Citing a “routine audit,” the businessman has broken with tradition among presidential candidates and has so far refused to release his tax returns.
As ABC News’ John Santucci and Corinne Cathcart reported, Trump’s tax returns from 1978, 1979 and 1984 are available because of business dealings and legal proceedings.
However, on Saturday night, the press and the public got a more updated glimpse at Trump’s tax dealings, when the New York Times released what appears to be three pages from the Republican nominee’s 1995 tax return.
Within those documents -- which the newspaper said were anonymously mailed to a reporter there -- Trump appears to have declared just shy of $1 billion in business losses.
The loss that Trump apparently declared, “could have allowed him to legally avoid paying any federal income taxes for up to 18 years," according to the Times.
The operative word here is “could.”
The documents -- the veracity of which has not been explicitly confirmed or denied by the Trump campaign, but was confirmed by the businessman’s former accountant -- is only part of a bigger picture that is Trump’s tax history.
And while the idea that Trump could have avoided taxes for nearly two decades while continuing to live a glitzy public life may seem like catnip to his political opponents, it isn’t clear whether Trump did indeed avoid any taxes after 1995.
Given the limited evidence in the documents, we can only formulate possibilities, not conclusions.
First and foremost, the documents sent to the Times are for only one year -- 1995.
Without knowing exactly what Trump’s income in subsequent years was, it's difficult to estimate the taxes he could have avoided paying, according to an expert.
According to Kyle Pomerleau at the Tax Foundation, which calls itself an “independent tax policy research organization," the documents the Times published suggest that Trump’s business dealings were almost certainly set up through a corporate structure that sees profits and losses passed through to its owners. This is a common and legal practice.
Because those taxes were being recorded on his personal return, what we can say definitively, according to Pomerleau, is that tax law in 1995 would have allowed Trump to legally wipe out some taxes for up to 15 years in the future and three years in the past.
Confused yet? Let’s explain it further.
Trump’s nearly $916 million loss in 1995 would have been recorded as a Net Operating Loss (NOL), according to Pomerleau, and that would have allowed him to avoid paying taxes up to that amount -- that year and in others.
“The story isn’t huge in sort of the tax world,” Pomerleau told ABC News. “It’s nothing out of the ordinary.”
But it means that he could basically use that number as a sort of coupon to offset his tax bill in subsequent years. Each year, he could essentially chip away at that massive 1995 loss, subtracting parts of his yearly tax bill until his cumulative tax bills equaled that loss, up to a maximum of 15 years in the future. He could also do the same for up to three years in the past.
That was the case in 1995, and the laws are even broader now, according to Pomerleau, who noted that taxpayers can now offset net operating losses up to 20 years in the future and two years in the past.
But since we don’t know how much he was making in other years, we don’t know how long he was able to avoid taxes.
Why Does This Provision Exist?
But why does the ability to offset net operating losses exist?
Its intention is to make sure businesses are treated the same no matter what time of year they earn or lose money, Pomerleau said, noting that in the United States the tax year is from January to December.
Take two hypothetical hamburger businesses: Awesome Burgers and Super Burgers.
Similarly, Super Burgers lost $50 in December but made $100 in January. However, because December and January are in different years, without the ability to carry forward that net operating loss, Super Burgers might end up with a different tax bill against its competition, even though they earned the same amount of money.
The bottom line is that without more information, we can’t know exactly how much or for how long Trump might have been able to avoid paying in taxes, Pomerleau said.
Whether Trump “brilliantly used those laws,” as he claimed during a Monday rally, is for the voter to decide.