On State Tax Returns, President Trump Loses Another Round

U.S. President Donald Trump delivers remarks in Lexington, Kentucky, U.S., November 4, 2019. (Yuri Gripas/Reuters)The judge rules that the D.C. federal court has no jurisdiction over New York State officials.

A federal court in the District of Columbia made fast work of President Trump’s attempt to sue New York State officials to prevent them from complying with any potential congressional request for disclosure of his state tax returns. District Judge Carl J. Nichols, a Trump appointee, issued a 19-page memorandum opinion on Monday, dismissing the president’s lawsuit for lack of jurisdiction.

The president has pursued a series of legal actions to prevent the disclosure of his tax returns to prosecutors and Congress. Monday’s ruling marked the second time in a week that President Trump has been set back. As we discussed here, a federal appeals court in New York last Monday ruled that the president’s accountants must surrender his tax-return information to state prosecutors in Manhattan. The latter are conducting a grand-jury investigation of whether any laws were violated by hush-money payments made to two women who claim to have had flings with Trump over a dozen years ago.

Yesterday’s ruling by the federal district court in Washington centered on the “TRUST Act” (the acronym is for legislation cutely entitled the Tax Returns Released Under Specific Terms Act). It is a state statute enacted by New York’s heavily Democratic legislature and signed into law by its Democratic governor, Andrew Cuomo, in July. Patently targeting Trump, the law permits three committees of the federal Congress, including the House Ways and Means Committee, to request that the commissioner of New York’s Department of Taxation and Finance produce state tax returns of various high federal elected officials, including the president.

So far, there appears to have been no such request. Nevertheless, the president anticipatorily sued New York State Commissioner Michael R. Schmidt, along with New York’s attorney general, Letitia James, to block transmission if there is a request — on the theory that his claim would be moot if he waited until after the state officials complied with a committee request.

Among other things, the president claims that the TRUST Act flouts the First Amendment, and thus that state officials would violate his constitutional rights by relying on the statute to surrender tax returns he filed confidentially under New York law. Judge Nichols clearly believed not only that the claim was premature but that it was doubtful a Washington federal court had jurisdiction over New York state officials.

Commissioner Schmidt and AG James moved to dismiss, arguing that the court lacked jurisdiction and that the president should have brought his suit in New York State court.

Judge Nichols agreed that his court lacked jurisdiction – the power to hear the case. This question is controlled by the District of Columbia long-arm statute, and under binding D.C. Circuit decisions, the long-arm statute does not apply to states. Consequently, the president would have to establish that the D.C. court had jurisdiction over the New York State officials in their individual capacities.

For that, they would need to be engaged in commercial or business-related activity directed at District of Columbia residents. Neither official is, particularly in connection with the TRUST Act — the president did not even allege that either executive official was involved in the legislature’s passage of the law. Moreover, although the congressional committee has not requested the New York Commissioner to provide Trump’s returns (at least, not yet), the Commissioner’s mere act of corresponding with the Committee would not amount to commercial or business-related activity, and thus would not trigger jurisdiction. (The New York AG would have no role in the transmission of tax returns under the TRUST Act.)

The court gave the back of the hand to a number of other claims by the president, including the assertion that there should be jurisdiction in Washington over the New York officials because they are in a “conspiracy” with congressional Democrats. Judge Nichols observed that Trump’s lawsuit does not even allege, much less posit facts establishing, such a conspiracy.

The judge left the door open for the president to refile his suit in the event that some future action is taken in the District of Columbia by the New York officials that could cause legally cognizable harm, or at least predicate some connection to the jurisdiction. For now, however, if the president wants to pursue claims against the New York officials, he will have to do it in the New York courts.

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