Cohen: Trump feared audit if he released tax returns

WASHINGTON (Reuters) - U.S. President Donald Trump’s former personal lawyer Michael Cohen said on Wednesday that Trump has not released his tax returns because he feared that public scrutiny would lead to an audit and tax penalties.

In congressional testimony that could aid efforts by House Democrats to obtain Trump’s returns, Cohen also said he does not believe the president is under audit, despite repeated claims by Trump that he could not release his returns because they are being audited by the Internal Revenue Service.

Members of the House of Representatives tax committee also pointed to other segments of Cohen’s testimony as topics likely to draw further scrutiny, including claims that Trump deflated the value of his properties to lower his tax bill and called the government “stupid” for giving him a $10 million tax refund in 2008.

As a presidential candidate in 2016, Trump broke with a decades old practice of making his tax returns public and continues to refuse to release them as president.

“What he didn’t want is to have an entire group of think tanks that are tax experts run through his tax return and start ripping it to pieces, and then he’ll end up in an audit and he’ll ultimately have taxable consequences, penalties and so on,” Cohen told the U.S. House of Representatives Oversight Committee.

“I presume that he is not under audit,” he added.

Democrats on the House Ways and Means Committee, the tax oversight panel that plans to request Trump’s returns from Treasury Secretary Steven Mnuchin, has considered focusing on the IRS audits that Trump cites as the reason for not releasing the documents.

Democrats are trying to back up their looming request with an iron-clad legal argument for what is expected to be an unprecedented court battle.

But Republicans say that obtaining Trump’s returns would “weaponize” the confidential tax documents for political purposes. “This is about an abuse of power by Congress,” Representative Kevin Brady, the committee’s top Republican, said earlier this month.

But Democratic committee members on Wednesday said they were struck by Cohen’s remarks about Trump receiving a multimillion-dollar refund from the IRS after slashing wages for his employees.

“That is of concern. Because that means there’s potential cheating on his taxes,” said Democratic Representative Judy Chu.

Cohen said Trump was able to lower real estate tax bills by deflating the value of his golf courses and requesting a tax deduction.

“There are three or four things of a financial nature that Ways and Means could be interested in and that the IRS should be looking into,” Democratic Representative Bill Pascrell said.

Reporting by David Morgan, Ginger Gibson and Doina Chiacu; editing by Jonathan Oatis and Cynthia Osterman