Six days after Donald Trump won the presidential election, the federal government finalized a key step toward a tax subsidy worth as much as $32 million for a company that is owned by Trump, his daughter Ivanka, and two of his sons.
That company owns Trump’s luxury Washington, DC, hotel, located in a taxpayer-owned historic landmark known as the Old Post Office Building, which Trump leases from the federal government. The hotel has become emblematic of Trump’s many potential conflicts of interest, because when he becomes president he will effectively be both landlord and tenant.
The latest step toward the massive tax credit, which has not been previously reported, puts that conflict in sharp relief.
On Nov. 14, the National Park Service, which oversees “Historic Rehabilitation Tax Credits” with the IRS, finalized the second phase of a three-step process.
Technically, it approved an amendment to Trump’s previous plans for the rehabilitation of the building. With that done, the Trump family company that leases the hotel, the Trump Old Post Office LLC, has to go through just one more phase to get the tax credit worth 20% of the rehabilitation project.
“This is a classic or textbook example of a conflict of interest,” said Steven Schooner, a professor of government procurement law at George Washington University School of Law. “The decision-maker here, the National Park Service, works for the party that stands to benefit from a favorable decision.”
As Trump prepares to take the reins of government, his potential conflicts of interest are sparking more criticism and scrutiny. The New York Times, for example, published a lengthy article about Trump’s conflicts from his overseas business dealings.
But Trump’s hotel, on Pennsylvania Avenue just blocks from the White House, may be the most glaring conflict. A federal agency, the General Services Administration, will report to him at the same time the agency acts as his landlord. Technically the president himself is exempt from criminal conflict of interest laws, but ethics experts say that doesn’t make the deal less improper.
On Wednesday morning, Trump tweeted that he was “leaving” his business, saying that “legal documents are being crafted which take me completely out of business operations. The Presidency is a far more important task!”
Earlier, Amanda Miller, vice president of marketing at the Trump Organization, said in a statement to BuzzFeed News, “We are in the process of vetting various structures with the goal of the immediate transfer of management of The Trump Organization and its portfolio of businesses to Donald Jr., Ivanka and Eric Trump along with a team of highly skilled executives.
In fact, ethics experts have slammed the idea that giving Trump’s children control of his companies could resolve his potential conflicts of interest, because his interest and theirs would be closely aligned, and because they appear to be advising him in his political role. Those concerns were heightened when, shortly after the election, Ivanka Trump met with her father and the president of Japan.
With the hotel, there are additional problems. Schooner points out the lease the GSA signed with the Trump Organization specifically bans any “elected official of the Government of the United States” from participating in the lease. Schooner and another contracting expert have recommended that the GSA break the contract. (The GSA has said it plans to coordinate with Trump's transition team to deal with any potential conflict of interest.)
The project has already been embroiled in litigation. Trump is suing the DC government to lower his taxes on the hotel. He’s also sued two restauranteurs who had agreed to build restaurants at the hotel, because they pulled out after he launched his campaign with a speech they felt included racist comments about Mexicans.
The tax credit is complex: Trump has applied for a “historic rehabilitation tax credit” worth 20% of the cost of the rehabilitation of the building. As BuzzFeed News has previously reported, in an original application for the tax credit, Trump estimated the cost of the hotel at $160 million, which would yield, at 20%, a $32 million tax credit. That estimate may change once the final bills are tallied.
The tax credit program is administered by the National Park Service, which is a bureau within the Interior Department. (Other authorities, including the IRS and the Washington, DC, government, are also involved.) As president, Trump will select both the director of the Parks Service and the secretary of the Interior. Sarah Palin’s name has been floated for the latter job.
Until now, Trump had only obtained “Conditional Approval” for what is called “Part 2” of his application for the 20% subsidy. The company had submitted six amendments over the years, starting in 2014, and all received “conditional approval.”
Then in Oct. 2016, Trump submitted another amendment to the application, evidently with new changes and alterations to comply with previous conditional approvals. And then, on Nov. 14, the Park Service approved “Part 2” of the tax credit application, ending that phase.
Now that the hotel has been completed, Trump will still have to file a Part 3 of the application, to collect the tax credit.
Jeremy Barnum, an NPS spokesman, says that the approval of the Trump project is a step closer to finalizing the subsidy. “It’s definitely progress.”
He says it has nothing to do with the election. “Certainly, by the National Park Service standpoint, this would not have been impacted by the election in any way,” he said.
As BuzzFeed News previously reported, Trump obtained control of the historic Old Post Office Building, beating out competitors, back in 2012, when the GSA selected him based in part on his choice of an architect and his financial backer. Once he won the bid, both his architect and the financing changed.
In 2013, Trump signed the lease with the federal government, and as BuzzFeed News disclosed, he did that after investing just $2.4 million in equity, while giving his children Ivanka, Donald Jr., and Eric, a share of 22.5% in the federal property for nothing at all.
The contracting official at the GSA who handled the deal from the beginning, Kevin Terry, is still in that role. As BuzzFeed News reported, he has an outside business interest in a financial services corporation in Iowa.