GUEST EDITORIAL One Tax Lawyer’s Thoughts on the Trump Organization Indictments James A. Nitsche

New York prosecutors appeared in court Organization maintained a separate record Trump’s trust are the shareholders of the of the Trump Organization’s affiliates. Except on July 1 to present a 15-count indictment of all these payments (i.e., a “cheat sheet”), corporation that serves as the “parent” of for the rather limited fringe benefits scheme charging the Trump Organization and Allen treating them internally as compensatory the entire Trump Organization). While these alleged by the indictments, the indictments Weisselberg, the Trump Organization’s chief payments to Weisselberg. Perhaps as sig- tuition payments would seem to have been are silent regarding these matters. financial officer, with a range of state and nificant, the Trump Organization failed to made for the benefit of the children’s father, So the New York case is far from over. local tax-related crimes. In a nutshell, the in- notify New York City tax authorities of Weis- Barry Weisselberg, a Trump Organization dictments contend that, over an approximate selberg’s residence within the City, thereby employee, rather than for Allen Weissel- Following the July 1 hearing, the Trump 16-year period, the Trump Organization and allowing Weisselberg to dodge the City’s berg’s benefit, the Trump Organization’s Organization issued a statement claiming Weisselberg conspired to provide Weissel- income tax. While not specifically stated internal documents treated them as part of that “Legal experts across the country all berg and select other Trump Organization in the indictments, one of the prosecutors Allen Weisselberg’s compensation. agree: never before has the Internal Revenue executives, including Weisselberg’s son, stated in court that the Trump Organiza- Service criminally charged a company over The indictments allege that Weisselberg Barry Weisselberg, with a host of “fringe tion’s former chief executive officer—former fringe benefits.” Trump and some of his sup- received unreported compensation income benefits” without notifying the relevant tax President Donald J. Trump—“signed many porters, including sons Don Jr. and Eric, totaling approximately $1.75 million as a authorities, thereby enabling those persons of the illegal compensation checks” that have attacked the actions of the prosecutors, result of the conspiracy, thereby enabling to evade federal, state and local taxes on the were issued by the Trump Organization for claiming political bias. They’ve also shouted him to evade more than $900,000 in federal, fringe benefits. the benefit of Weisselberg and other Trump to anyone who’ll listen that it’s customary for state and local income taxes. While the in- Organization employees. employers to provide their executives with In Weisselberg’s case, the benefits included dictments refer to other Trump Organization fringe benefits without them being reported the full-time rent-free use of an apartment The indictments contend that, in addition employees who benefitted from the scheme, as compensation. These statements are leased by the Trump Organization, the use of to these perks, from 2012 through 2017, no mention is made as to the amount of their belied by numerous cases involving tax eva- two luxury automobiles leased by the Trump Weisselberg and other Trump Organization unreported income or unpaid taxes. sion that have arisen where business assets Organization, and payments of personal ex- personnel arranged for tuition payments to The news media and many expert commenta- were used surreptitiously to pay personal penses, including for improvements to Weis- be made to an expensive Manhattan private tors have debated the question whether the expenses. selberg’s Florida home. Though the Trump school attended by Barry Weisselberg’s two indictments disclosed on July 1 represent Organization deducted all these expenses as children. Curiously, the payments, totaling Generally speaking, good faith reliance on the prosecutors’ entire case against persons “ordinary and necessary business expenses” almost $360,000, were made by checks a tax advisor can serve as a defense against connected to Trump or the Trump Organiza- of one type or another, none were reported drawn on the personal account of either a charge of tax evasion. This defense is tion, or are simply the tip of the iceberg. as part of Weisselberg’s Form W-2 compen- Trump or a revocable trust created by Trump available, however, only upon a showing Even if viewed solely from a New York law sation. Quite damningly, however, the Trump (according to the indictments, Trump and that all relevant facts were provided to the perspective, and even if considered solely tax advisor. Is it conceivable that the Trump from what is expressly stated in the indict- Organization and Weisselberg provided a ments, it would be naïve to think the indict- copy of the cheat sheet to their tax advisors ments represent the sum and substance of and tax return preparers? potential exposure. After all, the indictments themselves refer to other Trump Organiza- A question that begs to be answered is tion personnel who participated in, and whether the federal tax authorities will pur- benefitted from, the scheme, none of whom sue the apparent blatant federal tax evasion has been indicted. in light of the evidence adduced by the New York prosecutors. Frankly, the facts scream Plus, most tax practitioners would agree for intervention by the IRS. Otherwise, much that New York’s case against Weisselberg as it was for not pursuing Richard Nixon’s appears virtually open and shut. This fol- apparent federal tax evasion relating to the lows in significant part from the existence donation of his presidential papers, the IRS of the internal documents that tracked the will be open to criticism that it will not pur- compensation he received in the form of sue clear cases of criminal federal tax fraud. fringe benefits, coupled with his knowledge of those documents. Also quite damaging is Perhaps the most fundamental rule of federal the fact that, while he is not a certified public income taxation is that “gross income,” the accountant, Weisselberg holds a degree in starting point for determining one’s federal accounting from Pace University, and has income tax liability, means, “all income from worked as an accountant for the Trumps whatever source derived, including . . . since 1973, factors that make it virtually im- compensation for services, including fringe possible for him to claim that he doesn’t un- benefits.” Is there any way that Weisselberg, derstand the rather basic rules regarding the an accountant with almost 50 years of ex- taxation of employee fringe benefits. Hence, perience, can claim that he doesn’t know barring his cooperation, which would almost that rule? certainly lead to a new round of indictments, And that leads to an intriguing question: Weisselberg figures to spend a good deal of Will the IRS pursue Trump—a former U.S. time in prison due to his active and knowing president—individually based on the New participation in the scheme. York record? Suppose the cheat sheet bears In addition, as is well known, in 2019, the his fingerprints and/or DNA. Manhattan district attorney issued two sub- Stay tuned. poenas, one to the Trump Organization seek- ing information concerning certain “hush Jim Nitsche concentrates money” payments made to two women to his practice in federal, buy their silence leading up to the 2016 elec- state and local tax mat- tion, the other to Mazars USA LLP seeking a ters, including the taxa- wide range of tax and accounting records of tion of business entities Trump, the Trump Organization and a host and transactions. n

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