February 18, 2009 in Idaho

Reforms proposed for secret tax deals in Idaho

By The Spokesman-Review

BOISE - Idaho’s state Tax Commission would be required to hold additional hearings on the controversial secret tax deals a whistleblower exposed last spring and submit annual reports on them to the governor and state Legislature, under legislation a Senate committee unveiled this afternoon.

“We’re still awaiting an annual report this year,” noted Sen. Kate Kelly, D-Boise, who worked on the bill with Senate Tax Chairman Brent Hill, R-Rexburg.

A longtime state tax auditor, Stan Howland, issued the whistleblower report to the governor and lawmakers in May, charging that millions in taxes owed by large, multi-state corporations were being illegally excused by a single tax commissioner, and confidentiality laws prevented anyone from finding out about it. Investigations ordered by the Idaho Attorney General and the governor concluded no laws had been broken, but the governor’s analysis, by a longtime CPA, called for reforms.

In response to that investigation, Gov. Butch Otter ordered the Tax Commission in August to provide a full report on the secret deals to the Legislature each year, starting in January of 2009. But the report still hasn’t arrived.

“At this point, all I can say is it’s with the chairman,” said Ted Spangler, deputy attorney general for the Tax Commission.

Commission spokeswoman Renee Eyman said, “Chairman (Royce) Chigbrow is still working on the compromise and closing agreement report for the Legislature and hopes to have it ready in two weeks.”

Said Kelly, “I’m not exactly sure why it’s taking them so long to get that information from last year.”

The new legislation, on which the Senate Local Government and Taxation Committee plans to hold a full hearing, would require the commission to submit such a report by March 1 of each year. It also would require all “compromise and closing agreements” involving more than $50,000, which would be renamed “settlement and closing” agreements, to have an additional hearing at which at least two tax commissioners would be present, along with with a representative of the commission’s audit staff, a deputy attorney general and a tax policy analyst.

Full summaries and copies of the agreements would have to be kept by the commission, and though they’re exempt from disclosure to the public because they contain companies’ and other taxpayers’ confidential tax information, they’d be open to legislative auditors.

The legislation also requires the Tax Commission to adopt formal administrative rules outlining how it will conduct such settlement procedures - “which we will get to review,” Hill noted - rather than relying on its own internal policies. Idaho lawmakers review all new formal state agency rules each year, and can reject them and request new ones.

Hill and Kelly crafted the new legislation with the help of Legislative Services Director Jeff Youtz, whose staff conducted extensive research, and with the collaboration of Tax Commission staff.

Sen. Curt McKenzie, R-Nampa, praised the legislation. “We took a statute that was a pretty broad grant of authority, and we created specific procedural requirements,” he said. “It does exactly what was intended at the beginning of all this, which is to create transparency.”

Kelly, an attorney, said, “An argument can be made that it doesn’t go far enough, but I’m encouraged that it’s a … step in the right direction. It will add more transparency, it will add more accountability, and it will add more checks and balances.”

She added, “This isn’t really about tax law - this is about due process, and procedure and transparency.”

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