Over the past decade, Jared Kushner’s family company has spent
billions of dollars buying real estate. His personal stock investments
have soared. His net worth has quintupled to almost $324 million.
And
yet, for several years running, Mr. Kushner — President Trump’s
son-in-law and a senior White House adviser — appears to have paid
almost no federal income taxes, according to confidential financial
documents reviewed by The New York Times.
His
low tax bills are the result of a common tax-minimizing maneuver that,
year after year, generated millions of dollars in losses for Mr.
Kushner, according to the documents. But the losses were only on paper —
Mr. Kushner and his company did not appear to actually lose any money.
The losses were driven by depreciation, a tax benefit that lets real
estate investors deduct a portion of the cost of their buildings from
their taxable income every year.
In 2015, for example, Mr. Kushner
took home $1.7 million in salary and investment gains. But those
earnings were swamped by $8.3 million of losses, largely because of
“significant depreciation” that Mr. Kushner and his company took on
their real estate, according to the documents reviewed by The Times.
Nothing
in the documents suggests Mr. Kushner or his company broke the law. A
spokesman for Mr. Kushner’s lawyer said that Mr. Kushner “paid all taxes
due.”
In theory, the depreciation provision is supposed to shield
real estate developers from having their investments whittled away by
wear and tear on their buildings.
In practice, though, the allowance often represents a lucrative giveaway to developers like Mr. Trump and Mr. Kushner.
The
law assumes that buildings’ values decline every year when, in reality,
they often gain value. Its enormous flexibility allows real estate
investors to determine their own tax bills.
The White House last
year championed a sweeping revision of the nation’s tax laws that
expanded many of the benefits enjoyed by real estate investors, allowing
them to reap even larger deductions.
“The Trump administration
was in a position to clean up the tax code and promised to get rid of
some of the complexity that certain taxpayers use to their advantage,”
said Victor Fleischer, a tax law professor at the University of
California, Irvine. “Instead, they doubled down on those provisions,
particularly the ones they have familiarity with to benefit themselves.”
The
documents, which The Times reviewed in their entirety, were created
with Mr. Kushner’s cooperation as part of a review of his finances by an
institution that was considering lending him money. Totaling more than
40 pages, they describe his business dealings, earnings, expenses and
borrowing from 2009 to 2016. They contain information that was taken
from Mr. Kushner’s federal tax filings, as well as other data provided
by his advisers. The documents, mostly created last year, were shared
with The Times by a person who has had financial dealings with Mr.
Kushner and his family.
Thirteen tax accountants and lawyers,
including J. Richard Harvey Jr., a tax official in the Reagan, George W.
Bush and Obama administrations, reviewed the documents for The Times.
Mr. Harvey said that,
assuming the documents accurately reflect information from his tax
returns, Mr. Kushner appeared to have paid little or no federal income
taxes during at least five of the past eight years. The other experts
agreed and said Mr. Kushner probably didn’t pay much in the three other
years, either.
Peter Mirijanian, a spokesman for Mr. Kushner’s
lawyer, Abbe Lowell, said he would not respond to assumptions derived
from documents that provide an incomplete picture and were “obtained in
violation of the law and standard business confidentiality agreements.
However, always following the advice of numerous attorneys and
accountants, Mr. Kushner properly filed and paid all taxes due under the
law and regulations.”
Mr. Mirijanian added that, with regard to
the tax legislation, Mr. Kushner “has avoided work that would pose any
conflict of interest.”
Representatives of the White House and Mr. Kushner’s firm, Kushner Companies, didn’t respond to requests for comment.
The revelation about Mr. Kushner’s minimal tax payments comes as his father-in-law’s taxes are under renewed scrutiny. A
Times investigation published this month found that Mr. Trump participated in outright fraud that shielded his family’s fortune from estate and gift taxes.
Mr.
Trump has broken with decades of tradition by refusing to release his
tax returns. But portions of a 1995 tax return previously published by
The Times show trends similar to the one visible in the documents
detailing Mr. Kushner’s finances. Mr. Trump at the time reported
nearly $916 million in losses, which could have permitted him to avoid any federal income taxes for almost two decades.
The
summaries of Mr. Kushner’s tax returns reviewed by The Times don’t
explicitly state how much he paid. Instead, the documents include
disclosures by his accountants that estimate how much tax he owed for
the year just ended — called “income taxes payable” — and how much he
paid during the year in anticipation of taxes he would owe, called
“prepaid taxes.” For most of the years covered, both were listed as
zero.
Peter Buell, who runs tax services for the real estate
practice of the accounting firm Marcum, said the lack of prepayments
indicated Mr. Kushner most likely didn’t owe income taxes in those
years. Mr. Buell said he was especially confident that Mr. Kushner had
no tax liability because the documents also report no “income taxes
payable.”
Kushner Companies — where Mr. Kushner was chief
executive and remains an owner — has been profitable and has thrown off
millions of dollars in cash annually for Mr. Kushner and his father,
Charles, according to an analysis by the company that was included in
the documents reviewed by The Times.
But as far as the Internal Revenue Service is concerned, the Kushners have been losing money for years.
Kushner
Companies, like many real estate firms, passes on any tax obligations
to its owners, including Mr. Kushner and his father, who incorporate
them into their personal tax returns.
Unlike typical wage earners,
the owners of such companies can report losses for tax purposes. When a
firm like Kushner Companies reports expenses in excess of its income,
the result is a “net operating loss.” That loss can wipe out any taxes
that the company’s owner otherwise would owe. Depending on the size of
the loss, it can even be used to get refunds for taxes paid in prior
years or eliminate tax bills in future years.
Mr. Kushner’s
losses, stemming in large part from the depreciation deduction, appeared
to wipe out his taxable income in most years covered by the documents.
He
is reporting the losses even though he bought his properties with
borrowed funds. In many cases, Mr. Kushner kicked in less than 1 percent
of the purchase price, according to the documents. Even that small
amount generally was paid for with loans. Mr. Kushner’s credit lines
from banks rose to $46 million in 2016 from zero in 2009, the documents
show.
The result: Mr. Kushner is getting tax-reducing losses for
spending someone else’s money, which is permitted under the tax code.
Depreciation deductions are available in other industries, but they
generally don’t get to take losses related to spending with borrowed
money.
“If I had to live my life over again, I would have been in
the real estate business,” said Jonathan Blattmachr, a well-known trusts
and estates lawyer, now a principal at Pioneer Wealth Partners, who
reviewed the Kushner documents. “It’s fantastic. You get tax deductions
for things you don’t pay for.”
One of the only years in which Mr. Kushner appeared to have owed anything was 2013,
when he reported income taxes payable of $1.1 million. According to the
documents, Mr. Kushner has filed tax returns separately from his wife,
Ivanka Trump — a relatively common practice among wealthy couples who
want to avoid entwining their complex personal finances.
Mr.
Kushner’s father appears to have benefited from the same tax deductions,
the documents indicate. The experts interviewed by The Times said
Charles Kushner most likely avoided paying federal income taxes from at
least 2012 to 2016.
The tax code affords real estate investors
great leeway in how they calculate their depreciation — flexibility that
often is used to inflate their annual deductions. Among the tactics
used by many developers: Their tax advisers prepare studies arguing that
much of a property’s value is attributable to things like appliances
and parking lots, which under the law can be depreciated more quickly
than the building.
Such strategies are almost never audited, tax
professionals say. And the new tax law provides even more opportunities
for property investors to take larger deductions.
Developers might
have to pay capital gains taxes if they sell their properties. But the
Kushners, like others in the real estate business, often avoid that tax,
too, by using the proceeds of sales to buy more properties within a
certain time window.
At least in part because of that perk, the
Kushners’ property sales in the period covered by the documents —
totaling about $2.3 billion, according to Real Capital Analytics, a
research firm — generated little or no taxable income for Mr. Kushner.
Last year’s tax legislation eliminated that benefit for all industries but one: real estate.