Kevin McCoy

USA TODAY

President-elect Donald Trump could face a decision that may affect whether his tax returns will continue to be audited throughout his four-year term of office.

IRS regulations call for annual audits of tax returns filed by U.S. presidents and vice presidents. But those rules, in place roughly 40 years, theoretically could be changed by the tax agency — whose current leader is under fire from Capitol Hill.

The rules are included in the Internal Revenue Service Manual, which guides actions by the nation's tax agency. It states that tax returns filed by the president and vice president "are subject to mandatory examinations," and should not get less-rigorous screening.

The protocol dates back to the Watergate era and President Richard Nixon. He refused to release his 1971 and 1972 tax returns, said they had been audited and initially opposed any re-check.

Under mounting public pressure, Nixon subsequently invited an examination by the congressional Joint Committee on Internal Revenue Taxation. The panel's review concluded that Nixon owed the federal government more than $476,000 in unpaid taxes and accrued interest.

"The inclusion was made under the direction of career, non-partisan IRS compliance personnel," Matthew Leas, the IRS chief national spokesman, said of the audit regulation. "Since then, this provision has remained in place during both Republican and Democratic administrations, as well as under IRS commissioners appointed by both parties."

However, the protocol does not have the force of federal law, and could be changed — potentially through the appointment of a new IRS commissioner.

Trump has not publicly discussed future leadership for the IRS, which is part of the Department of the Treasury. According to numerous media reports, he has considered several candidates for Treasury secretary, including Steven Mnuchin, the national finance chairman of his winning White House campaign, JPMorgan Chase CEO Jamie Dimon and Rep. Jeb Hensarling, R-Tex.

However, Trump was asked throughout the presidential campaign about his continued refusal to release his own tax returns. Citing ongoing IRS audits for several years, he said he would make his returns public when the examinations concluded.

"Look, I've been under audit for almost 15 years," the GOP nominee said during the first presidential campaign debate with Democrat Hillary Clinton in September. "And in a way, I should be complaining. I'm not even complaining. I don't mind it. It's almost become a way of life. I get audited by the IRS. But other people don't."

Current IRS Commissioner John Koskinen, serving a five-year term that's set to end in November 2017, has been under pressure from congressional Republicans angered by what they contend was the tax agency's politically motivated delays of applications for non-profit status submitted by conservative Tea Party organizations. They say Koskinen misled Congress and obstructed committees that investigated the issue, allegations he has denied.

Koskinen has also been criticized over the IRS' embarrassing 2015 cyber theft of personal data for more than 700,000 taxpayers.

Cyber hack got access to over 700,000 IRS accounts

House Republicans started the process of initiating impeachment proceedings against Koskinen with a Judiciary Committee hearing in September. But no votes were held during the session. If he leaves through impeachment or resignation after Trump takes office, Trump would nominate a successor, subject to Senate confirmation.

"I serve at the pleasure of the President and a new President can always ask me to step aside sooner," Koskinen said in part of a statement prepared for a House hearing in July.

IRS chief says impeaching him would be 'improper'

IRS commissioners haven't always stepped down for a new White House administration. Shirley Peterson, appointed in 1992 by President George H.W. Bush, officially left as of January 1993, as Bill Clinton took office. But Charles Rossotti, appointed by Clinton in 1997, stayed on for the opening two years of President George W. Bush's first term following enactment of the law that established five-year terms for IRS commissioners.

In a move to guard against any interference with the IRS, a 1998 federal law makes it illegal for executive branch officials to ask the tax agency to initiate or terminate an audit or investigations, Leas said. Convicted violators are subject to a maximum $5,000 fine and five-year prison term.

Several tax law experts recently told Politico the statute wouldn't necessarily stop the appointment of a nominee who might seek easier or tougher treatment of certain audits.

However, Robert McKenzie, a tax expert at the Arnstein & Lehr law firm's Chicago office, theorized that "a conscientious IRS employee would come forward and report it if someone tried to influence him or her on an audit."

If the IRS' presidential audit regulation remains unchanged, Trump would receive assurance that his tax returns would be treated with even stricter-than-usual IRS security.

"The location of the returns of the President and Vice President will be monitored at all times throughout the examination process," the IRS Manual states. "The returns should be kept in an orange folder at all times," and "should not be exposed to viewing by other employees."

To guard against unauthorized prying eyes, the manual also instructs that the returns should be locked away when the examiner is not working on them.

"The bottom line is he'd continue to be audited," Bryan Skarlatos, a tax law expert at the Kostelanetz & Fink law firm in New York City said of Trump. "And there would be enhanced security."

Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc



