He articulated the legislative needs that the House Ways and Means Committee intends to address, and he provided assurances that safeguards would be put in place to protect the taxpayers’ privacy interests.
History of confidentiality
Since the early 20th century, Congress’s authority to obtain tax returns and return information from the Internal Revenue Service has played a critical role in its legislative oversight authority. The Revenue Act of 1924 established Congress’ power to compel tax return and return information, notwithstanding the general rule of taxpayer privacy. Interestingly, the Revenue Act was passed under circumstances similar to Congress’s pursuit of President Trump’s tax returns.
In 1921, Congress modified the law that designated tax returns as “public records” to permit their release if ordered by the President pursuant to rules prescribed by the secretary of the treasury.
Teapot Dome and Treasury Secretary Mellon
The rule of tax return secrecy, however, proved to be a roadblock for two important Congressional investigations of the 1920s: Teapot Dome and Treasury Secretary Mellon’s financial dealings.
In 1922, Albert B. Fall, secretary of the interior in President Warren Harding’s administration, was alleged to have accepted bribes from businessmen in exchange for no-bid leases on public oil reserves, including the Teapot Dome oil field in Wyoming.
As part of that investigation, Congress sought the tax returns of individuals it believed to have been involved in the scandal. Calvin Coolidge, President Harding’s successor (Harding died unexpectedly in office) initially refused to provide the records. Although Coolidge ultimately relented, Congress resolved that its ability to obtain tax return information to aid its investigations should not be dependent on the President’s approval.
At about the same time, committees of Congress sought to obtain tax return information from Treasury Secretary Andrew Mellon to determine whether his personal business interests influenced his tax policy recommendations. Here too, Congress believed that its investigation was hampered by its need to obtain executive branch approval to obtain tax returns.
The Revenue Act of 1924
Nothing in the legislative history or case law would appear to vest Secretary of Treasury Mnuchin with the discretion to disobey a request from Congress.
Congressional legislative and investigatory powers
Beyond the Committee’s statutory right to the Trump tax information, Congress’s broad oversight powers provide a clear additional basis for the requests.
First, if Congress has a legitimate legislative purpose, it can exercise its investigative powers.
In this case, Chairman Neal appears to have met the threshold for establishing a legitimate legislative need for obtaining the tax information consistent with the Revenue Act and longstanding case law.
Second, the powers of Congress to investigate are very broad and fundamental to our constitutional system of checks and balances.
Recently, the scope of Congress’s investigative powers was challenged, when Fusion GPS (the company that hired Christopher Steele of Steele Dossier fame) sought to have the U.S. District Court for the District of Columbia enjoin the enforcement of a subpoena that its bank had received from Chairman Devin Nunes of the House Permanent Select Committee on Intelligence for certain of Fusion’s financial records. In that lawsuit, Fusion opposed compliance with the subpoena on the grounds that Congress lacked a valid legislative purpose in seeking the information and that the information request was overbroad and not relevant to the Committee’s investigation. The House Permanent Select Committee intervened in the case in support of its subpoena.
In ruling against Fusion’s effort to quash the subpoena, Judge Leon observed that “[w]hile Fusion is correct that “Congress’ investigatory power is not, itself, absolute” and that it “is not immune from judicial review,” this Court will not – and indeed, may not – engage in a line-by-line review of the Committee’s requests.
In the end, if the requested information is not furnished, the courts will decide, thereby resolving a constitutional standoff. That is why we have checks and balances.