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Two separate New York State fraud investigations against President Trump and his companies, one criminal and the other civil, have expanded to include tax write-offs on millions of dollars in consulting fees, including some appear to have gone to Ivanka Trump, according to people. with knowledge of the subject.
The investigations – a criminal investigation by Manhattan District Attorney Cyrus R. Vance Jr., and a civil investigation by State Attorney General Letitia James – are being conducted independently. But both offices have issued subpoenas to the Trump Organization in recent weeks over expense cases, people said.
The subpoenas were the final stages of two investigations by the Trump organization and underline the legal challenges facing the president when he steps down in January. There is no indication that his daughter is at the center of any of the investigations, which the Trump organization has ridiculed as being politically motivated.
The development follows a recent New York Times review of more than two decades of Mr. Trump’s tax records, which found that he had paid little or no federal income tax in most years, in largely because of its chronic business losses.
Among the revelations, Mr. Trump reduced his taxable income by deducting approximately $ 26 million in fees from unidentified consultants as a business expense on numerous projects between 2010 and 2018.
Some of those fees appear to have been paid to Ms. Trump, the Times found. In a 2017 disclosure she filed while joining the White House as a presidential adviser, she said she received payments from a consulting company she co-owned, totaling $ 747,622, which exactly matched the fees. consultation claimed as tax deductions by the Trump Organization for hotel projects in Hawaii and Vancouver, British Columbia.
The subpoenas focused on fees paid to the company for its disclosures, TTT Consulting LLC, and made up only a portion of the $ 26 million, according to a person familiar with the matter. The company’s name appears to be a reference to Ms. Trump and other members of her family.
Ms Trump was a senior executive at the Trump companies that made the payments, meaning she appears to have been treated as a consultant while also working for the company. While businesses can deduct professional fees, the Internal Revenue Service requires consulting agreements to be market-based and reasonable, as well as “ordinary and necessary” to the management of a business.
Alan Garten, general counsel for the Trump organization, said in a statement that “this is just the latest fishing expedition in a continuing attempt to harass the company.”
“Everything was done in strict compliance with applicable law and under the advice of lawyers and tax experts,” he added. “All applicable taxes have been paid and no party received an undue advantage.”
The IRS has sometimes rejected attempts to write off consulting fees if they were aimed at avoiding taxes and did not reflect an independent business relationship. It is not known if the IRS has ever questioned the Trump organization about this practice. The tax benefit for Mr. Trump of deducting fees from his companies’ federal returns would also be reflected in his New York returns, which could be of interest to the state.
A tax adviser who has worked with the Trump organization said such consulting fees were not uncommon.
The offices of the district attorney and attorney general declined to comment. Ms Trump did not respond to requests for comment, but said on Twitter after the post that “there was no tax benefit.”
Few details have been publicly disclosed about the district attorney’s investigation, the only known active criminal case involving Mr. Trump. Mr Vance’s office opened the investigation more than two years ago, initially focusing on the role of the Trump organization in silencing the money paid during the 2016 presidential campaign to Stormy Daniels, a pornographic actress who claimed to have had an affair with Mr. Trump.
The investigation has been on hold since last fall, after the president filed a lawsuit to block a subpoena for his tax returns and other financial records.
The legal fight is before the United States Supreme Court for the second time, with a ruling expected soon. Prosecutors have suggested in court documents that their investigation has extended well beyond silence over money and focuses on a number of potential financial crimes, including insurance and banking fraud, evasion tax and grand theft.
Mr Trump said the investigation was part of “the greatest witch hunt in history”. Mr. Vance and Ms. James are both Democrats.
Ms James’ civil investigation centers on the business practices of the Trump organization, although she may make a criminal referral and seek permission from the administration of Governor Andrew M. Cuomo or the State Comptroller to lay charges on her own.
His investigation began last year in March, after Michael D. Cohen, the president’s former lawyer, told Congress that Mr. Trump had inflated his assets in the financial statements to guarantee bank loans and sub-loans. estimated elsewhere to reduce his tax bill. In August, the attorney general’s office asked a judge to force President Eric Trump’s son to testify in the investigation, and he did so last month. Eric Trump is executive vice president of the Trump organization, which manages its day-to-day operations.
Investigators in Ms James’ office examined a wide range of transactions. One of them is a 2010 financial restructuring of the Trump Hotel & Tower in Chicago, when the Fortress Credit Corporation forgave more than $ 100 million in debt. The attorney general’s office said in court documents filed in August that the Trump organization had thwarted efforts to determine how this money was reflected in its tax returns and whether it was being reported as income, as required by law. in most of the cases. The Times’ analysis of Mr. Trump’s financial records found that he had avoided federal tax on almost all of the canceled debt.
The Attorney General’s office is also examining whether the Trump organization used inflated valuations when it received significant tax breaks for pledging to hold land where its development efforts failed, including in its Seven Springs estate. in Westchester County, New York.
“The outcome of the election will have no impact on our investigations,” Ms. James said in a television interview this month, adding, “No one is above the law. We will simply follow the facts and evidence, wherever they take us.
Mr Trump has frequently assaulted Ms James, the latest in a series of New York attorneys general he has clashed with. Ms James presided over the final stages of an investigation that led to the shutdown of her scandal-tainted charitable foundation. She is also seeking to dissolve the National Rifle Association, a key ally of the president.
“They pursue everything, always in search of a crime”, tweeted last year, although his own lawsuit is legendary. His campaign and his allies have filed more than two dozen lawsuits in recent days aimed at overturning the election results he lost this month.
The review of the honoraria apparently paid to his eldest daughter risks eliciting even more vitriol from the outgoing president. And that raises the question of whether the payments were a tax-deductible way for him to compensate his children, or to avoid taxes on gifts he might incur by transferring wealth to them, which the father of Mr. Trump had done so through legally questionable ploys uncovered by The Times in 2018.
This is not the first investigation by the Attorney General’s office to involve Mr. Trump’s children. As part of the settlement that led to the closure of the president’s charitable foundation, Trump and her brothers, who were board members, were to receive “training on the duties of officers and directors of charities. so that they cannot allow illegal activity. they supervised the Trump Foundation again, ”under the terms of the agreement.
In September, after a state judge dismissed arguments by Trump’s lawyers to further delay Eric Trump’s testimony, the president’s son called the investigation a “continuing political vendetta.”
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