Lawfare Daily: Attorney General Blanche’s Purported Waiver of Pres. Trump’s Past Tax Liabilities

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For trading, for sale, and for the qualified talent, with premium sales. March the Indeed einfach, yet off indeed.de/recruiting. The acting AG has issued this adendum that, in our view, and based on what's publicly known, he did not have authority to issue. And so, the IRS is not obligated to follow through on that, but we can imagine there's immense political pressure on the IRS to ask. It's the law fair podcast. I'm Roger Parloff, senior editor at Law Fair, and I'm with Brandon DeBoe and Kelsey Merrick of NYU's Tax Law Center.

Congressional Actions are really important here, both to undo the agreement and the audit release, but also to use their oversight and invest in contemporary powers to find out exactly what happened here. Today, we're talking about Attorney General Blanch's purported waiver of President Trump's past tax liability, and what can be done about that.

“Before we go further, I'm going to ask you each to introduce yourselves, and also to explain what the tax law center is. So, Brandon?”

I'm Brandon DeBoe, I'm a senior attorney advisor and policy director at the Tax Law Center at NYU Law. And I'm Kelsey Merrick, I'm the director of litigation here at the Tax Law Center at NYU Law. We're a nonpartisan organization that's focused on protecting the integrity of the federal tax system. Many of our staff come from major law firms as well as IRS and DOJ. Most of our work is technical. Think research papers, technical comment letters, amicus briefs, and the like.

We work closely with practitioners and former government officials, and our advisory board includes former officials from Republican and Democratic administrations. Over the last couple years, we've closely examined the laws on taxpayer privacy and political interference in the tax system. We've also launched a project on remaking tax administration, which will focus on creating an executable vision for rebuilding and reimagining how the tax system is administered and developing concrete blueprints to achieve that. So, when news began to break on this topic,

we were well positioned to examine these issues, to educate the public about the potential consequences, and to detail steps that should be taken to block this unprecedented deal.

Okay, today we'll be discussing the portion of the settlement of President Trump's $10 billion lawsuit

against the IRS that does not involve the $1.776 billion anti-weaponization fund. That's the part that was created the next day in the addendum on May 19th, where Attorney General Blanche purported to, among other things, drop any pending tax audits or investigations of Trump and to wave any past tax liabilities. Brandon, earlier this month, you called upon Congress to quote, "Stop the administration

from implementing the sweetheart deal to end audits and to investigate potential criminal violations

“of the laws against political interference in the tax system." So, broad brush, why did you do that?”

We're deeply concerned about the potential abuse of the tax and legal system in this case, and how it could undermine the rule of law. The acting AG's Addendum was entered into

So, on June 2nd, with the acting AG stating that the administration is not pursuing the fund, but that it doesn't tend to pursue these extraordinary audit protections, we became increasingly concerned that if Congress doesn't act, it will get even more difficult to stop this audit release as a practical matter. It's still possible that the IRS could choose to not act to carry it out, or that a future IRS could try to unwind it, or that there could be actions in the courts,

but the best path forward is decisive action by Congress right now. We've also become increasingly

“concerned based on public reporting that there could have been potential violations of crucial”

protections against political interference that help ensure the tax laws are administered neutrally, and Congress has built these protections on an overwhelmingly bipartisan basis over decades, and our view is that any potential violations were an investigation, including by Congress. Okay, and I should say that for those interested in this topic, the Tax Law Center has some articles on this topic, which are very useful in my opinion. Brandon and Kelsey also wrote a useful and informative

article on just security called what Congress should do about the president's sweetheart deal in Trump versus IRS. Also, before going further, I do think our readers, our listeners,

“our familiar with the outlines of the lawsuit, Trump brought the $10 billion lawsuit and the”

settlement, but it might be worth just a very quick timeline to get us up to that May 19th Addendum if one of you can provide that. So this suit, Trump, the IRS, was filed back in January of this year when the president two of his sons and one of his entities sued the IRS for $10

billion in this other district of Florida, asserting claims under internal revenue code section

7431. This section provides a private rate of action for civil damages for the unauthorized disclosure of taxpayer information. This is because tax returns are confidential under internal revenue code section 6103 and that confidentiality extends to the president. As law for readers might be familiar already, the president's tax returns among several others were leaked by an IRS contractor named Charles Little John back during the first Trump administration in 2019 and 2020.

Little John was then prosecuted by the Biden DOJ in sense to the maximum prison term of five years under the internal revenue code. So fast forward again to this year with Trump's civil damages suit in April his attorneys filed a consent motion to stay the case while the parties engaged in settlement discussions. The government hadn't made any appearance and so the judge responded to a response day requesting briefing from the parties and court appointed Amiki on whether there was

actually a case or controversy here that would give the court jurisdiction in the first place. And as we now know, the plaintiffs dismissed the case with prejudice before that briefing deadline

the government never made an appearance in the case and on May 18, the DOJ announced the settlement

of the suit and the establishment of the so-called anti-weaponization fund. And then the following day May 19, the acting attorney general Blanch had signed a purported adendum that included this extraordinarily broader lease of claims that the government had or might have had against not just the plaintiffs but also any Trump affiliates and that purported adendum specifically mentions that it extends to tax returns. Okay, great. And of course the anti-weaponization

part has the government has said it's not going to or a blanch has said he's not going forward with that and a judge has at least preliminarily enjoying that from going forward. A lot of people ask me and other law fair people what about the other half is somebody going to sue to block that.

“And I take it your position is that a lawsuit is not really the best way to approach”

that prong of the so-called settlement that it's either inappropriate or unnecessary.

What would you say? You know, first I would just observe that the fund itself is still an open

Folks might have seen just a few days ago that a department of justice filed a motion

in the court that has enjoyed the fund saying we're not submitting any more declarations. Whatever has been said should be good enough for you judge to say that we're not moving forward. So I, you know, one that's still an open question. But, you know, back to the the audit release

“here and what can be done about that, you know, I think it's definitely fair to say that our view is”

congressional intervention is is really imperative here. I think, you know, it could be challenging for someone to bring a suit based just on this audit release. You know, one way that could happen for example is by someone who's a Trump affiliate or claiming to be a Trump affiliate if they're under iris audit, they might freeze this may 19th order as a defense to that iris action. But rather than I think waiting for someone who's potentially interested in effectuating this

waiver to bring some kind of claim, it's really better for Congress to take action now to send a very clear and legally binding signal to the iris that this is not an order that they have to

“follow or affect you. Brendan, anything you want to add to that? Yeah, I think Kelsey put it really”

well. I would just add that to the last point about where we are right now, the acting AG has issued this adendum that in our view and based on what's publicly known, he did not have authority to issue. And so the iris is not obligated to follow through on that. But we can imagine there's immense political pressure on the iris to act. Members of Congress in both parties have expressed serious concerns over this extraordinary audit release and they could by passing legislation

both nullify this specific order, making it crystal clear that the iris doesn't need to act and also implement structural reforms that would prevent any president or any administration from pursuing a similar approach in the future. And this would resolve the audit issue right now quickly before the iris takes any actions. Once the iris takes actions, if they do, there are still potential

“steps to unwinding the agreement, but they become much more challenging. And so that's why we think”

it's important for Congress to act quickly. Okay. And one of the things that we probably ought to mention is that this is not apparently an abstract question. There seems to be pretty strong reporting that there is a, there has been a tax audit, a very significant tax audit, perhaps involving

100 potentially 100 million dollars in liability for Trump. Can one of you discuss that?

Sure. We won't get into the details. I think we know as much as you and your listeners about the status of this audit based on reporting, especially from the New York Times, but according to that reporting, the president has been under audit for at least one particular tax return for over a decade. It relates to his potentially attempting to take double tax deductions to double dip on particular deductions. And according to the Times, the amount in dispute may now exceed

over $100 million dollars. The Times has reported that that audit recently entered into several

men agreements shortly before this release was signed. And so based on that public information, it sounds like, if that reporting is accurate, that this case has a lot at stake in just one particular matter, and that it was unresolved in the lead up to the acting attorney general's purported release. And just at one other detail, I think the Times has also reported that in 2024 that Eric Trump himself had acknowledged that a tax audit was active. So it sounds like pretty strong.

This isn't just an anonymous sources. Suppose hypothetically at the IRS, pencils are put down at

wants to say, let's finish the audit, is there a civil statute of limitations on tax audits that we

“need to worry about or does that not exist? There is a statute of limitations for tax audits.”

The standard rule is three years, but it is longer in particular cases if there's severe understatement of tax liability, for example, than at six years, it is also extended if there is fraud. And it can be extended as has likely been the case based on the reporting and in the with respect to the Trump audit, it can be extended by the parties agreeing to extend it while they

work out the details and resolution of the audit. So there is a potential statute of limitations here

issue here, although we don't know the exact nature of the dispute between the presidents and

“the IRS and so don't know exactly when the statute of limitations might run. But this is also something”

that Congress can address and it can address that by passing a law that, for example, says any claims that are open between the presidents and certain other officials in the administration automatically have the statute of limitations extended past that person's time and office,

plus in addition to all maybe two years or pick your number. But Congress could ensure that

there's not a statute of limitations issue with respect to audits of the president. Let's now go to the criminal statutes that might be implicated here. This is one of the more interesting parts of your articles. There's at least two statutes in the IRS code that are particularly

“relevant. One is 26 USC 72 17. Can one of you discuss how that works?”

Section 72 17 was enacted on an overwhelmingly bipartisan basis after President Nixon tried to use the IRS to target his political enemies. In Section 72 17 makes it unlawful for the president, vice president, White House staff, and certain other political officials, including the Treasury Secretary to directly or indirectly request that the IRS terminate in audit of any particular taxpayer. Violations of Section 72 17 carry serious criminal penalties, including up to five years imprisonment.

That's an unusual statute in that it explicitly mentions the president as one of the people that is is covered. It also has an oddity which it says one of the people that is not covered is the attorney general and of course that's the sole person who signed this document which is strange. It's supposed to be a settlement, but the other side doesn't touch it. Stan Woodward who signed the anti-weaponization fund part of this, he also doesn't signed this tax part of it. What is the

statute of limitations on this provision? Section 72 17 carries a three-year statute of limitations in your correct Roger that there is an exception for the attorney general here. Section 72 17 doesn't apply directly to the attorney general as a covered official, but that doesn't mean there is there hasn't been a violation of Section 72 17 because of how it applies with respect to direct and indirect interference by the president or other White House officials. For example,

so here we have New York Times reporting that has details about how the president discussed his audits in circumstances related to this lawsuit and that his advisors receive drafts of the settlement, which suggests that officials like the president who are covered by Section 72 17 may have used the acting attorney general's purported order to influence the IRS

apply to the Section 72 17 violations or the possibility that the acting attorney general

“was in accessory to a violation of Section 72 17 here. I see another interesting thing I'll just”

listeners might be interested in as another unusual aspect of this statute is it's built right

into the statute, the second subsection B, that IRS officers and employees have an obligation

to report such a request if they witness it and in fact if they don't they themselves are subject to the same penalties up to five years criminal as a very unusual statute. I'll also mention the New York Times reporting here, we're lying a lot on the New York Times, it's a group led by Alan Foyer. They said that the people involved in negotiating this will obviously Todd Blanch signed it. The private lawyers included Boris Epstein or Boris Epstein, who is a former client of Blanch's

also, Blanch's current top deputy Trent McCotter, a private lawyer named Daniel Epstein, who works who represented Trump. We don't know that all of them worked on this aspect of it. And of course, that's just the report. I mean, I guess the OLC had T. Eliot Gaser blessed a portion of this. That might have been the anti-weaponization fund. Boris Epstein is usually described as a senior counsel to the president. I don't know if that's a member of the executive office of

“the president. Is he an applicable person under 17 as you understand it?”

I don't know his employment status either. And so I can't apply on that. In general, the White House officials, any employee of the executive office of the president, is a

covered official. So it would depend on his capacity. Okay. And then there's a second statute

at least in play. 26 USC 72 12. Can one of you describe that one and how it works? Section 72 12 makes it a crime to interfere in a particular tax audit or investigation either corruptly or by force or threat of force. Section 72 12 covers everyone. So both government officials and private citizens. It carries a serious criminal penalties including a maximum three-year term of imprisonment. And what's the statute of limitation? The statute of limitations

on Section 72 12 is six years under the tax code. Okay. And I interrupted you. You were going to add something? I was just going to add that that here the reporting suggests that those involved in negotiating the settlement were aware of at least one pending audit of President Trump,

the one that we've talked about with likely more than $100 million in dispute. And so that

audits could be what is required under Supreme Court doctrine to meet the standard for 72 12 that there was intent to corruptly interfere in a particular tax audit or investigation.

“So that's a particular element of that statute. You need to know about a particular audit or”

investigation that's ongoing. Right. Exactly. And that's what Brandon mentioned with the Supreme Court precedent there. It has to be a specific audit. It can't just be general interference in IRS administration for purposes of 72 12. Do your current managed services really help run your operations? Or are they just running in circles? Running isn't enough anymore. With PWC's managed services, your operations don't just run, they evolve continuously, powered by AI embedded

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his president Trump, we get immediately into immunity questions, and I don't know how much

you all have thought about that, and whether this is an official act, and if it's not an official

act, whether you could ever overcome the evidentiary hurdles to bring a case against him, do you have thoughts on that, either of you? I mean assuming he did something wrong. Right, right, and we have some thoughts, I don't know that they're particularly enlightened. Our bread and butter is titled 26 of the US code and tax administration, but of course we're

“well aware of the immunity rolling by the Supreme Court in Trump, the US, and I think there are”

a lot of open questions in terms of just how broad that is. Is it absolute immunity? Is it

presumptive and rebuttable immunity? I think this is really untarded territory, and as with so much

of what we're discussing today, truly unprecedented. But I think we can observe that to your question about whether this is an official act, I think it's pretty difficult to make the argument that resolving the president's private claims and his personal tax liability would fall under any definition of official acts, but of course it's just hard for us. I think sitting here today to predict how that might come out in the future, and in terms of the ability to uncover any

“evidence of wrongdoing, again, I think this just goes back to our position that congressional”

actions are really important here, both to undo the agreement and the audit release, but also to use their oversight and investigatory powers to find out exactly what happened here. And Brandon, do you agree with that? I assume that getting to the bottom of what happened here will, well, itself run into headlong into a lot of privileged issues, executive privilege, attorney client privilege, I'm sure it may not be practical to pursue, is that how do you feel

Brandon? I agree with Kelsey's analysis, and also that as Kelsey suggested, there are still so many remaining questions, including who specifically was involved in what elements of the settlement negotiations. I'd underscore that in addition to Congress needing to investigate and having the ability to use its oversight powers to bring the facts to light here, additionally, the provision you mentioned, Roger, requiring reporting to the Treasury Inspector General for

“tax administration is really crucial, and I think that's evidence that when Congress set up this”

regime, Congress thought it was really important that the facts of these violations be reported and that there would be investigation, and so that responsibility for the IRS employees, if they feel they've received an improper request and unlawful, you know, politically influenced requests to make a referral to TIGTA is also very important, and that TIGTA could then investigate and bring to light potential violations and in the facts that we need to learn more to determine the

legal status, that's another pathway that those facts could be developed. And you mentioned TIGTA, that's the Treasury IG Inspector General for tax administration, correct? Yeah, administration, okay, so really you do focus on Congress and what they should do, and one thing I take it you think they should do is hold an investigation try to find out what happened here, but what are your other legislative proposals? Sure, definitely, in addition to oversight,

we think it's important for Congress to take several actions to block the release of claims

effectively close their own audits. The first step, as I mentioned before, is simply nullifying the

“acting attorney general's purported release of claims, including tax audits. The second is”

preventing the IRS from entering into final closing agreements with the president and other

powerful officials while they're in office. The IRS can enter into a closing agreement that is signed

by both an authorized IRS official and the taxpayer that conclusively resolves the matters in dispute and detailed by that closing agreement unless there's a showing of fraud, malfeasance, or misrepresentation of a material fact. But that's determined by statute, and Congress could, for example, say that while a covered official is in office, that IRS cannot enter into a closing agreement with that official, or they could say that such

closing agreements do not receive the finality that's afforded to other closing agreements. So that's

the second step. The third step is extending the statute of limitations so that a future IRS can

effectively pursue audits of the president and his affiliates, and we got into this a little bit earlier but just to underscore that Congress could choose to ensure that a future IRS can effectively examine the returns of the president. For example, if a closing agreement has been set aside due to fraud, malfeasance, or a misrepresentation of material fact, that the statute of limitations

is automatically extended in such circumstances, or that the statute of limitations is automatically

extended beyond the term of the president or other specified officials. The fourth step that we think

“Congress should take is to require additional reporting of key information to ensure that it becomes”

public and to facilitate oversight here. For example, beyond TIGTA, the Inspector General, requiring TIGTA to make reports to congressional committees that could then have information to investigate and also to release information that is not confidential publicly. So the public has an understanding that there's been a report of potential improper interference. So that legislative step would facilitate oversight and investigation. So when you mention closing agreement, I take it that means that in an ordinary

audit, the IRS and the taxpayer might reach a genuine agreement settlement, or the IRS might decide they were mistaken that there is nothing there, the tax liabilities correct, and then they would enter a closing agreement to finalize and make sure that this doesn't get re-litigated later. So here, you want to, you're hoping for congressional action before a closing

“agreement might take place in Trump's case. Is that basically what you're saying?”

Yes, that's a core component of our recommendation is for Congress to act as quickly as possible. Congress could make this provision retroactive to the beginning of the year, the beginning of this administration, or another date, so as to try to ensure that there couldn't be a final closing agreement with the president or his affiliates who are covered by the purported release, that might you know, implicate some of the issues that you and Kelsey were discussing earlier, but the best

path for Congress to ensure that the IRS doesn't act and can't act with with finality

And that sort of retroactivity you think is lawful and there wouldn't be a problem with that.

“You know, I think retroactivity is not necessarily a problem for Congress acting here.”

It does potentially raise a due process concern, but in the tax context, courts have found the Congress has pretty broad latitude to make retroactive changes to the tax code, so I think Congress is in pretty good footing considering court precedent with respect to that. And even if, you know, there were a future challenge to any of these congressional laws, for example, again, if a

Trump affiliate or someone else under audit who thinks they get protection under the May 19th order

raises as it at his defense, again, you know, we think the court should be able to, you know, not even look to the act of Congress in order to, you know, make it a determination that the May 19th order was invalid to begin with. So the problem, of course, with any congressional hoping for any congressional action is that they don't seem to act very often, and especially in ways that displease this president. So maybe what Kelsey was getting at is the next, well,

maybe you disagree with me about that, or maybe you think that this is might be an exception.

“But otherwise, I think we should talk about what Kelsey was getting to, if nothing does change,”

what does the next administration do if it wants to resume this tax audit? What do events look like them? So I think with respect to whether Congress will act or not, I would just observe that here there's been substantial bipartisan criticism, certainly of the fund, which the administration did back away from after public and congressional backlash, at least for now, but also of the audits agreement, specifically, and members of both parties have introduced amendments or legislation.

That would take some of the steps that we've been discussing. So that doesn't mean that

“it will get enacted, but I do think there's bipartisan concern here. In terms of what happens”

under a future administration, that depends on the steps that the IRS takes now. If the IRS doesn't take any steps to effectuate the acting AG's purported order, then a future administration doesn't need to respect or follow that purported order because it was lawless. If the IRS follows through and, for example, enters into closing agreements with the president and his affiliates, then the question would become, was that agreement entered into

with a showing of fraud, malfeasance or misrepresentation of material fact, that would be a threshold question regarding whether a future administration could reopen and decide to continue to pursue that audit. That would be the question that the IRS would need to consider. And when you say that Attorney General Blanche's order was lawless, just to be clear, you mean is it because it was only him signing it? Is it because he's not treasury, secretary,

he's not IRS? What makes it lawless? Yeah, DOJ does not have unilateral authority to agree to drop IRS audits. DOJ's settlement authority in tax cases only extends to matters that are referred to DOJ. And so this is under section 71/22 of the tax code. So here, the only relevant matter that was referred to DOJ, based on what's publicly available is President Trump's taxpayer privacy lawsuit. So DOJ's

settlement authority would be limited to those claims. And DOJ doesn't have free standing authority to just settle any audits with a particular taxpayer without a referral, let alone to settle

person who was involved in a lawsuit. So let's assume that Congress does nothing and this goes

forward in that posture. What will the impact be on trust and the tax system and fairness going

“forward? I think there could be a really unfortunate negative impact on untrust.”

Some of the laws that we've been talking about are specifically designed to ensure neutrality and that the tax laws apply the same to everyone without regard to politics or other characteristics

that should be irrelevant. And so the idea that a different set of rules apply to different taxpayers

could erode trust in the tax system. And that is especially concerning because the tax system is built on voluntary compliance for the overwhelming majority of revenue collection. And that system depends on taxpayers believing in the code and that they should fulfill their federal tax responsibilities without the need for intervention from the IRS. And this is part of a broader story, which is that those protections that Congress has been enacted, those guard rails designed

to prevent politicization and to protect taxpayer privacy have been breaking down under this administration. And so this is another unfortunate step that is putting pressure on those protections and that could erode a fundamental aspect of the tax system. Well, I think we'll have to leave it there, but thank you very much for joining us both Brandon and Kelsey. It's a very important topic. I appreciate you coming on. Thank you for having us. Thanks for having us, Roger.

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