The decision comes after weeks of debate over a section in the Trump International Hotel’s lease agreement which stipulates that no elected official of the federal government can take part in the lease.
Since the President’s inauguration, ethics experts have been calling on the agency, which oversees the three-year lease for the Trump International Hotel, to end the rental agreement.
Critics have argued that the five-star hotel, housed in the historic Old Post Office just a few blocks from the White House, should be considered a conflict of interest for Mr Trump because he is both landlord and tenant of the building.
But, in a letter addressed to the President’s son, Donald Trump Jr, the GSA said the Trump Organisation was in “full compliance” with a section of the hotel’s rental agreement that prohibits elected officials from taking part in a lease of federal property.
“To date, most of the review and reporting on Section 37.19 has focused on only a few select words, and reached simplistic ‘black and white’ conclusions regarding the meaning and implications of the clause,” GSA contracting officer Kevin Terry wrote in the letter.
He said the lease is “valid and in full force and effect” because Mr Trump moved his interests in the building to a revocable trust, which is currently being managed by the US President’s sons, Mr Trump Jr and Eric Trump.
Even though the President is the sole beneficiary of that trust, Mr Terry said: “During his time in office, the President will not receive any distributions from the Trust that would have been generated from the hotel.”
Top Democrats have condemned the decision, dismissing Mr Terry’s explanation as “inadequate”.
“This decision allows profits to be reinvested back into the hotel so Donald Trump can reap the financial benefits when he leaves the White House,” Elijah E Cummings and Peter DeFazio, ranking members of the House Committee on Oversight and Government Reform and the House Committee on Transportation and Infrastructure respectively, said in a joint statement.
“This is exactly what the lease provision was supposed to prevent.”
They said the “new interpretation” of the lease provision renders it “completely meaningless,” adding: “Any elected official can now defy the restriction by following this blueprint.”
In his letter, Mr Terry said the Trump International Hotel had “turned a building that had been costing taxpayers millions of dollars per year in a revenue-generating asset”.
“Even prior to actually opening the hotel and generating any revenues, [the tenant] began making payments to GSA under the lease in the amount of $250,000 per month. By the time of the hotel’s official opening, GSA and the taxpayers had already received approximately $5.1 million,” he said.
US consumer advocacy group Public Citizen was quick to condemn the GSA’s decision with a harsh rebuke.
“The GSA’s legal analysis would get a first-year law student kicked out of law school,” the group said in a statement.
“This Alice-in-Wonderland legal reasoning is an affront to the rule of law.” It added: “The operation of the Trump International Hotel just down the street from the White House represents an institutionalisation of cronyism on a scale never seen in American history.”