The Justice Department is standing by an extraordinary measure giving President Trump, his family and his businesses potentially lucrative protection from I.R.S. investigations, Todd Blanche, the acting attorney general, said on Tuesday.
Mr. Blanche’s remarks about the tax protections came during an appearance in front of a House Appropriations subcommittee, in which he told lawmakers that the Trump administration was abandoning a related plan to create a $1.8 billion fund to pay restitution to people who claimed they were victims of government “weaponization.”
Mr. Blanche said the end of the fund would not affect the separate agreement shielding Mr. Trump from audits of tax returns he and his family had already filed. Both proposals had emerged in recent weeks as part of a settlement of Mr. Trump’s $10 billion lawsuit against the I.R.S. But now only the measure benefiting the Trumps will survive, Mr. Blanche said.
“Nothing has changed with that,” he said, referring to the tax proposal. “We’re not moving forward with the anti-weaponization fund.”
Mr. Blanche’s directive left in place a staggering public benefit to a president who has sought to bend the government toward his own interests and pushed the limits of his office. A host of thorny legal questions also remain; Mr. Trump’s lawsuit against the I.R.S. was revived last week by a judge concerned about potential deception in the deal preceding the audit protections.
Those protections could be immensely valuable to Mr. Trump and his family, who have faced repeated audits from the Internal Revenue Service. Just one investigation by the I.R.S. stemmed in part from how Mr. Trump claimed losses on his Chicago tower could have cost him more than $100 million, The New York Times has reported. The Trump Organization had recently entered settlement talks with the I.R.S. to try to resolve the audit, The Times previously reported.
Tax lawyers and former I.R.S. officials have said that the protection for Mr. Trump was unprecedented in its scope and form, particularly since it extends to “affiliates” of the Trumps. Pre-existing I.R.S. procedure has been to audit the president every year, rather than confer on him sweeping protection from scrutiny on tax returns already filed.
Mr. Blanche tried to cast the audit protections as a typical outcome of litigation against the I.R.S. But Mr. Trump’s lawsuit against the agency did not deal with an ongoing audit or tax issue, instead focusing on the leak of his tax returns by a former I.R.S. contractor during his first term.
Indeed, when the tax proposal was first floated to the Justice Department last month, lawyers there raised questions about whether giving the Trumps protection against I.R.S. scrutiny would run afoul of a law barring the tax agency from dropping audits at the direction of the president or his aides.
The I.R.S. also sought to contest Mr. Trump’s lawsuit, with lawyers at the agency preparing a 25-page memorandum recommending that the Justice Department move to dismiss the case.
“Like anytime the I.R.S. settles with an individual taxpayer or another company, as part of the settlement, it’s standard, it’s typical to get rid of past ongoing audits,” Mr. Blanche said. “It’s not a forward-looking document. It’s nothing that gives any sort of immunity in the future to the president or his family or his organizations.”
The federal judge who oversaw Mr. Trump’s suit against the I.R.S. abruptly reopened the case last week, saying that she wanted to investigate allegations that lawyers involved in the negotiations had deceived her. But it remained unclear whether her inquiry could force the lawyers to answer questions about the origins of the tax deal.
Mr. Blanche personally signed the document conferring tax protections on Mr. Trump, his family and businesses. The brief agreement was posted without fanfare on the Justice Department’s website on May 19, one day after the agreement setting up the anti-weaponization fund was released. Some lawyers have questioned whether Mr. Blanche, as the acting attorney general, even has the authority to order the I.R.S., a separate agency, to stop civil tax audits.
While Senate Republicans had loudly protested the $1.8 billion fund, spurring Mr. Blanche’s retreat on that provision, many have appeared to look the other way at the audit protection, a public benefit for the president potentially worth tens of millions of dollars.
“I haven’t been focused on that to tell the truth,” said Senator Susan Collins, Republican of Maine. “I think the same rules should apply to everybody.”
Andrew Duehren covers tax policy for The Times from Washington.
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