Recently disclosed records show Donald J. Trump declared a loss of $916 million on his 1995 income tax returns. Tax rules at the time would have turned this massive loss into a tax break, allowing him to avoid paying income taxes up to the amount lost.
The records, which have never before been released, show how much Trump has benefited from business failures in the early 90s, including the failure of three Atlantic City casinos, the failure of his airline business and his ill-advised purchase of Manhattan’s Plaza Hotel.
The New York Times hired tax experts to go over the newly released records, who said Trump’s $916 million loss would allow him to cancel out income tax up to that amount over an 18-year period.
Trump has not yet released his tax return, breaking a four decade tradition among major party candidates. While his income since 1995 is unknown, the massive loss he incurred that year would allow him to avoid paying $50 million in income tax every year for the next 18 years.
“He has a vast benefit from his destruction in the early 1990s”, said Joel Rosenfeld, one of the experts and an assistant professor at New York University. Rosenfeld said if a client came to him with a return like Trump’s he would say to them: “Do you realize you can create $916 million in income without paying a nickel in taxes?”
Trump has refused to talk about the records. Instead, his campaign released a vague statement which did not directly address the loss.
“Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required,” the statement said. “That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes.”
“Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it,” the statement continued.
Trump has cited him being audited by the Internal Revenue Service as reason for not releasing his tax returns. The IRS has commented, saying there is no legal reason he cannot release his returns while being audited.
During the presidential debate last week, rival candidate Hillary Clinton suggested Trump was not releasing his returns so voters would not know “he’s paid nothing in federal taxes”. When she later pointed out that Trump once revealed he paid no federal income tax in the late 70s, Trump responded, “That makes me smart.”
The records were mailed anonymously to The New York Times, with a return address from Trump Tower.
The Times took the documents to Jack Mitnick, a lawyer and accountant who handled Trump’s tax matters for over 30 years up and until 1996. He was listed as the preparer on one of the tax forms.
Mitnick said the forms appeared to be authentic copies of Trump’s 1995 tax returns and validated that the signature was in fact his.
“This is legit,” he said.
The $916 million loss does not suggest Trump was bankrupt in 1995. The profits generated by his other businesses that year were more than enough to meet his debt payments.
Still, the documents provide an insightful look into Trump’s finances, something he continues to espouse as excellent, while asking the world to just take him at his word.
The provision that allowed Trump to benefit from these losses is known as net operating loss. This allows deductions, expenses, depreciation and operating losses to move from the tax sheets of businesses to the personal tax returns of people like Trump. In turn, these business losses can be used to cancel out income tax on almost anything, like book deals or episodes of The Apprentice.