Judge Signals Support for Democrats to Seek Trump’s Tax Returns

(Bloomberg) -- A federal judge indicated he would allow House Democrats to proceed with a lawsuit that seeks to obtain President Donald Trump's tax returns from the Treasury Department.

“Congress has been subpoenaing for a long time and the executive has been complying for a long time,” U.S. District Judge Trevor McFadden, who was appointed by Trump in 2017, said in a hearing Wednesday. “There is a pretty strong line of cases there suggesting the House would have standing to bring this kind of case.”

The House Ways and Means Committee wants six years of Trump's personal and business tax returns, one of several legal battles aimed at reviewing the presidents business and personal finances, which Trump has refused to disclose, even under subpoena. The House sued for the documents in July.

QuickTake: How Trump's (Private) Tax Returns Could Become Public

The Treasury Department asked McFadden to dismiss the lawsuit, arguing that House Democrats don't have a legitimate reason for wanting the tax returns and that the court lacks jurisdiction to enforce a congressional subpoena.

James Burnham, the deputy assistant attorney general at the Justice Department, said the House should use other means -- such as appropriating funds, withholding funds or passing legislation -- as the way to negotiate an exchange of information.

There's been an “unprecedented refusal to comply with subpoenas in this administration,” said Megan Barbero, a lawyer for the House. “Bringing a civil case is a more orderly manner than sending the sergeant in arms to arrest a high-level government employee.”

IRS Review

House Ways and Means Committee Chairman Richard Neal, a Massachusetts Democrat, had said his panel needed the records to see whether the Internal Revenue Service was following its practice of auditing the president annually. Treasury Secretary Steven Mnuchin called the request a pretext for a political attack.

The president is fighting to protect his tax documents on several fronts. The U.S. Court of Appeals in Washington ruled the House Oversight Committee can get Trump's tax records from his accounting firm Mazars USA LLP. The court granted Trump a pause on the document transfer so he can appeal the case.

Lawyers for Trump have argued that the outcome of that case shouldn't affect the resolution of the dispute between Ways and Means and the Treasury Department and reiterated their desire to have this case thrown out. The House disagrees with that assessment.

The appeals court ruling “firmly establishes that federal courts can and may resolve disputes exactly like the present one, and this court should proceed to do so,” House lawyers said in a brief.

Trump also faced a legal setback on Monday, when a federal appeals court in New York refused to block the Manhattan district attorney's subpoenas for his tax records from Mazars. Jay Sekulow, a lawyer for Trump, has said the president will appeal the case to the Supreme Court.

New York Taxes

Trump also is seeking to block House Democrats from getting his New York tax returns under a new state law signed by Governor Andrew Cuomo this year. That law permits the chairman of the House and Senate congressional tax committees to request state tax records for public officials who are New York taxpayers.

Trump broke with four decades of presidential tradition in refusing to release his tax information during the 2016 election. Neal has said he received a complaint from a federal employee alleging there may have been efforts to influence the mandatory, annual audit of presidents and vice-presidents. Neal has said he is talking with House lawyers about whether to release that whistle-blower complaint.

The litigation could drag on for months, if not years. Democrats are hoping to get the tax returns before the 2020 presidential election. McFadden previously denied a request from House lawyers asking to fast-track their case.

McFadden suggested during the hearing that the two sides could resolve their dispute with some agreement on an information exchange, though that appears unlikely.

“It seems to me there is some common ground here,” the judge said.

White House Acting Chief of Staff Mick Mulvaney has said the House will “never” get the tax returns. Barbero, the House's lawyer, said the administration's repeated refusal to give the documents requires the court's intervention.

The case is Committee on Ways and Means v. U.S. Department of the Treasury, 19-cv-1974, U.S. District Court, District of Columbia (Washington).

--With assistance from Aysha Bagchi.

To contact the reporter on this story: Laura Davison in Washington at ldavison4@bloomberg.net

To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, Peter Blumberg, Steve Stroth

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