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The Trump Trash Talking of Puerto Rico

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This spot in our week here at Emptywheel is supposed to be a set aside for light hearted banter on sports, especially football and Formula One. That is what we have done since our beginning over a decade ago.

But I just cannot summon the enthusiasm for that right now any more than I could last weekend when the Trump racism and narcissism were already raging.

There are 3.5 million American citizens in the lurch in Puerto Rico, suffering from dehydration, starvation and death. Because of a fundamental lack of fuel to move, and communications to know, the full extent of the damage is still not really known.

So, what is the most powerful leader in the world doing? Tweeting a bunch of racially bigoted trash at the people and leaders of Puerto Rico. Here is what our disgrace of a President blasted off this morning:

That graphic was posted on Twitter by Josh Marshall of TPM, and his annotations are perfect.

Trump’s conduct is disgusting and unconscionable. From a man fiddling golfing while Rome burns Puerto Rico dies. What did the Mayor of San Juan, the largest population center and capitol hub of Puerto Rican government say? She begged for her people via a tearful plea to all of the federal government:

“We are dying, and you are killing us with the inefficiency and the bureaucracy,”

That would be Mayor Carmen Yulín Cruz. She also had the temerity to call out Acting DHS Secretary Elaine Duke who made the horribly insensitive and asinine comment that Puerto Rico is a “good news story”. For seeking to keep her constituents from dying and calling bullshit on the actual bullshit of Elaine Duke, Trump now thinks Mayor Carmen Yulín Cruz is the functional equivalent of Kim Jong-Un. Even insanity has rarely run this far amok.

Where will you find Mayor Carmen Yulín Cruz? Perhaps there is a photo somewhere in an office, but since the Puerto Rican crisis began, I have never seen her portrayed by the press, or anybody else, as being anything other than tirelessly out in the streets and flooded destroyed neighborhoods with her devastated constituents. Like a real leader would be. This photo is indicative:

Remember General Russell Honore, who brought some long past due seriousness and reality to Katrina in NOLA? He is in San Juan now. Here is what he had to say when questioned on Trump’s attack on the Mayor:

“The mayor’s living on a cot and I hope the President has a good day at golf.”

Can’t argue with that. Maybe Trump can secretly meet with the Puerto Rican bondholders he so cherishes that put their craven investments ahead of the lives of American citizens, while he is relaxing at his fucking golf resort this weekend. It is simply who he, and they, are. It should NOT be who we are though. This country is better than that.

I would also like to, again, point out that the much ballyhooed by Sarah Sanders and Trump Administration “Jones Act Waiver was a complete fraud and sham on the press, public and, most of all, people of Puerto Rico. There are effectively little more than SEVEN days left on Trump’s bogus waiver and gift to craven bondholders and rapacious shippers. Trump insured he got good press for a news cycle and completely stiffed Puerto Rico of any meaningful assistance via relief from the hideously oppressive Jones Act. Heckuva job Trumpie.

If you want a couple of fantastic pieces of reportage on Puerto Rico today, go see the Washington Post piece “Lost weekend: How Trump’s time at his golf club hurt the response to Maria” as well as the superb interactive overview from the New York Times, “One Day in the Life of Battered Puerto Rico”. You will be better for having seen both.

As to the games. Eh, Pirate Mike Leach and Washington State pulled off a serious upset of USC last night. Leach had his usual awesome take. As to the NFL, the focus seems to be more on the pre-game than the real games. I will note that Tom Brady’s first start was 16 years ago today. The Patriots have since won 5 Super Bowls, 14 AFC East titles and 185 of his 238 starts. Kid can play ball. Also, this weekend is the Malaysian Grand Prix at the Sepang Circuit. Hamilton takes pole and Vettel starts at back of the grid due to a bad engine. That likely ends the Drivers’ Championship battle for yet another year.

That is it for today. Rock on, and put the thoughts of our fellow citizens of Puerto Rico in your hearts.

Is Trump’s $915 Million Tax Loss Connected to an Exotic Tax Shelter?

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293015Guest Post by Robert J. Lord

The news is out about Donald Trump’s $915 million of tax losses.

The real question is whether those losses were real economic losses, or just a tax artifice created by a clever planner.

Real estate developers like Trump benefit tax-wise from provisions that allow them to claim losses attributable to borrowed money. But those provisions are not a complete giveaway if the borrowing ultimately is repaid.

If the borrowing is not repaid, as we know to be the case of Trump’s casino debt, the tax law generally requires the person whose debt is forgiven to recognize income, which typically erases the tax benefit of those earlier losses. Even in those situations where debt forgiveness does not result in income, the borrower’s tax attributes are reduced by the amount of debt forgiven, and unused losses are at the top of the list of those tax attributes to be trimmed.

Could Trump have figured out how to have his cake and eat it too – that is, keep his losses for tax purposes, even while being excused from having to repay the borrowed money on which those losses were based? Yes, it is possible!

One possibility is that Trump’s lenders agreed not to expressly forgive Trump’s debt, but instead to sell their rights as lender for pennies on the dollar to an individual or entity close to Trump, such that it would never be enforced. This strategy is referred to as “parking” the debt. Some tax professionals like John Hempton at Bronte Capital and commentators like Josh Marshall at TPM have speculated this is the artifice Trump and his advisors engineered to preserve Trump’s huge losses and thus shelter close to a billion of future income from tax.

Does the tax law permit the parking of debt that effectively has been forgiven? Certainly not by design. If Trump parked the debt with a close relative, the tax code would have treated it as if the debt was forgiven.

Trump could have parked the debt with someone not so closely related or with a friend, but not if had an agreement that said person would not enforce the debt. Which means he’d be at severe risk, as the person could turn on him and enforce the debt. That would have been almost a billion dollar risk. It is hard to imagine Trump, his accountants and attorneys permitting that.

Could Trump have parked the debt with a corporation, trust or partnership he controlled? In a word, yes. Congress tried to prevent debtors from circumventing the law this way as well, but they inadvertently created a small crack in the law, which Trump just may have been able to squeeze through.

The tax code expressly identifies corporations, partnerships and trusts deemed too close to a debtor to purchase his debt without causing the debt to be deemed forgiven for tax purposes. Those rules were well written. After they were written, however, and not long before Trump faced his financial difficulties, Congress created a new type of entity for tax purposes only, the “real estate mortgage investment conduit,” or REMIC. Those rules state, in no uncertain terms, that certain partnerships, corporations and trusts become something else for tax purposes. They are expressly NOT to be treated as partnerships, corporations or trusts. Thus, unwittingly, Congress created a gaping yet little noticed hole in the rules that prevent parking debt with a controlled corporation, trust or partnership.

And Trump may have seized on Congress’ mistake.

The REMIC rules were enacted in 1986 to facilitate investment in mortgage-backed securities (yes, those securities that crashed the economy in 2008). A REMIC is a partnership, corporation or trust under the law of the state in which it is formed (usually, Delaware) that holds almost exclusively interests in mortgage debt, and satisfies a few additional statutory requirements related to the type of ownership interests (for example, corporate stock, partnership interests, or beneficial interests in a trust) it issues.

Congress anticipated that REMICs would hold entire pools of mortgage interests, but never specified a minimum number, which means a REMIC might hold only one mortgage – for example, the mortgage on a Trump casino – and still qualify. Or it could be multiple similar obligations.

A few clever tax lawyers realized that by qualifying a partnership, corporation or trust as a bastardized form of REMIC, they could circumvent the rules that prevent the parking of debt with a controlled entity to avoid debt forgiveness income.

Trump’s situation quite clearly lent itself to this exotic strategy. If he used a REMIC he controlled to purchase the mortgage debt on one or more of his casinos (and/or other properties) at a deep discount, the rules that prevent debt parking would not have applied to him.

The bottom line: Trump indeed could have used a debt parking strategy to preserve close to a billion dollars in losses for tax purposes even though he avoided the economic loss on which those tax losses were based.

Did Trump employ this strategy? Nobody knows yet, but it would explain why those losses still showed up on his tax return in 1995 and how he gamed the system for an enormous tax windfall.

The secretive and shady nature of whatever avoidance scheme Trump has used, which would clearly be on the edge of legality, even if putatively legal as Trump claims, would also very easily explain why Trump steadfastly refuses to make public any more of his tax return information.

It is also exactly why the public is entitled to see his convoluted machinations and judge for themselves his honesty. And, remember, all statutes of limitation, both criminal and civil, have long ago expired as to the 1995 and surrounding years tax returns. There is no legitimate reason whatsoever Trump cannot release them. Other than fear that what he is hiding is exposed.

Robert J. Lord, a tax lawyer and former Congressional candidate, is an associate fellow at the Institute for Policy Studies. Bob previously served as an adjunct faculty member at the Arizona State University School of Law. Bob’s work focuses on the relationship of tax law to inequality. He contributes to both the Inequality.org website and to OtherWords, the Institute’s national syndicated editorial service. Bob also is a staff member at Blog For Arizona, the leading political blog in Arizona.

1st Amendment and Other Concerns On Appeal of Redskins Decision

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JusticePicThere has been a lot of commotion over Wednesday’s decision by the US Trademark Trial and Appeal Board to cancel several trademark registrations of the Washington Redskins originally recognized back in the 1960’s by the United States Patent and Trademark Office (PTO). The full decision is here. It is quite long, detailed, and, at least facially, pretty compelling in its finding that the trademarks are “disparaging to Native Americans”.

Before I go further, let me say that I agree with those who think Daniel Snyder and the Washington Professional Football Franchise should change their name. It may not be the most pressing issue in our society, but it is something for which the time has come. Josh Marshall posted his thoughts on this subject at Talking Points Memo, and I think he put it all in excellent perspective and I agree with his conclusions.

The simple fact is we shouldn’t be using whole peoples as mascots for sports teams. Whether or not Indians in America today find it offensive is almost beside the point. The fact that most do is just an extra reason to do away with the practice.

With all I’ve said, there’s a part of me who feels like, ‘We really can’t have the Cleveland Indians anymore?’ It feels like a loss – part of the landscape of American sports I’m attached to. But it’s time.

Well said and, again, I agree. Josh’s entire piece is not long and is worth a read.

That said, and as much as I would like to see the name changed, I have trepidation about the government forcing the issue through agency decisions on what is proper speech, and what is not.

Tradenames and trademarks are, by their nature, really public speech and, thus, at least where they interact with the government, should be entitled to First Amendment protection. Now First Amendment protection is never absolute, but it is presumptively extremely broad. Likewise, First Amendment protections are against governmental action restricting free speech, not necessarily against private persons or entities. If I refuse to listen to you or to print what you have to say, that would be censorship, but it is not First Amendment action. If I am the government and censor you, then that is a different matter and there is a First Amendment issue.

So, here, the TTAB has taken it upon itself to restrict, at least in some regards, the free expression of the Redskins, via refusal to extend the same protection offered other “acceptable” speech and they do so by obvious decree of a governmental entity. Now the TTAB decision made out a VERY thorough and facially compelling case for Read more →