I.R.S. Routinely Audited Obama and Biden, Raising Questions Over Delays for Trump | Big Indy News
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I.R.S. Routinely Audited Obama and Biden, Raising Questions Over Delays for Trump



WASHINGTON — The I.R.S. subjected both President Donald J. Trump’s predecessor and his successor to annual audits of their tax returns once they took office, spokespeople for Barack Obama and President Biden said on Wednesday, intensifying questions about how Mr. Trump escaped such scrutiny until Democrats in the House started inquiring.

Late Tuesday, a House committee revealed that the I.R.S. failed to audit Mr. Trump during his first two years in office despite a rule that states that “the individual tax returns for the president and the vice president are subject to mandatory review.” But its report left unclear whether that lapse reflected general dysfunction or whether Mr. Trump received special treatment.

The disclosure of routine audits of Mr. Obama and Mr. Biden during their time in office suggested that the agency’s treatment of Mr. Trump was an aberration.

“I’m absolutely flabbergasted,” said Nina E. Olson, the national taxpayer advocate from 2001 to 2019. “It’s disturbing. You have a process where you’re auditing the president, you better be auditing the president.”

Reports issued by the Ways and Means Committee, which obtained Mr. Trump’s tax data last month after a yearslong legal battle, said the I.R.S. initiated its first audit of one of his filings as president in April 2019, the same day that Representative Richard E. Neal, Democrat of Massachusetts and the committee’s chairman, had inquired about the matter.

The I.R.S. has yet to complete that audit, the report added, and the agency started auditing filings covering Mr. Trump’s income while president only after he left office. Even after the agency belatedly started looking, it assigned only a single agent to examine Mr. Trump’s returns, going up against a large team of lawyers and accountants who objected when the I.R.S. added two more people to help.

The committee’s discovery that the I.R.S. flouted its rules is bringing new scrutiny to concerns about potential politicization at the I.R.S. during the Trump administration and spurring calls for the inspector general that oversees the agency to investigate what went wrong. It has also raised questions about why the I.R.S. devoted so few resources to auditing Mr. Trump, who, as a business mogul, had far more complicated tax filings than any previous president.

Under Mr. Trump, the I.R.S. was run for most of 2017 by a commissioner appointed by Mr. Obama, John Koskinen, and — after about 11 months being overseen by an acting head, David J. Kautter — a successor appointed by Mr. Trump, Charles P. Rettig. None ensured that the agency followed its rules requiring presidential audits.

Neither Mr. Kautter nor Mr. Rettig, who left in October, responded to a request for comment. Mr. Koskinen said that his only involvement in Mr. Trump’s tax returns was working to ensure that they were kept in a secure location.

“The good thing about being commissioner is that you never know who is being audited,” Mr. Koskinen said, adding that it would have been inappropriate to ask about the status of any examination.

The committee’s reports left many questions unanswered given that it had little time to act: While Mr. Neal had sought Mr. Trump’s tax records since 2019, Mr. Trump fought that request for nearly four years. The Ways and Means Committee only received access to the information last month, with Republicans set to take control of the House in January.

Spokespeople and associates of several other former presidents over the last three decades either did not respond on Wednesday to queries about whether those presidents had been audited every year they were in office or said they did not recall.

Senator Ron Wyden, Democrat of Oregon and the chairman of the Senate Finance Committee, on Wednesday called the House panel’s findings a “blockbuster” that required further attention.

“The I.R.S. was asleep at the wheel, and the presidential audit program is broken,” he said. “There is no justification for the failure to conduct the required presidential audits until a congressional inquiry was made.”

The Internal Revenue Service has already been the subject of repeated controversy.

The New York Times reported this year that the I.R.S. had initiated particularly invasive audits of two of Mr. Trump’s perceived enemies, the former F.B.I. director James B. Comey and his deputy, Andrew G. McCabe. Mr. Trump also repeatedly told his chief of staff that he wanted his perceived rivals, including those two, to face tax investigations.

Despite the low odds of both being singled out, an inspector general’s report concluded that both had been randomly selected for the initial pools from which the agency drew to carry out the examinations. But it is unclear how the I.R.S. made final selections from those pools.

In 2019, Mr. Trump raised eyebrows by telling Senator Mitch McConnell, the majority leader, to prioritize a confirmation vote for a longtime associate, Michael J. Desmond, as general counsel of the I.R.S. over the nomination of William P. Barr as attorney general. Mr. Desmond had advised a subsidiary of the Trump Organization and worked with two of its tax lawyers.

And in 2018, Mr. Trump appointed as commissioner Mr. Rettig, who had written a Forbes column in 2016 defending Mr. Trump’s refusal to release his taxes as a candidate and portrayed the I.R.S. as fully engaged in auditing very wealthy people.

“Teams of sophisticated tax advisers were likely engaged throughout Trump’s career to assure the absence of any ‘bombshell’ within the returns,” Mr. Rettig wrote. “His returns might actually be somewhat unremarkable but for the fact they are the returns of Donald Trump.”

In fact, the few glimpses of Mr. Trump’s taxes have shown much to talk about. The Trump Organization was convicted of a tax fraud scheme this month. The New York attorney general has sued Mr. Trump and three of his children, accusing them of fraudulently overvaluing his assets.

The Times gained access to years of his tax information and published a report in September 2020 that raised numerous questions about the legality of write-offs and deductions he had used to avoid paying any taxes most years. The article prompted the I.R.S. to consider looking at Mr. Trump’s 2017 tax returns, the committee report said.

The I.R.S. has had scant resources for years because Republicans have sought to cut its funding. The report highlighted the agency’s broader struggles in dealing with complicated tax returns filed by wealthy people and criticized its willingness to trust that returns filed by big accounting firms contained accurate information.

Congress has approved an $80 billion overhaul of the I.R.S. intended in part to hire more specialists capable of auditing high-income filers.

The committee released the reports after a party-line vote, exercising a rarely used power to obtain and make public any U.S. taxpayer’s private information.

Congress invoked it in 1974, when a committee released a report about President Richard M. Nixon’s taxes after a scandal about whether he was underpaying what he owed. That scandal led the I.R.S. in 1977 to create its rule mandating audits of presidents and vice presidents, ensuring that agency officials are not put in the awkward position of deciding whether to audit their boss.

The Ways and Means Committee again used that authority in 2014, when Republicans accused the I.R.S. of political discrimination because it used conservative terms like “tea party” when selecting groups to scrutinize for political activities that would make them ineligible to receive tax-deductible donations. But an inspector general determined that the agency had also used liberal terms, like “progressive” and “occupy,” for the same purpose.

Commissioners of the agency are political appointees of presidents. Mr. Koskinen — who had also run the agency several of the years that it was routinely auditing Mr. Obama — was not the only one to say he avoided involvement in presidential audits.

Charles O. Rossotti, who served as I.R.S. commissioner from 1997 to 2002, said that he was aware that presidents were audited as a matter of practice but that he played no role in the process.

“I kept away from that with a 10-foot pole,” Mr. Rossotti said.

The requirement that presidential returns be audited is included in the tax agency’s Internal Review Manual, which offers few details. A 2019 I.R.S. document accompanying the committee report said the examinations were conducted by experienced revenue agents.

“The I.R.S. is not aware of any reports of improper bias or partiality in the conduct of an officeholder’s examination in the more than 40-year history of the mandatory procedures,” it said.

The House committee report also documented an extraordinary lack of resources the I.R.S. dedicated to auditing Mr. Trump’s returns when it belatedly started doing so, initially assigning just one staff member to the matter despite the unusual complexity of his business entities and partnerships.

The committee cited internal I.R.S. memos stating that “it is not possible to obtain the resources available to examine all potential issues” raised by the more than 400 pass-through entities cited in Mr. Trump’s taxes.

“To do a thorough review of these returns, we would need a team much larger than the current team,” it said.

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Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Savingforcollege.com. Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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