Congressional power to Subpoena Tax Returns

The saga of the public’s interests in seeing Donald Trump’s tax returns and his interests in preventing that has been playing out for nearly four years now. After initially saying he would release his taxes he changed his story in February of 2016 stating that he couldn’t release them due to an on-going IRS audit. He’s maintained this position ever since despite the fact that the IRS said that an audit doesn’t preclude the release of his taxes and the implausibility of all his taxes being under continuous audit for four years. The dynamics of this story changed in November 2018 when the Democrats won a sweeping victory in the House of Representatives. Upon taking control of the House, the Democrats gained the power of congressional subpoenas. However, there’s been much debate lately concerning the exact nature of congress’ access to tax information. Who can get access to an individual’s tax return? Getting to the bottom of this question is the topic of this post.

This question first became an issue in the 1800s, however it wasn’t until the passage of the Sixteenth Amendment to the Constitution in 1913, which clarified the legality of an income tax, that the issue took on increased importance. Following the Sixteenth Amendment the income tax became a permanent fixture of the federal government, but initially only the President had access to tax returns. This raised concerns in Congress about the balance of power between these two branches of government.  Yet, it wasn’t until a series of scandals in the early 1920s involving the executive branch that securing congressional access to tax returns became a priority. 

The most important of these incidents was the Teapot Dome scandal. For those of you who don’t remember that day from your 10 grade U.S. History class, this scandal involved bribes being paid to the Secretary of the Interior, Albert B. Fall.  After receiving the bribes he approved oil drilling rights to the Navy petroleum reserves near a location known as Teapot Dome in Wyoming, as well as 2 locations in California. Ultimately, Secretary Fall became the first presidential cabinet member to go to prison. For Congress to perform their oversight function of the executive branch they needed the President to voluntarily give them access to needed tax returns, including those of the President himself. After initially refusing, President Harding gave into pressure and agreed to hand over the returns. Although Congress eventually got the returns, the fact that they were reliant on the President to give them the information they needed to investigate the President’s administration proved problematic.

Perhaps even more germane to our present-day situation was an investigation into Treasury Secretary Andrew Mellon. After joining the Harding administration Mellon continued to own many businesses, creating possible conflicts of interest. Mellon went on to propose tax reforms prompting congressional inquiries into how the proposed legislation would affect Sec. Mellon’s business interests. Kind of sounds familiar, doesn’t it? As a result of these concerns over Congress’ ability to investigate possible violations of the public’s trust within the Executive branch, Congress passed provisions 6103(f)(1) and (4)(A) of the tax code in 1924 to allow them access to filers tax returns and to then release those returns as a public record. A 1926 amendment narrowed which committees could request tax information and a 1975 amendment removed the President’s ability to request tax returns due to abuses of that privilege during the Watergate scandal.

The law as it stands today requires the Secretary of the Treasury to give the chairman of the Committee on Ways and Means in the House of Representatives, the chairman of the Committee on Finance in the Senate, or the chairman of the Joint Committee on Taxation the returns of anyone they request. The returns are given while the committees are in closed session so that the tax information is not automatically made a public record. After being received by the requesting committee in closed session, the committees can decide to send the information to the full House or Senate, and thus make the information part of the public record. Here’s a link to section 6103 of the IRS code for anyone who wants to read it for themselves, (https://www.law.cornell.edu/uscode/text/26/6103).

As the law is written the power of these three committees to request returns and then make them public is absolute, all they have to do is make a written request and after receiving the documents send them to the full House or Senate. But that’s not quite the whole story, because in fact, there are some restrictions. Over the last 140 years there has developed a body of case law that says, even if legislation doesn’t specifically require it, Congressional investigations must have a valid legislative purpose. In 1880 the Supreme Court ruled in Kilbourn v. Thompson that

Congress may not issue subpoenas nor use its investigatory powers for an improper legislative purpose, and that decision has been upheld since then. As a result, if Congress receives and disseminates individual tax information without a valid reason it could theoretically be considered an improper release of tax records which is a felony. Realistically, because members of Congress have blanket immunity for speech in Congress, prosecution for the release of tax information is essentially impossible. 

Congress has had this authority to request tax information for nearly a century, however it hasn’t actually been used very often. It appears it was used sporadically for a couple of decades but fell out of use until Watergate in the mid-1970s. After that it wasn’t used again until 2013 when Republicans investigated the IRS for possible bias in how they treated conservative organizations. During that investigation they requested tax returns from 51 filers, all of which

were released in full to the public even though 40 of the returns were never referenced in their report and those that were referenced could have been redacted to protect the identity of the filer. Clearly the sanctity of the individual tax return is a new-found principle of the Republican party.

On April 3rd House Ways and Means Chairman Richard Neal officially requested six years of the President's tax returns. By law the Secretary of the Treasury, Steven Mnuchin is required to hand over the returns, but so far has refused to do so. Mnuchin claims to be reviewing the legality of the request, but in reality, seems to be simply stalling for time. The only legal reason they can give for not complying is if they’re claiming Congress has no valid grounds for investigating the President’s financial records. Given President Trump’s extensive business interests, including foreign holdings, and the major rewrite of the tax code last year there’s no reasonable grounds for this refusal. The President has potential conflicts of interest concerning nearly everything he does, especially foreign policy. This type of situation is exactly the reason these provisions were added to the tax code in 1924, the longer the administration refuses to comply with the law, the more guilty they appear.