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Idaho senators criticize new rules on secret tax deals

BOISE - Senators weren’t enthusiastic this afternoon about a new Tax Commission rule that would clarify when the commission can secretly settle big tax cases.

It comes after a whistleblower’s report charging that the commission was cutting secret deals to excuse millions in income taxes for large out-of-state corporations prompted several state investigations. The Idaho Attorney General concluded that the Tax Commission hadn’t acted illegally, as did a review ordered by Gov. Butch Otter, but Otter directed the Tax Commission to immediately develop new rules better defining and laying out their settlement procedures.

Those rules came before the Senate Local Government & Taxation Committee this afternoon, as a temporary rule that’s already taken effect. Lawmakers review such rules and decide whether to let them continue. But Ted Spangler, deputy attorney general for the Tax Commission, said the commission plans to work further next year on a permanent rule, and is proposing only a temporary rule at this point. The new temporary rule essentially just writes the commission’s current practice into more specific rules.

It lets tax commissioners settle a tax case where there’s dispute about liability, when commissioners think litigation will be more costly, when the taxpayer has economic hardship or when the settlement will “promote effective tax administration.” Spangler said that last reason was added as “sort of a safety valve in the system.” Tax commissioners retain wide discretion.

Senators raised several concerns about the new rule. Sen. Tim Corder, R-Mountain Home, said, “I still wonder if this isn’t a bit broad.”

Sen. Curt McKenzie, R-Nampa, an attorney, noted that the new rule appears to allow broader authority for waiving tax penalties than the law actually allows. Spangler thanked him for pointing that out and said it’ll be looked at in the new, permanent rule.

Sen. Eliot Werk, D-Boise, said he thought the new rule “could lead to the same set of misunderstandings or perceptions that we have been dealing with.”

Committee Chairman Brent Hill, R-Rexburg, said he’s fine with the rule, but wants more information about the process commissioners will follow for deciding who gets the settlements and who doesn’t. “These procedures, some of us would like to see more of,” Hill said.

Sen. Kate Kelly, D-Boise, told the panel,”The process can be improved.” Kelly said beyond the definitions in the rule, the tax commission needs to provide for more “transparency and internal controls.” In an earlier letter to the state Tax Commission, she wrote that the new rule “does little, if anything to respond to the recommendations” of two state investigations.

The committee won’t vote on the rule until Thursday at the earliest.

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