U.S. says federal court should decide Trump tax return dispute

NEW YORK (Reuters) - A dispute over whether New York state prosecutors can obtain President Donald Trump’s tax returns raises “significant constitutional issues” and should be decided in federal court, not state court, the U.S. Justice Department said on Wednesday.

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Manhattan District Attorney Cyrus Vance subpoenaed eight years of Trump’s tax returns and other records from the president’s longtime accounting firm Mazars USA on Aug. 29 as part of a criminal investigation. The scope of that investigation is unclear.

Trump sued Vance last month in Manhattan federal court, saying a sitting president is immune from criminal investigation. Vance has moved to dismiss the case, arguing that the dispute belongs in state court, where a grand jury issued the subpoena.

In a filing in Manhattan federal court, the Justice Department said the dispute should stay in federal court because Trump’s claims “implicate the very relationship between the federal and state governments,” while “the state’s interest in litigating such an unusual dispute in a state forum is minimal.”

The U.S. government is not a party to the case, and the Justice Department did not take a position on whether Vance should get the tax returns.

Marc Mukasey, a lawyer for Trump, and a spokesman for Vance’s office both declined to comment on the filing.

Vance’s office has agreed to not seek to enforce the subpoena until Oct. 7, or two business days after the judge rules on Trump’s challenge, whichever comes first.

Mazars, also named as a defendant in Trump’s lawsuit, said in a statement it would “respect the legal process and fully comply with its legal obligations.” It said that as a matter of policy, it did not comment on its work for clients.

While campaigning for the presidency in 2016, Trump broke with a decades-old convention of candidates releasing their tax returns publicly. His lawsuit against Vance is one of several efforts to shield his personal finances from investigation.

Trump is separately trying to block Deutsche Bank AG from handing over financial records for him, several members of his family and his company to Congress. The bank has said the records include two individuals’ tax returns.

A federal appeals court in Manhattan heard arguments in that case on Aug. 23 and has yet to rule.

Reporting by Brendan Pierson in New York; Editing by Tom Brown and Howard Goller