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Trump excuse for not releasing tax returns puzzles experts

WASHINGTON (AP) – Republican presidential front-runner Donald Trump is sticking to his new explanation for why he can’t yet release copies of his recent tax returns: The IRS is auditing him, as Trump says it has for the last 12 years.

“Until my audit is finished, you’re not going to see anything,” Trump said Friday, adding that he believes the government has unfairly targeted his returns. “I’m not going to complicate things.”

Tax experts say that explanation has them scratching their heads – emboldening Trump critics who argue that the celebrity businessman-turned-candidate’s personal finances remain unexamined.

During Thursday’s debate, Trump predicted what anyone reviewing his tax returns would find: “nothing, nothing.” But the odds of being randomly audited every year for a decade is vanishingly small – and Trump’s statement that “four or five” years of his tax returns are actively being audited raised even more questions. The IRS’s normal statute of limitations for an audit is three years – though that time frame is extended in instances of substantial underreporting and there is no time limit on reviews in the event of fraud.

The Trump campaign did not respond to questions from the AP about why the IRS would be auditing his tax returns past the normal three-year period. At the Christie endorsement event, Trump ignored questions from a reporter on why he would keep private earlier returns not at risk of audit.

With both Ted Cruz and Rubio having pledged to release their own returns – an invariably unpleasant rite of passage for every major party nominee since 1976 – Trump will soon stand alone among the major Republican candidates in having not yet produced them. And, despite Trump’s claims to the contrary, the last Republican nominee – Mitt Romney – had long since released two years of tax returns by this time in the 2012 cycle.

Romney has speculated that a “bombshell” is lurking in Trump’s returns – perhaps indications of trouble in his business empire. And Cruz -who normally boasts of his plans to dismantle the IRS – declared that “the voters need to know” if the government is homing in on possible wrongdoing.

Given the complex matrix of partnerships and business structures disclosed on Trump’s filings with the Federal Election Commission, the scope of information available through Trump’s personal tax returns is difficult to predict. But the nature of Trump’s charitable endeavors, his effective tax rate and the underlying profitability of his business operations would all likely loom large. Similar questions dogged Romney until late in the general election – suggesting that the focus on Trump’s taxes may not quickly abate.

“If you are not prepared for this level of scrutiny of your financial affairs, you should rethink your vocational choice,” said Joseph Thorndike, a tax historian and contributing editor to Tax Analysts, an accounting trade publication. “This one doesn’t go away.”

If Donald Trump has been audited for a dozen years straight, Trump would be certainly right to think that the process isn’t random. According to statistics published by the IRS, between 2005 and 2013, audit rates for earners bringing in more than $1 million ranged between 5 percent and 12 percent a year.

“Why am I audited every single year?” Donald Trump asked at a news conference Friday, insinuating unfair scrutiny of his taxes began under the Bush administration.

But regular audits wouldn’t necessarily be a sign of anything more than the complexity of Trump’s tax returns, Thorndike said: “No one claims it’s a lottery.”

There is no way to independently verify if Trump is in fact the subject of numerous active audits. But Thorndike said tax attorneys he’s spoken with are generally sympathetic to the desire not to make tax returns public while they’re being audited.

“If the returns are out there, then no one can hide – the taxpayer can’t hide, and the authorities can’t hide,” Thorndike said.