relating to how the information was obtained – something we do not know.

While the federal laws that Stu discusses provide a framework for thinking about the issue, the returns that were disclosed were state tax returns of three states, New York, New Jersey and Connecticut.  Neither we nor Stu practice in those states and we are not prepared to write opinions on the applications of the laws of those states to this situation.  You can find here, the comments on this subject provided by Slate which states that the disclosure does not violate the laws of the three states involved.  We know we have readers from the states involved and welcome comments that address the implications of the disclosure vis a vis the laws of those states.  Having persons disclose information in this fashion seems to be more popular today than in the past.  If current laws do not address this type of disclosure, the disclosure of Mr. Trump’s returns raises the issue of whether the federal or state laws should address this type of disclosure with civil or criminal penalties or whether the matter is one between the person making the disclosure and the person whose information is disclosed.

While we may wish that Mr. Trump would disclose his tax returns for whatever benefit we would derive from such disclosure, the disclosure of his returns, even 20 year old state returns which provide a basis for more speculation than true knowledge, also leaves us wondering how the system should treat the making public of someone’s returns who wants them to remain private and who filed them with that expectation.  Keith

Last week, the New York Times published excerpts from Donald Trump’s 1995 tax returns.  Soon thereafter, Mr. Trump’s spokesmen charged that the Times violated federal law by illegally disclosing Mr. Trump’s returns.  Invoking the First Amendment, the Times defended the publication.  Which side correctly read the tax law?

The public generally believes that federal tax returns are confidential and that disclosure of a taxpayer’s return or return information is illegal.  Indeed, Code Section 6103(a) provides that returns and return information are “confidential” and that government employees are prohibited from disclosing returns and return information.  Section 7431 authorizes civil damage claims for unauthorized disclosures and Section 7213 establishes criminal penalties for unauthorized disclosures.

Those general principles are qualified, however, by the specific language of the statute.  Section 6103(b) defines “return” as those returns filed with the Service.  Distinguishing between the signed return formally filed with the Service and other copies of the return, the courts have ruled that, when a government employee obtains a copy of a taxpayer’s Form 1040 from a source other than the Service, that tax form is not protected by Section 6103.  For example, where naval investigators obtained a copy of a return from a briefcase stored in the taxpayer’s government workspace, the Ninth Circuit held that Section 6103 did not apply because the return was not obtained from the Service.  See Stokwitz v. United States, 831 F.2d 893 (9th Cir.1987), cert. denied, 485 U.S. 1033 (1988).   Copies of returns obtained from the taxpayer’s accountant or through a grand jury subpoena are likewise not protected.

Similarly, the statutory language of the Section 6103 applies only to disclosures by federal employees and state employees.  Similar limiting language can be found in the statutes authorizing civil suits for unlawful disclosure and imposing criminal sanctions for unlawful disclosures.   The statutes simply do not reach publications of returns by persons other than government employee, such as the Times.

Section 6103 is not implicated by publication of Mr. Trump’s returns unless he can establish that the published actually came from the Service.  That issue of proof is complicated by the fact that a laundry list of regulatory agencies, lenders, and litigants, including Mr. Trump’s former spouses (and their representatives) have probably obtained copies of the returns during the past two decades.  Because the Times’ documents did not bear any IRS file-stamps and the fact that the disclosures included state tax returns which would not have been filed with the Service strongly suggests that the source was not the IRS.

Bottom line.   Section 6103 almost surely did not protect Mr. Trump’s returns and he has no wrongful disclosure claim against the Times or anyone else.