A lot of eyebrows were raised when a last minute perk was thrown into the Trump administration’s tax bill on Dec. 17, giving a tax break to people profiting from certain kinds of real estate sales—like Donald Trump.
The US president had long insisted that his bill would cost him “a fortune,” but this addition clearly helps rich people in his industry. It gives a 20% windfall to pass-through businesses like LLCs which don’t pay corporate tax on their profits, instead passing it through to their owners who then pay personal tax on it as income. As Quartz has documented, Trump makes extensive use of LLCs in his own real estate dealings.
There were plenty of reasons to make this available to huge swaths of small American businesses, but even Republican lawmakers were at a loss to explain why it was now helping real estate LLCs, which don’t tend to employ many people.
Meanwhile, data uncovered by USA Today reveals a huge shift in how clients of the Trump Organization buy. In the two years before Trump became the Republican presidential nominee, just 4% of his customers used LLCs to buy his real estate—now that number is at 70%, USA Today reports. If and when those buyers sell their apartments, they stand to make a much larger windfall on the profits, following the tax bill’s passage.
Shell companies are often used in the real estate sector to hide owners’ real identities, as well as for their potential tax benefits. At least one Trump buyer told USA Today that the anonymity motivated him—alongside other financial benefits. But shrouding buyers’ identities in secrecy creates an ethical quandary: if watchdogs don’t know who they are, it’s very difficult to know to know if buyers are currying favor with the president.
Trump’s independent ethics advisor Bobby Burchfield told USA Today he has a four-point test to evaluate whether it would be proper to sell to a given customer, but he reportedly refused to say whether he turned down a single real estate deal in 2017.
Trump has said he would not involve himself in business dealings as president, instead leaving it to be run through a trust by his sons. However, there’s no legal provision in that structure to stop him discussing its activities with them, and he can withdraw money from it at any time.