Tax Analysts Blog

The Public’s Right to Know

Posted on Jun 19, 2013

Disclosure of corporate tax liabilities by states has been the subject of debate for over a decade. In general, opponents allege that publishing a list of corporations' tax liability is an unnecessary breach of taxpayer confidentiality that will not provide a state with additional insight about specific tax policies. For example, when California proposed legislation to require taxpayer disclosures, the idea was that such disclosures would enable the state to engage in an evaluation of single sales factor apportionment. In reality, providing a corporation's tax liability, without any other pertinent information, would provide little insight into why a corporation chooses to elect single sales factor.

State taxing authorities are already receiving a substantial amount of information about corporate taxpayers, and they have the ability to do any types of analysis they choose. Given that the information is already available to people that can properly analyze it, the question is raised whether there is a need to make any of that information public.

It appears that requiring the disclosure of a corporation’s tax liability could publicly stigmatize the corporation and could mislead the public about an individual corporation. But maybe that isn’t such a bad thing. Proponents argue that it is vital to provide the name of the taxpayer. Names are critical to get the public and politicians excited about the matter. It is just not as exciting to say that 25 corporations paid no income tax as it is to say that a certain "big name" corporation paid no income tax.

Still, in October 2000 the Department of Treasury issued a report titled “The Scope and Use of Taxpayer Confidentiality and Disclosure Provisions.” Treasury said it “strongly recommends against publishing the names of nonfilers or delinquent taxpayers.” The benefits of doing so, it said, “are speculative at best and do not warrant taking the risk of inaccuracies or other adverse consequences that may undermine taxpayer confidence in the tax system.”

In the end, there is no real need to disclose confidential taxpayer information. It does not advance the tax policy debate and has not been definitively shown to improve state tax collections. State tax officials are already receiving all the information they need to make informed policy decisions. Disclosing any of that information to the public does little more than provide the public with enough information to make uninformed accusations against certain corporations.

Read Comments (2)

David BrunoriJun 19, 2013

I agree. State Tax Notes ran a great series on this issue back in the 1990 in
which Bob Strauss and Rick Pomp duked it out. Disclosure serves no purpose
except as a propaganda tool for increased taxes.

Jay StarkmanJun 23, 2013

Thanks for the link to the Treasury report.

Our nation has tried corporate return publicity in the past and rejected it. A
very brief summary:

In 1909, Congress imposed a one percent "excise" tax on corporate profits. Far
more onerous than this mere one percent tax was that the law permitted public
inspection of the income tax return itself.

Before any disclosure took place, protests led to the 1910 repeal of
corporate return public inspection. Thereafter, the law provided that
income tax records would be considered public records and open for
inspection only upon order of the president. J. Edgar Hoover would
rely on this directive for his FBI to snoop through Internal Revenue
income tax records starting in 1931.

Publicity was again resurrected in 1934. Corporations would be required to
submit a yellow slip open to public inspection, listing the salaries it paid to
officers. The yellow slip rule was repealed in 1936.

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