Congress’ grab for Trump tax returns previews new era of weaponized IRS

House Democrats’ legal fight to get former President Donald Trump’s tax records threatens to open a Pandora’s box that empowers lawmakers to weaponize the IRS and gain limitless access to political opponents’ financial data.

Democrats on the House Ways and Means Committee are asking the Supreme Court to grant them unlimited authority to compel the IRS to provide taxpayer information. That could allow lawmakers to use tax returns as ammunition to inflict political wounds on their opponents.

Court watchers and tax experts warn that it would mean open season against anyone the party running the House doesn’t like, including rival politicians, civil rights leaders or judges.

“We should be worried about all of this. Taxpayers need to know that if they are providing stuff to the IRS on Thursday, it won’t be on the front page of The New York Times on Friday,” said Joe Bishop-Henchman, executive vice president of the National Taxpayers Union Foundation, a conservative taxpayer advocacy group.

Under a century-old provision in the U.S. tax code, the chairs of Congress’ tax-writing committees, including the Ways and Means Committee, have the authority to order the IRS to turn over financial information on any taxpayer. The provision says the IRS “shall” furnish material upon request to the committee.

The provision is otherwise poorly defined, and its limits are self-imposed. It simply requires the committee to vaguely prove it has a valid legislative purpose for requesting tax documents.

The House Ways and Means Committee and Senate Finance Committee frequently use this provision to study the impact of tax policies on taxpayers. Under the provision, taxpayers are not notified if Congress asks for their financial information.

Although tax documents requested by Congress are supposed to remain confidential, Capitol Hill is notoriously leaky and the Department of Justice has had little appetite to prosecute suspected leakers.

The IRS has a poor track record of staying out of politics, which adds to concerns about strengthening Congress’ power to access Americans’ tax returns.

The IRS admitted in 2013, during the Obama administration, that it had been aggressively scrutinizing conservative groups with names such as “Tea Party” and “Patriots.” It also targeted some liberal groups but in significantly smaller numbers.

The IRS stepped up the scrutiny in 2010 as applications for tax-exempt status surged. Tea party groups were organizing and sought to be labeled as 501(c)(3) nonprofits so donors could get tax write-offs.

In 2017, the Trump administration reached two “substantial financial settlements” with nearly 500 conservative groups. As part of the settlements, the IRS apologized for mistreating the organizations.

Last year, ProPublica obtained a vast trove of IRS data on the tax returns of some of the nation’s wealthiest people, including Carl Icahn, Michael Bloomberg, Jeff Bezos and George Soros.

Republicans said IRS staffers leaked the confidential information to push for higher taxes on the wealthy. Democrats blamed weakened information technology and fewer safeguards and used the leak to argue for more IRS funding.

ProPublica insisted it didn’t know the source of the information and said it had no evidence that IRS staffers released it.

In 2019, The New York Times obtained copies of Mr. Trump’s tax returns from 1985 to 1994 and published them in an article that won a Pulitzer Prize. Mr. Trump sued the paper and accused his niece, Mary Trump, of leaking the documents to the paper.

Andy Grewal, a professor of income tax law at the University of Iowa, said those incidents underscore the dangers of giving lawmakers unfettered access to individual tax returns.

“This really depends on how much trust you have in public officials,” Mr. Grewal said. “Most congressmen and congresswomen don’t release their returns, and under this power, a chairman can request the tax returns of all their opponents and leak them in one big dump.”

Mr. Bishop-Henchman of the National Taxpayers Union Foundation said that publicly releasing tax returns could put more pressure on the IRS. He described a scenario in which IRS officials give harsher audits to high-profile people, including presidential candidates, out of fear of being criticized for leniency on taxpayers.

Trump fight

Although congressional requests for taxpayer information are shrouded in secrecy, there appears to be no precedent for lawmakers asking for a president’s tax returns until 2019. That was when House Ways and Means Committee Chairman Richard E. Neal, Massachusetts Democrat, subpoenaed the IRS to hand over Mr. Trump’s personal and business tax records from 2015 through 2020.

Mr. Neal said the documents were necessary for a valid investigative purpose: to improve the IRS process for auditing presidents.

Unlike other recent presidents, Mr. Trump refused to make his tax returns public and turned to a federal court to stop the IRS from handing over the documents. It kicked off a three-year court battle that landed in the Supreme Court last week.

The high court quickly issued a temporary order blocking Congress from obtaining Mr. Trump’s tax returns until he formally asks the court to stop their release. The Ways and Means Committee has until Thursday to respond to Mr. Trump’s application for the delay.

Mr. Trump asked the justices to reconsider an August decision by a three-judge panel on the U.S. Court of Appeals for the D.C. Circuit. The panel, which included two judges appointed by Republican presidents, ruled that the committee is entitled by federal law to review anyone’s taxes to consider legislation.

The appellate court ruled that the committee identified a “legitimate legislative purpose” for requesting Mr. Trump’s taxes. The judges said fears of political motivations were unfounded and that it was rare for a member of Congress to pursue a legislative purpose “without considering the political implications.”

Mr. Neal hailed the ruling as evidence that “the law has always been on our side.” He promised that his committee’s investigation would begin as soon as possible.

Rep. Kevin Brady of Texas, the top Republican on the Ways and Means Committee, said the ruling created “a dangerous new political battleground” where “no citizen is safe from the majority party.”

Legal experts say there are plenty of reasons to be skeptical of Democrats’ claims that they are not targeting Mr. Trump.

Many of Mr. Trump’s tax documents are already in the hands of The New York Times, so it would be easier for the committee to subpoena the paper for the materials than engage in a protracted legal fight with the former president.

The committee has requested Mr. Trump’s tax documents only for its inquiry into how the IRS audits presidents. It did not ask the IRS for the tax returns of President Biden or his other recent predecessors.

Mr. Neal and the Ways and Means Committee did not respond to requests for comment. 

The committee’s reason for wanting the documents was never good, said Josh Blackman, who teaches constitutional law at South Texas College of Law.

“It creates the risk that Congress can start making all kinds of rationale to obtain potentially compromising personal financial documents,” he said. 

Court watchers worry that the legal dispute may never be resolved at the Supreme Court level. If that happens, the appellate court ruling would stand, giving Congress unlimited access to taxpayer documents.

The Supreme Court ruled in 2020 that Mr. Trump must turn over his business and tax records to Manhattan District Attorney Cyrus Vance Jr., who was investigating the president’s business dealings.

In that case, the court ruled that a president is not immune from state criminal subpoenas. The decision was narrow and did not define a legitimate investigative purpose.

Congress’ case also doesn’t define the extent of congressional power. If Republicans win control of Congress in elections Tuesday, they likely will drop the dispute if it is unresolved by the time they take over in January.

Court watchers say Supreme Court clarification is critical.

“Right now, the statute is very broad, so there are no limitations,” Mr. Bishop-Henchman said. “There are cases that if a request could cause harm, the IRS doesn’t need to honor the request, but that is not written into the law. Congress and the court need to take a second look at this law when it is less heated.”