Tax Analysts Blog

Kentucky DOR's Disregard of Transparency

Posted on Jan 30, 2013

Transparency has become a topic that is near and dear to my heart. After all, I work for Tax Analysts, where transparency is paramount to the company’s mission. For the past year, Tax Analysts has been exploring transparency in state tax administration. Some states do a pretty good job of ensuring that guidance (including private letter rulings) are publicly available.

Other states just don’t seem to get it. Kentucky is one of those states. The Kentucky Department of Revenue issues written final rulings. The rulings are the final decision by the DOR on a disputed assessment before the case is moved to the Kentucky Board of Tax Appeals.

However, despite the fact that they are written and are final determinations by an administrative agency, the rulings are not published or otherwise made available to the public. Practitioners have expressed particular concern when rulings from administrative agencies are not publicly released. Typically, matters are heard by an administrative law judge and the result is an opinion that has the feel of a court opinion in that it sets forth the facts, lays out the applicable law, and applies the law to the facts.

Mark Sommer, a partner with Bingham Greenbaum Doll LLP recently tried to obtain final rulings from the Kentucky DOR via an open records request but was told the rulings are private until the taxpayer files an appeal with the board. The department indicated that it would be nearly impossible to redact the records and that the request was “unduly burdensome.”

On appeal, the Office of the Attorney General found the DOR’s denial was a violation of the open records act and Sommer’s requested review of the documents was authorized. A win for taxpayers…but not so fast. The Kentucky DOR has appealed the attorney general’s ruling, saying it is “contrary to the law of the Commonwealth of Kentucky.”

It is not clear why Kentucky is resisting release of final rulings, which would provide valuable guidance to taxpayers and improve the state’s overall ability to enforce and collect its taxes. Voluntary compliance is all about information. Taxpayers must have access to information in order to understand and properly comply with a state’s tax laws. Apparently the Kentucky DOR needs to be reminded of these facts.

Read Comments (3)

vivian darkbloomJan 30, 2013

"It is not clear why Kentucky is resisting release of final rulings, which
would provide valuable guidance to taxpayers and improve the state’s overall
ability to enforce and collect its taxes. "

I fear you may be overstating the case and perhaps confusing "private letter
rulings" you reference with adversary case rulings.

I'm not familiar with Kentucky law, however, it seems to track federal practice
where final agency determinations of appeals of audits are not published,
either (even though "they are written and are final determinations by an
administrative agency").

Private letter rulings are a different matter and represent requests for
advance guidance (which are published but identities redacted for privacy
purposes). These cannot be cited as precedent or relied on by persons other
than those to whom it was issued, but this is a reason you cite that Kentucky
should publish.

In both cases (internal IRS determinations on audits and administrative
decisions by Kentucky Revenue) the reasons for not publishing are likely
three-fold: First, considerations of privacy (IRS determinations are not
published even if redaction); second, the idea that disputes that are not
subject to the normal rigors of litigation are not suitable as precedent, and
third, opening up the requirement to redact and publish internal agency appeals
would increase the administrative burden and costs.

It strikes me that these considerations need to be weighed against any benefit
the determinations would have as "guidance". It seems quite possible to me
that Kentucky has weighed these pros and cons and that they actually do "get
it". (I would add even another factor--taxpayers often settle cases at the
agency level or do not appeal for the very reason that they don't want to "go

I would tend to agree that the Kentucky equivalent of private letter rulings
should be published (if there is such a thing and if they are currently not
published) ; however, that does not appear to be what is at issue. And, if
the issue were a PLR, the reason for publishing the Kentucky equivalent of a
PLR would, in my view, be more valuable to ensure that taxpayers in similar
circumstances are not receiving disparate treatment rather than their value as
precedential guidance.

vivian darkbloomJan 30, 2013


Thanks for your response.

As to PLR's, or their equivalent, I don't think we have any disagreement. I
failed to mention in the earlier posts federal "Technical Advice Memoranda"
(TAM's) which is another form of redacted material the IRS makes available.
The latter represent advice by IRS National Office to area offices on matters
where the application of the proper tax law to developed facts is unclear.

PLR's and TAM's share the same characteristic in that each of these documents
is directed towards the proper application and interpretation of tax *law*.
These documents do not purport to adjudicate *facts*. With respect to PLR's,
the "facts" are those presented by the person requesting the ruling. As noted
earlier, PLR's can't be cited as precedent (nor can TAM's) but, since they
address the application of tax *law* they are of interest to taxpayers and
their advisors. One may also access "determination letters" serving a similar
function, but this is already technical enough.

I'm not sure I can agree with you as to the policy regarding revenue
administrative decisions on private tax disputes---apparently the type of
document you refer to that Kentucky does not publish. These decisions often
deal more with the adjudication of *facts* than they do with settling any
principle of tax *law*, much less novel ones. As such, it strikes me that
there is less of a compelling reason to publish them (and more of a privacy
concern). A lot of quite trivial matters get solved at that level that are of
little value to anyone as "guidance" other than to satisfy one's voyeuristic
interest in the private tax lives of others. Forcing Kentucky to publish such
decisions and redact them in the process would force them to spend time, effort
and money on publishing and redacting largely factual determinations.

You wrote:

"These rulings are important because most states do not have an independent tax
tribunal (similar to the U.S. Tax Court), so these rulings may be the only
document published about a particular case and therefore represent valuable

I don't find that argument persuasive. Final decisions on appeal in the IRS
are not published either (perhaps for the reasons I outlined above) even though
they are often the final word on the matter. The fact that the federal
government has a specialized Tax Court to appeal to strikes me as
irrelevant---taxpayers can also appeal to the District Court or Claims Court
(provided the disputed tax is first paid). While these courts have the
responsibility to "find facts" as well as settle law, the facts are normally
not in dispute at that level. The primary responsibility of these courts is
therefore not to develop facts but to settle what the law is. Should a
taxpayer wish to appeal an IRS final determination to one of these courts, much
like an appeal of a Kentucky Revenue decision to its independent court system,
there is an implicit agreement that the facts of the case and the legal
determination will be on the public record. As such, I'm not convinced
Kentucky has not drawn the proper balance between privacy, administrative
burdens and costs on the one hand, and the benefit of these agency
determinations as non-binding guidance on the other. It is quite possible they
actually do "get it", but I reckon reasonable persons could disagree on where
the proper balance should be struck.

Cara Griffith's pictureCara GriffithJan 30, 2013

Vivian-You are correct. Private letter rulings and administrative agency
determinations are two different documents. We found that 45 states will issue
private letter rulings (though the documents have different names in different
states). Thirty-five of those states publish the letter rulings in redacted
form. Letter rulings are applicable only to a single taxpayer, but they provide
valuable guidance on how the taxing authority will apply the law given a set of

Taxpayers and practitioners want to have letter rulings available because it
represents guidance and most tax administrators seem to think that if they did
the research to prepare the guidance, they might as well publish it. In
addition, because state tax authorities have a significant amount of discretion
in how they apply their tax laws, publication of letter rulings provides a
means of checking to see if the taxing authority is using their discretion

Rulings from an administrative adjudicatory body that regularly hears tax cases
are another document that most states publish (in redacted form). There are a
few standout states that do not publish these rulings or publish very few of
these rulings. These rulings are important because most states do not have an
independent tax tribunal (similar to the U.S. Tax Court), so these rulings may
be the only document published about a particular case and therefore represent
valuable guidance.

You are correct that many cases settle out of court. But it is not only
taxpayers that are trying to get cases to settle because they don’t want to “go
public.” State taxing authorities are increasingly sophisticated are know the
cases they want to move and those they want to table.

There is always a give and take when determining what to publish and
practitioners understand what they can rely on and what they can’t. But by
ensuring that private letter rulings and administrative-level rulings are
published is one means of keeping an eye on whether similarly-situated
taxpayers are treated in a similar fashion.

Submit comment

Tax Analysts reserves the right to approve or reject any comments received here. Only comments of a substantive nature will be posted online.

By submitting this form, you accept our privacy policy.


All views expressed on these blogs are those of their individual authors and do not necessarily represent the views of Tax Analysts. Further, Tax Analysts makes no representation concerning the views expressed and does not guarantee the source, originality, accuracy, completeness or reliability of any statement, fact, information, data, finding, interpretation, or opinion presented. Tax Analysts particularly makes no representation concerning anything found on external links connected to this site.