If there was something I never saw coming, it was the hand-wringing and TV pundit analys of the relatively common use of Net Operating Losses–albeit by Donald Trump.  To all tax attorneys, the very idea of rolling forward Net Operating Losses (or NOLs) is common and rather mundane.  So when I saw and heard the media headlines lambasting Mr. Trump for his use of this mega NOLs I wasn’t all that surprised.  The only think that surprised me however, was the sheer size of Mr. Trump’s NOLs, nearly $1 billion (with a “B”).  Even for a businessman in Trump’s position, actual losses coming close to $1 Trillion is rare.  What’s interesting about the revelation in his 1995 State return that was released was that this $1 Trillion loss was simply a rollover from a prior year.  The make up of this massive NOL could have come from a whole host of different sources.  Some have speculated it related to losses on sales of casinos and land, but Mr. Trump appears to have been fully leveraged and so any debt forgiveness woud have actually been considered income and offset any NOLs.  Some have suggested Mr. Trump has engaged in a rather unscrupulous tactic called “debt parking”, but the technique is extremely aggressive and I suspect would have easily been uncovered by the IRS in their apparent never-ending audits of Mr. Trump. 

Interestingly, in the middle of this NOL media firestorm, Trump’s campaign released the following statement: 

“Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes, along with very substantial charitable contributions.”

What fascinated me that while he lists certain taxes expliclity by name, he does not actually mention “income” taxes, which are the taxes which would have been offset by the his massive NOLs.  Granted, income taxes would clearly fall under the reference to “federal taxes” but I just found it curious they were not explicilty mentioned when one of the biggest allegations against him was that he may not have paid any income taxes in the past 18 years or so as a result of this NOL. 

Unfortunately, without seeing Mr. Trump’s full federal returns, we’ll never know for sure.