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Trump tax fight with House put on hold for McGahn ruling

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House Democrats’ lawsuit seeking President Donald Trump’s federal tax returns was put on hold as a judge said he’s waiting for a higher court’s ruling in a separate case on whether Congress can make ex-White House counsel Don McGahn testify.

The president, who has been fighting in court on several fronts to guard his financial information, got the reprieve Tuesday when U.S. District Judge Trevor McFadden in Washington issued a stay on the tax case, following a phone conference with lawyers for both sides. McFadden revealed his decision in a single-sentence docket entry without elaborating on his reasoning.

The House Ways and Means Committee sued the U.S. Treasury Department and its Internal Revenue Service in July to force them to turn over six years of the president’s tax records, after an earlier request by letter was rebuffed by Treasury Secretary Steven Mnuchin. McFadden, whom Trump named to the bench, heard arguments on Nov. 6. Trump broke with four decades of tradition by refusing to release his tax returns as a nominee.

In August, the House Judiciary Committee filed a separate suit seeking an order forcing McGahn to obey a subpoena for his congressional testimony. He spurned the subpoena at the direction of the president. U.S. District Judge Ketanji Brown Jackson, appointed by Barack Obama, ruled for the House in November, and the administration appealed.

Arguments in the case were heard by the U.S. Court of Appeals in Washington on Jan. 3. McFadden is waiting for the result.

“McFadden is dragging his heels to avoid ruling against Trump,” said Steven Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center. He said the judge seems to be drawing a tenuous connection between the two cases.

“In an earlier case, McFadden rejected Congress’s challenge to Trump’s border wall spending but acknowledged that Congress had extensive authority to pursue oversight and investigation of the executive branch,” Rosenthal said. “I think McFadden does not want to follow his own precedent.”

The Ways and Means committee, the Justice Department and Trump attorney William Consovoy didn’t respond to emailed requests for comment on the court’s decision. A transcript of the phone conference wasn’t immediately available.

Both cases turn on whether Congress can sue the executive branch, said Andy Grewal, a tax and law professor at the University of Iowa.

“That is a deeply debated and uncertain question, present in both controversies,” Grewal said. “In McGahn, the case is treated as the House suing the executive branch, even though McGahn is now a private person. And in the tax returns case, you have a lawsuit directly between the House and the Treasury.”

Both cases also deal with the potential court enforcement of a congressional subpoena against an executive branch official. But with McGahn, Congress is seeking to learn whether Trump engaged in a pattern of obstruction, which relates to the House’s impeachment of the president. That’s the issue on which Jackson sided with the Democrats.

The lawmakers have something else going in their favor. The tax code says the chairs of the congressional tax committees can request anyone’s returns.

The tax case is Committee on Ways and Means v. U.S. Department of the Treasury, 19-cv-1974, U.S. District Court, District of Columbia (Washington).

— Andrew Harris and Laura Davison, with assistance from Aysha Bagchi

Andrew Harris and Laura Davison
Bloomberg News
Tax returns Donald Trump Lawsuits