Tax Analysts, which has been pushing for tax transparency since it first sued the IRS more than 40 years ago to force the release of agency records, has for the first time entered the state arena, the company's president said July 30.
The organization has intervened in support of a complaint filed by a taxpayer suing to obtain copies of final rulings from the Kentucky Department of Revenue and the Finance and Administration Cabinet for the period from 2004 to 2012.
The taxpayer, Mark Sommer, is a longtime state tax attorney and contributor to State Tax Notes. He is suing for the documents under the Kentucky Open Records Act.
"This is the first case where they [Tax Analysts] are fighting the same fight in the state courts that they have been fighting for 40 years on the federal level," said Sommer's attorney, Jennifer Y. Barber, managing associate at Frost Brown Todd LLC, Louisville.
"I think this is a good test case," Barber said July 30 at the annual conference of the Southeastern Association of Tax Administrators in Hilton Head, S.C. "This case is really going to dictate" whether states should be required to be more transparent, she said.
"For more than 40 years this organization has fought for transparency," Chris Bergin, president and publisher of Tax Analysts, said in a telephone interview. "We believe in sunshine. We believe secret law is an abomination. This was a case that I thought merited our intervention."
Tax Analysts had also filed record requests for final decisions from the Kentucky Department of Revenue. When the DOR denied its latest request, the organization joined Sommer's case.
"That was my decision," Bergin said. The company did not release the news even to its own journalists. A Tax Analysts reporter learned of it while attending the SEATA conference.
"We keep a firewall between our litigation and our journalism," Bergin said.
Barber said the DOR denied her client's request for records on three grounds, saying that providing the documents would violate taxpayer confidentiality, that the request for about 700 documents was "too burdensome," and that the documents "were not public record."
Her client disagreed on all counts. First, Barber said, Sommer appealed to the state's attorney general to overturn the DOR decision, but the request was denied in an open records decision late last year. An appeal of that decision, Sommer v. Finance and Administration Cabinet, is now pending in the Franklin Circuit Court.
"We're proud to support Jennifer and Mark," Bergin said. "You can't have a fair tax system without transparency."
Barber appeared at the SEATA conference to discuss transparency on a panel with Cara Griffith, editor in chief of state tax publications for Tax Analysts. Griffith said state transparency is essential for the taxpayer because "state officials have increasingly been willing to use their discretionary authority to adjust taxpayer income." But she maintained that there is a strong benefit for state agencies as well.
"Transparency improves DOR efficiency and facilitates voluntary compliance," she said.
She and Barber agreed that states have a strong interest in protecting taxpayer confidentiality, but both said agencies can address that concern by redacting information or by writing documents in such a way as to minimize exposure in the first place, as is the practice in most states that issue similar taxpayer guidance.
"Confidentiality should not be used as a reason not to strive for a more transparent tax system," Griffith said.