Tax Professionals Suggest Trump May Owe Taxes on ‘Anti-Weaponization Fund’

While several Democratic governors have vowed to impose a 100 percent tax on any payout from the $1.776 billion “Anti-Weaponization Fund,” some tax law analysts believe that President Trump will end up owing taxes on awards from the fund. The acting attorney general, Todd Blanche, announced earlier this month that the Justice Department will set up the fund, using the Treasury Department’s Judgment Fund, which was created to pay federal court settlements. The Trump administration says the Anti-Weaponization Fund — which was created as part of an agreement to resolve Mr. Trump’s lawsuit against the Internal Revenue Service — will be used to “provide a systematic process to hear and redress claims” of anyone who suffered weaponization and lawfare.”Politico cites a “range of federal income tax experts” who believe the president would be the legal beneficiary of the nearly $1.8 billion. A tax law professor at Duke University School of Law, Lawrence Zelenak, told the outlet, “It’s unique, and we haven’t really seen anything like this before.”“But I think the tax analysis is actually not all that complicated,” he added, suggesting that Mr. Trump is “more likely than not” responsible for paying taxes on the roughly $1.8 billion.The statute that created the Judgment Fund stipulates that the funds can only go to actual litigants. However, the Trump administration has said that anyone can apply for the payments from the Anti-Weaponization Fund. A five-member commission will evaluate whether the claimants were victims of weaponization. Republicans and Democrats have raised questions about the plan, noting that it is the first time the Judgment Fund has been used in such a manner. Settlement payouts are usually taxable, unless they are related to compensation for sickness or medical injuries. The agreement that created the Anti-Weaponization Fund includes a clause that appears intended to settle the question of whether Mr. Trump will have to pay taxes on any payouts, saying the sum involved “does not represent the value of any current claim” by the plaintiffs in the IRS lawsuit, who include the president. Rather, the money is “based on the projected valuation of future claimants’ claims” from the fund. It adds that the money is “not taxable income as to Plaintiffs, who receive no economic benefit from this Settlement Agreement.”But the director of the Tax Law Policy Center at NYU, Brandon DeBot, said in a blog post, “President Trump used the threat of a lawsuit against the government alleging taxpayer privacy violations to draw $1.8 billion from the public for himself and his political allies for unrelated purposes.”“It’s difficult to see how this could be a valid use of the Judgment Fund, and the payout should be taxable as income to the president and other plaintiffs since it is settling their claims,” he said. Mr. DeBot noted that the Justice Department says that Mr. Trump will receive “no monetary payment or damages of any kind” from the Anti-Weaponization Fund. But, he said, the statement “only” refers to Mr. Trump’s lawsuit against the IRS, and the claims by the other plaintiffs in that case.“If the settlement funds are payable to non-parties to this case, then they should represent an assignment of income from the parties eligible to receive payment,” he wrote. “That income should remain taxable to the parties in the litigation (President Trump, his family, and one of their businesses), for whom this fund was a condition of their settlement agreement.”However, a tax law professor at the University of Iowa, Andy Grewal, challenged that view. He told Politico that because Mr. Trump “has no control over whom the money goes to,” the funds “would not be income for him.”While the settlement to end Mr. Trump’s lawsuit shields him from pending and future audits, a tax law professor at the University of California, Berkeley, Brian Galle, told Politico he does not “think there’s any way that this purported agreement not to audit the president can bind any later administration.” He suggested a future presidential administration could look into whether Mr. Trump is responsible for paying taxes on the fund. The future of the fund is uncertain as it is facing a pending legal challenge. On Friday, a federal judge blocked any payouts before a hearing on June 12. The Justice Department did not respond to the Sun’s request for comment by the time of publication.

Tax Professionals Suggest Trump May Owe Taxes on ‘Anti-Weaponization Fund’

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