ILYA MARRITZ: I want to tell you about a building in Chicago that may be failing. To look at it, you would not think this building is in trouble. It's one of the city's biggest buildings, right in the center of town: Trump International Tower.
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TIM NOVAK: It’s a very tall glass building, sitting along the banks of the Chicago River, on the north bank of the river. It, uh, proclaims his name on it, as most of his properties do.
MARRITZ: This is Tim Novak, a reporter with the Chicago Sun Times. To be clear, he’s not the one saying the building is failing. It's the Trump Organization's own lawyers. They're arguing in court that the city has vastly overvalued the tower.
NOVAK: In general, the argument is that the building is not worth what the assessor believes it to be. For instance, the, uh, retail space — the storefronts along the base of the Trump Tower have never been filled, even though the building’s been open for eight years. So the — at the hearing in December, they argued the value of the space was actually less than zero.
MARRITZ: [IN DISBELIEF] Less than zero?
MARRITZ: It’s quite a turnaround for a man who bragged in the finale of The Apprentice, season one …
DONALD TRUMP: [OVER DRAMATIC MUSIC] The Trump International Hotel and Tower Chicago could have a value of $1.2 billion, and we'll raise the standards of architectural excellence throughout the world. [CHEERING AND APPLAUSE]
MARRITZ: Once it was complete, the story changed. In a brief, one of the lawyers representing the building called the retail space, with its sweeping views of the Chicago River, quote, “unleasable.”
They've also argued that the original plan of selling rooms in the portion of the building that's a hotel is a, quote, “failed business model.” These arguments are part of a strategy that has already saved Trump over $14 million in taxes by disputing the city's assessments. Trump may yet save more money on his “failing tower” because he has not one, not two, but five active lawsuits against the city of Chicago, all for that same building, arguing for further tax reductions.
NOVAK: There are cases pending from 2010, 2012, 2014, 2015. The most recent one was filed last May.
MARRITZ: This is not so unusual. In Chicago, property owners sue to reduce their taxes all the time. But think about it from Chicago's perspective, the city is fighting off a lawsuit from the Trump Organization while Trump is president. He hasn't divested from his company. He can even draw income from it. President Trump and the city have a contentious relationship — like in this Trump Tweet, which got read on the news.
NEWS ANNOUNCER: “If Chicago doesn't fix the horrible carnage going on — 228 shootings, 42 killings, up 24% — I will send in the feds.” That’s the expression.
MARRITZ: And Chicago mayor Rahm Emanuel isn't so sweet on Trump either.
RAHM EMANUEL: We’re — our motto? A city he'll never sleep in. [LAUGHTER] We don't want him.
MARRITZ: Tim Novak says Trump may eventually win back some money from the city of Chicago. And when he does, Chicago will have to pay interest to the man who is now President of the United States.
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MARRITZ: Hello, and welcome to Trump, Inc., the podcast from ProPublica and WNYC that explores the business of being president Trump. I'm Ilya Marritz. Today, all the president’s taxes. You probably know that candidate Donald Trump never released his income taxes — as all other recent candidates for president have done.
DONALD TRUMP: I will absolutely give my return, but I'm being audited now for two or three years … [FADES UNDER]
MARRITZ: He’s bragged throughout his career about avoiding taxes and strong-arming government into giving him tax breaks. He says it makes him smart.
HILLARY CLINTON: So, if he’s paid zero —
TRUMP: That makes me smart.
MARRITZ: And now that he's in office, he oversees the IRS. He signed a new tax bill into law.
PRESIDENT TRUMP: This is, again, the biggest tax cut — biggest reform of all time.
MARRITZ: And we found the President's company is a plaintiff in 12 property tax cases around the country, 9 of them filed since he's become president — and there may be more.
LARRY NOBLE: The idea that the president's companies would, um, sue localities is — is really a dangerous precedent. It is, in some ways, very threatening.
MARRITZ: Larry Noble is with the Campaign Legal Center, a nonpartisan good-government group. He says local governments can't be certain whether they're really dealing with the Trump Organization, the business, or, also, the Trump White House.
NOBLE: So you have to really be concerned about whether or not, if you go against the president’s, uh, business on a tax decision, that all of a sudden you're going to find yourself on the wrong end of a federal deal. It may have been an absolutely valid decision by whatever agencies involved — or if the White House was involved — the decision may make perfect sense. Nobody's going to believe it.
MARRITZ: We wanted to get a clearer picture of how and where local governments are trying to settle tax bills with the President. ProPublica researcher Katherine Sullivan has been compiling a list. Hey, Katherine.
KATHERINE SULLIVAN: Hello.
MARRITZ: And we also have Meg Cramer, senior producer of Trump, Inc. Hi, Meg.
MEG CRAMER: Hey there.
MARRITZ: So the first place on our list is Palm Beach County, Florida, and the Trump National Golf Course. This is near Mar-a-Lago, right?
SULLIVAN: It is. It's one of the courses where Mar-a-Lago members can go to play golf.
MARRITZ: And what's happening there?
SULLIVAN: So Trump has been challenging his taxes there for years. This is the fifth year in a row that he's been claiming his assessments are too high. In a financial filing during the campaign, he said this course is worth at least $50 million.
SULLIVAN: Fifty. But in a recent lawsuit, Trump National Palm Beach claims the property is worth only $15 million.
MARRITZ: Big difference.
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MARRITZ: Next stop on our tour, New York City.
SULLIVAN: The Trump Organization filed six lawsuits there, just last year: one on Trump Palace, Trump Park, Trump Plaza, Trump Tower. These are all big buildings in Midtown.
MARRITZ: And sticking with the Tristate area, two more from your list: Bedminster, New Jersey, and Colts Neck, New Jersey.
CRAMER: Okay. These towns are not in court with Trump right now. They're on the list because what Trump is doing there to avoid paying taxes is very creative. They have brought a small herd of goats onto the Bedminster course. The goats eat invasive plants. In Colts Neck, they make hay. All this lets them classify these properties as farmland, which could be saving them up to $80,000 a year.
MARRITZ: I mean, Jimmy Carter was a farmer.
CRAMER: And, Ilya, we also heard from a listener about one of the most interesting tax cases playing out right now. His name is Nick Verbitzki, and he actually went to the courthouse in Westchester, north of New York City.
NICK VERBITZKI: Okay. We are in the third floor records department in the county clerk's office for Westchester County.
CRAMER: And he did a search for Trump lawsuits in the county records.
VERBITZKI: Is this where I can sign up for an account? Uh, just to be able to print documents.
VERBITZKI: Okay, great.
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CRAMER: Nick’s record search got us interested. And we took a closer look at one town that has been settling tax lawsuits with a Trump golf course for years — until Trump ran for president. Katherine and I went there to check it out.
MARRITZ: I’m going to hand off this story now to Katherine and Meg. I'll be back in a little bit to talk income taxes.
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CRAMER: The Trump National Westchester is in the town of Ossining. It’s along the Hudson River, about 35 miles from New York City.
CRAMER: That’s the club?
SULLIVAN: And is this all the golf course down here?
CRAMER: Oh, yeah, there's the green.
CRAMER: We drove around one side of the green, saw a couple of sand traps and the clubhouse up on a hill. It's got a lot of windows and green copper accents on the roof. There's a big clock on a post out back. When we got to the front gate at Trump National, the security guard stopped us: members only.
CRAMER: Good, how are you?
GUARD: Where you going?
CRAMER: We were going to the parking lot. Are we able to do that or do we have to be members to go in?
GUARD: What are you going in for?
CRAMER: We just wanted to take a look at it. We're both reporters. We're doing — we’re not going to talk to anybody or anything. We just wanted to see.
CRAMER: Trump bought the property in 1996, in foreclosure for $8 million. He says he spent $40 million to rebuild it. Now the course has a waterfall that's over a hundred feet tall. Rudy Giuliani, Jack Nicholson, and Bill Clinton have all been members. Katherine searched court records to find out what the tax history is between the golf club and the town of Ossining.
SULLIVAN: The first instance I found where they went all the way to court over their property taxes was 2002.
CRAMER: They filed something called a tax cert, which is a lawsuit against a local government tax assessor.
SULLIVAN: It’s expensive to fight a tax cert, and cities and towns almost always settle. That's what happened here.
CRAMER: So Trump National Westchester got a tax reduction. It filed for a reduction again the next year, and again, the town settled. We found more requests for reductions in 2007, 2008 and 2009. In 2008, during the recession, its assessed value was cut by more than half through a settlement with the town.
SULLIVAN: And then, in 2015, the Trump National Westchester filed another tax cert, three days before Trump announced his candidacy.
CRAMER: [OVER VEHICLE SOUNDS] After we got turned away at the golf course, we took a car to the town offices to talk to Dana Levenberg Ossining’s town supervisor.
DANA LEVENBERG: Well, I would say that the thing that's most unusual about this case is that, publicly, as a candidate, when Donald Trump was running for president, he talked about the value of many of his properties — one of which was Trump National. And he said, I think, in federal tax filings, um, that it was worth $50 million.
CRAMER: It was a financial filing where Trump claimed it was worth at least that much.
LEVENBERG: At the same time, his lawyers had filed a grievance in the town stating that it was only worth, I think $1.4 million. What? [LAUGHTER] “How can this be?,” you say.
CRAMER: Reporters picked up on that $48.6 million discrepancy and people noticed. There was a letter writing campaign.
LEVENBERG: Victoria, do you have the postcards that we collected from all the people about the golf course?
CRAMER: Postcards came in from around the country. Victoria Cafarelli, who works in the town office, brought in a stack of photocopies of them, held together with a binder clip.
LEVENBERG: Allen, Texas; Phoenix, Arizona …
VICTORIA CAFARELLI: We got a call from somebody in Florida once.
CRAMER: One person wrote, “How low can it go?”
LEVENBERG: “How low can it go? How low will you assess a $50 million golf course when a rich man asks?”
CRAMER: The town didn't think the golf course was actually worth $50 million. They had valued it at $15 million. Still, that's 10 times more than what the company said it was worth. And this time, instead of settling, the town decided to let Trump National Westchester take them to court.
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LEVENBERG: I think we're not used to dealing with a President of the United States suing local governments to not pay their share of taxes. You know, we hear stories about, um, Mr. Trump seeking — not playing nice in the sandbox. Usually, that somehow involves money or, uh, taking them to task in public on any sort of thing, right? As president, I would hope that that wouldn't be something to be fearful of. But I do think that it's certainly as — uncomfortable at best.
CRAMER: Levenberg didn't want to talk about whether or not politics factored into the town's decision to go to court — Westchester County leans Democratic. She says the town has a fiduciary responsibility to spend taxpayer money well, and that the legal expenses are worth it in the long run — if you win.
SULLIVAN: While the case is moving through the courts, the Trump Organization is still filing lawsuits, the latest one from 2017.
CRAMER: The town's lawyer for the case is Ben Felter Leavitt. He came by Dana Levenberg's office while we were talking with her, and, just out of curiosity, I asked him if he likes to golf.
BENJAMIN LEAVITT: I think, personally, that golf is, uh, eco-terrorism, and yet, keeping with my own quirks, I have a — a driver in my trunk. [LAUGHS] And I actually go to driving ranges because I find something really zen about the repetitive hitting a very small object off into the distance.
CRAMER: Leavitt’s argument in the case is that private golf courses in New York state aren't assessed the right way. They're treated too much like public golf courses, and end up with a lower assessed value because of it.
LEAVITT: And so, is it weird to be on a case with the President? Yeah, [LAUGHS] it is. Um, but it's, I think fortuitous that — because it has facilitated some attention, some resources being devoted to, uh, you know, a dark corner of tax law that is unseen and, quite frankly, boring, and so wouldn't get any attention — and yet, is a real locale of inequality.
ANDREW HAYASHI: The assessment process — so, it's an appraisal process, and appraisals are much more art than science.
CRAMER: That’s Andrew Hayashi. He's a tax law expert and an associate professor at the University of Virginia School of Law. I wanted to know how these assessments work — how you can pin down the right one value for a property. He says that unique properties, like golf courses and luxury towers, are especially difficult to assess, which makes their assessments easy to dispute. The Trump brand might make these assessments even more complicated, now that Trump's president. Take a golf course, for example. Its value could depend on something like the fees that members pay to be a part of the club.
HAYASHI: Presumably, those fees are going to depend on how good that brand is so many years from now, and that's pretty speculative. You can imagine things going pretty hard in one direction or the other, right? It could be that the — the intellectual property of that brand, yes, probably makes — makes these kinds of properties even more difficult to value.
CRAMER: If the Trump National Westchester wins a reduction, the town will have to pay the money back, with interest. The local school district has set aside money in its budget, just in case. When the judge finally decides on the assessment, that number gets locked in for three years. Then, Trump National Westchester can start the whole process again.
We reached out to lawyers for the Trump Organization to ask how these properties can be worth just a fraction of what Trump claimed they were on his own financial disclosures. A spokesperson called these tax lawsuits part of a routine practice to ensure fair treatment. The fair treatment part is questionable.
ProPublica and the Chicago Tribune recently published an investigation showing that the tax appeal process in Cook County is deeply unfair, especially to lower-value property owners. It gives an advantage to big, commercial properties like the Trump International Tower. We asked the White House if it’s a conflict of interest when the President's company sues local governments. We didn't hear back.
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MARRITZ: That was Meg Cramer, Trump, Inc. senior producer, and Katherine Sullivan from ProPublica. When we come back: how the tax overhaul the President signed into law might save him and his family millions in income taxes.
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MARRITZ: Hey! It’s Ilya. I'm back. There's another way Donald Trump can give less money to the government. And that is directly by using the powers of the presidency to help rewrite the federal tax code. The income tax overhaul that Trump signed into law last year is pretty much the only major piece of legislation that he's signed as president. And the new law is not neutral on Donald Trump and the Trump family. Lily Batchelder says it will save them a lot of money.
MARRITZ: Hey, it's Ilya. How are you?
LILY BATCHELDER: Good. How are you?
MARRITZ: Good. Nice to make voice contact!
MARRITZ: She’s a Professor of Law at New York University and was Deputy Director of the White House National Economic Council under President Obama. And the tax law, she notes, is going to cost the U.S. Treasury $1.9 trillion, according to the Congressional Budget Office. That's one-point-nine, followed by 11 zeros.
BATCHELDER: It's a pretty large tax cut that is heavily skewed towards the wealthy.
MARRITZ: All wealthy people will benefit, but some of the biggest tax cuts are for wealthy people invested in real estate through private family businesses — like Trump's.
BATCHELDER: We do know, from his financial disclosure forms, that he owns about 500 pass-through businesses. And the new bill has a deduction for pass-through business income.
MARRITZ: A pass-through business is generally when the business and the business owner are one and the same. The business pays no taxes, but the owner pays taxes on their business income. Could be a barber, could be Donald Trump. In the new law, high-earning pass-through businesses that don't have many assets or property — like doctors and lawyers? They're limited in the deductions they can take.
BATCHELDER: It appears that real estate, specifically, in a last-minute change, would not really be subject to these limitations.
MARRITZ: The new law also lowers the top tax rates on personal income.
BATCHELDER: And so, between the two of those, it means that someone who is very wealthy and has a lot of pass-through businesses will potentially see their top marginal tax rate fall from 39.6% under prior law, to 29.6%. So that's going down about a quarter.
The New York Times actually went back and looked at the one tax return we've seen of his from 2005 and calculated that, if we applied the new law to that income that he had in 2005, this deduction of the lower rates would have saved him $11 million.
MARRITZ: There’s another big way the Trump family business can benefit — through the new reduction in the estate tax.
BATCHELDER: — which is the most progressive tax that we have in the federal tax system.
MARRITZ: Under the old tax code, you'd pay a 40% federal tax on any inheritance over $11 million. Now, under the new code, those taxes kick in at $22 million.
BATCHELDER: So, assuming that the President is worth more than $22 million, that means that his heirs will save $4.4 million when he passes.
MARRITZ: $4.4 million.
BATCHELDER: And again, this is just benefiting, essentially, heirs of families that own $11 million or more.
MARRITZ: One more thing Batchelder says should help Trump. This new law reduces the impact of the alternative minimum tax, which targets high-income filers.
The tax overhaul isn't all about cuts for the wealthy — some of them could end up paying more, because Congress reduced deductions for mortgage interest, for state and local taxes, and for property taxes. That will affect high earners in high-tax states like New York and New Jersey.
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MARRITZ: And there are a few other revenue-raisers, also known as tax increases. Lily Batchelder noticed something curious about them.
BATCHELDER: So, one is that the bill limits deductions for a business interest payments.
BATCHELDER: But real estate is specifically carved out of that limit.
MARRITZ: You’re kidding?
BATCHELDER: Nope. [A VERY LIGHT LAUGH] Um, another is that the bill, uh, eliminates something called like-kind exchanges, where you can trade properties and not pay the capital tax on that trade. And, again, the only industry — industry carved out from the repeal of like-kind exchanges is real estate.
MARRITZ: Every president who signs a tax bill into law is making changes that will affect his own bottom line. Past presidents have put their assets in blind trusts, so they didn't know exactly how they'd be affected. This president is different. He knows what he owns.
PRESIDENT TRUMP: Okay, Michael.
MARRITZ: Coming up, on Trump, Inc.
MICHAEL COHEN: Good afternoon, everybody. My name is Michael Cohen. I'm an executive at the Trump Organization.
MARRITZ: Donald Trump's deal-maker.
COHEN: Seven months ago, at the request of a dear friend of mine from Georgia, Giorgi Rtskhiladske, I traveled to the Republic of Georgia to explore several real estate opportunities on behalf of Mr. Trump.
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MARRITZ: Trump, Inc. is produced by Meg Cramer. The associate producer is Alice Wilder, and the engineers are Wayne Schulmeister and Merritt Jacob. The editors are Charlie Herman and Eric Umansky and Robin Fields. Jim Schachter is the Vice President for News at WNYC, and Steve Engelberg is the Editor-in-Chief of ProPublica.
Original music is by Hannis Brown. Special thanks to listener Nick Verbitski, who got us interested in property taxes in Westchester. Thanks also to Jeff Ostrowski from the Palm Beach Post, who's been covering the Trump Organization lawsuits there. ProPublica’s Jason Grotto and Sandhya Kambhampati have done spectacular reporting on all the ways Chicago's tax system goes easy on big property owners like Donald Trump, while harming the little guy. We’ve posted a link on our website, TrumpIncPodcast.org.
Additional support for WNYC was provided in part by the Park Foundation. Making sense of Trump world is an enormous group effort, involving tipsters, citizen journalists, and reporters. I'm looking at you, David Fahrenthold.
DAVID FAHRENTHOLD: This is something the Trump Organization always does — it always challenges the tax valuation and claims that the properties … where Trump, in other walks of parts of his life, inflates the value of his assets, uh, in these contexts, he tries to deflate the value and say that it's worth less than, uh, than it’s — than it's been assessed for.