Seth Perlman of Perlman and Perlman, a New York City firm that specializes in nonprofit law, said that accusations that Trump was illegally directing fees to his charity are tough to prove and not totally unheard of in the non-profit world.
“It becomes really troubling, however, if he was diverting or pushing fees to a nonprofit and using those fees to benefit himself. That becomes a much more serious problem,” Perlman said.
One former IRS regulator told TPM that, taken all together, the financial dealings surrounding the foundation would have forced him to “give some serious thought” to recommending a criminal investigation into the foundation’s practices.
“Once you see a pattern of that kind of egregious nature, you start to think if whether there’s an appropriate criminal referral there,” said Philip Hackney, a Louisiana State University Law Center professor who previously served in the IRS’ Office of the Chief Counsel as a senior technician reviewer for exempt organizations.
Monday’s Washington Post story on third-party contributions to the Trump Foundation points to two specific cases where payments to Trump for goods and services went to the charity. In the first case, Comedy Central made a $400,000 donation in exchange for his appearance on a 2011 roast. In the second, contributions amounting to nearly $1.9 million came into the charity over time from a New York man named Richard Ebers, who two unnamed sources told the Post bought goods and services from Trump or his businesses.
“Is this is a one-off or is this something he encouraged?” asked Gordon Fischer, a lawyer in Iowa who specializes in charitable giving. “Assignment of income – that you could just give income you receive to your foundation and not pay tax on it – that’s sort of taxes 101, or at least 201. It’s a pretty basic thing.”
The major issue is that the payments identified by the Post should have been taxed as income, and the campaign has waffled in explaining exactly how Trump handled the transactions and whether they were reported as income.
First, campaign advisor Boris Epshteyn denied Trump ever directed the third party payments to his charity. Then, he said Trump did in fact follow “all applicable rules and regulations” in handling the payments. Along the way, Epshteyn cited an obscure 1942 court case where the person in question was not required to pay taxes on charitable donations made in lieu of his income. But the circumstances were far different than those surrounding Trump.
Separately, Lynne Patton, an assistant to Trump’s son Eric, who is an officer for the Eric Trump Foundation, explained at a campaign event in Iowa last week that Trump will give speeches for organizations and then ask them to cut a check for his charity, rather than to him personally. The campaign disputed her characterization to the Post and finally said that taxes were paid on the Comedy Central payment. The campaign refused to elaborate on how Ebers’ contributions were handled, the Post said. As long as Trump refuses to release his personal tax returns, none of what the campaign says can be independently confirmed.
Trump himself, meanwhile, has brushed off the whole affair by saying his lawyers handle the charity issues.
“I’d really like to know who those lawyers are, because they either gave him really bad advice or he didn’t listen to them,” said Lloyd Mayer, a Notre Dame Law School professor who teaches courses on not-for-profit organizations.
According to numerous tax lawyers interviewed by TPM, the way such transactions typically would be handled – if someone being paid for a good or service said they’d prefer the money go to their charity – is that the income would first be paid and reported to the person who provided the service, and then he or she could separately cut the check for their foundation.
“The proper way to do it is, Comedy Center cuts a check to Trump and then Trump runs the check to the foundation,” said Jim Fishman, a professor at The Elisabeth Haub School of Law at Pace University in New York, who teaches courses on nonprofit law.
This was just the scenario that Epshteyn outlined Tuesday on MSNBC regarding the Comedy Central while rebutting the Post’s report.
“Comedy Central paid Trump productions. Trump Productions paid income tax and donated the money to the foundation,” he said.
But the foundation’s tax return for that year shows the contribution coming directly from Comedy Central. There could be some explanation for why it was reported that way that involved Trump still paying taxes on it, but without further documentation put forward by the campaign, there’s no way of knowing for sure, the experts said.
The IRS, if it chose to examine the discrepancies, could simply look at Trump’s personal tax returns to answer the essential question of whether the income was properly reported and taxed. From there, it would be a simple matter of correcting the report and paying back what was owed — and perhaps some additional civil penalties.
Taken with other allegations surrounding his charity, however, particularly the cases of “self-dealing,” where Trump used foundation money for his personal benefit, a closer look may be more appropriate.
“This is not as a clear violation as the self dealing, but it does make you wonder about how the foundation is being run,” Ellen Aprill, a professor at Loyola Law School in Los Angeles said.
Still, a criminal case would be tough to pursue, the experts said, as it requires proof of intent — that Trump knew he was violating the law — and ignorance is a permissible defense to tax allegations like these.
“No prosecutor would go after him for this, because it’s just too hard to prove,” Mayer said, unless there was some smoking gun, like an email, that showed Trump knew he was breaking the law.
“The pattern we are starting to see is that, he is not just pushing the envelope, he is going outside of what the law allows,” Mayer said. “He is being very aggressive in what he is doing. Maybe aggressive out of ignorance?”
A claim of ignorance also undermines the central arguments Trump has made for his candidacy: that he is an extremely successful businessman who knows how to surround himself with all the best people.
“He’s a guy who is supposedly a billionaire but has run that foundation like a thousand-aire,” Fishman said.