Tax Return Privacy

March 20, 2017

On March 14, various news organizations followed the lead of Rachel Maddow at MSNBC and David Cay Johnston of DC Report and published the first two pages of President Trump’s 2005 tax return. These two pages revealed that the president paid around $38 million in income taxes in 2005. Given his income, the president’s effective tax rate was 25 percent.

The president’s critics have claimed his refusal to release his tax returns is in part to hide tax strategies that make his effective tax rate close to zero. Thus, one would think these two pages helped the president more than they hurt. Still, the White House released a statement that characterized the reporting on the tax returns as “totally illegal.” The White House statement is wrong, although to paraphrase a former president it somewhat depends on what the meaning of “illegal” is.

The federal Internal Revenue Code is our nation’s tax law. Under that law, a federal or state employee may not willfully disclose a tax return. Governmental employees who do so are guilty of a felony punishable by up to a $5,000 fine and by up to 5 years in jail. The Internal Revenue Code also prohibits tax return preparers from knowingly or recklessly disclosing information given to them in connection with the preparation of a tax return. Tax return preparers who do so are guilty of a misdemeanor punishable by a fine not to exceed $1,000.

These provisions make it clear that it is illegal for certain persons to disclose a tax return. If a tax return is disclosed in an unauthorized manner, the Internal Revenue Code then provides that anyone who willfully prints or publishes the return also is guilty of a felony punishable by a fine of no more than $5,000 and up to 5 years in jail.

Putting these rules together, they say it is a felony for a news organization and its employees to publish a tax return that originated from a government employee. We probably also get the same result if the information came from the professional who prepared the tax return although the language of the statute is somewhat less clear. In one narrow sense, the White House statement could be correct: there is a section in a statute that would make printing the president’s tax return a crime if it originated with a prohibited source.

This law, however, is almost certainly unconstitutional and unenforceable as applied to the president’s tax returns. In a 2001 case before the U.S. Supreme Court called Bartnicki v. Vopper, a radio station had played illegally obtained recordings of persons at the center of labor-union contract negotiations with the local school district. Although federal law made it a crime to willfully disclose an illegally recorded telephone call, the Supreme Court ruled the First Amendment protected the radio station and its employees from a lawsuit by the persons who were recorded. In the Supreme Court’s words, the federal law implicated “core purposes of the First Amendment because it impose[d] sanctions on the publication of truthful information of public concern.” The law could not be enforced against the radio station because the matter involved was a public concern.

In whatever way the president’s 2005 tax return was leaked, it was not illegal then to publish the return. If the president authorized the release of the tax return, the president consented to the release. If the person who leaked the return was not a federal or state employee or the tax preparer, then no laws would appear to have been broken. But, even if someone broke the law in getting the tax return to the media, the lesson of the Bartnicki case is that the media cannot be held accountable. The remedy, if any, is against the leaker, not the press. The First Amendment requires nothing less.