Auditor criticizes Tax Commission

BOISE – A veteran Idaho Tax Commission auditor released a 17-page whistle-blower report Wednesday alleging that agency commissioners for years have improperly settled tax protests by large corporations, saving the companies money but shorting Idaho by millions of dollars.

Stan Howland, a corporate income tax auditor for the tax collection agency for 28 years, said the four appointed members of the Tax Commission, as well as the deputy attorneys general who advise them, routinely allow largely out-of-state corporations to pay just a percentage of what they really owe.

Then commissioners use disclosure loopholes in the state’s public records laws to keep these decisions secret, Howland said in his report, which he delivered to Gov. Butch Otter, Attorney General Lawrence Wasden and 105 lawmakers.

He said the practice began about 17 years ago and has continued, despite complaints from auditors who believe it violates state law. Howland said auditors feel undermined when companies win compromise settlements worth hundreds of thousands of dollars – even though the auditors’ objections are proper and reflect state tax law.

“I’m hoping the Legislature will totally review all of the activities of the Tax Commission and all of its internal control policies, or lack thereof, and they’ll address this situation,” Howland said, adding he’s tried unsuccessfully to address the matter internally. “I believe Idaho taxpayers are suffering because of deals cut with large corporations.”

Lawmakers who oversee tax issues in Idaho said they hadn’t yet seen the report and couldn’t comment.

“I’ll look at it, and follow up from there,” said House Revenue and Taxation Chairman Dennis Lake, R-Blackfoot. “But as we speak, I have no knowledge of it.”

Howland contends the improprieties result when companies file an incorrect Idaho income tax return, which is then corrected by the audit staff. When a company formally protests, he says it’s become standard practice for a tax commissioner to offer a “Confidential Compromise and Closing Agreement” requiring them to pay only a percentage of what is really owed.

“This allows these companies to avoid paying millions of dollars of income tax that are properly due the state of Idaho, and to do so in complete secrecy,” Howland said in his report. “The commission has settled the majority of all multistate corporate protests over the past 17 years with C&Cs. The commission has settled almost all multistate corporate protests in the past year in this manner.”

Howland, who said he is about 1 ½ years from retirement and wanted to take a stand now, contends the companies share information among themselves about how to take advantage of this practice in Idaho. He doesn’t identify the companies in his report, saying that would violate state law.

“The commission has operated that way for so many years, I think they just take it for granted,” Howland said. “They don’t see that all of the other taxpayers in this state are paying their full tax, and it’s not fair.”